[RFC] Collateral Basket Change Proposal: Adding Wrapped OUSD (wOUSD) to the eUSD Collateral Basket

[pete]

Summary

This proposal recommends integrating Wrapped OUSD (wOUSD) into the eUSD basket to increase yield and enhance platform diversification of the yield DTF, while following the mandate to maintain a $1 USD peg and be fully collateralized.

Motivation

On the Reserve Q2 Community Call which took place on Wednesday, August 19, Nevin Freeman mentioned that ABC Labs and Best Friend Finance are collaborating to try to figure out how to increase the total underlying yield on eUSD collateral. Nevin also mentioned that Morpho was a possible option, but that there were some issues with adding support for Morpho.

We believe that OUSD is a viable option that will both increase the underlying blended eUSD yield via integrated Morpho vaults, while also increasing the diversity of yield sources within the basket.

Abstract

Launched in 2020 by Origin Protocol, OUSD is an ERC20 stablecoin that generates yield while sitting in your wallet or multi-sig. Backed 1:1 by solely USDC, holders can go in and out of OUSD as they please. Yield is paid out daily and automatically (sometimes multiple times per day) though a positive rebase in the form of additional OUSD, proportional to the amount of OUSD held.

OUSD yield, currently ~5.15% APY, comes from a combination of:

1. Deploying USDC collateral to a Curve AMO
2. Lending USDC collateral to Morpho vaults on ETH mainnet, Base, and Hyperliquid
3. Reward tokens (MORPHO, CRV, and CVX) are automatically claimed and converted to stablecoin
4. OUSD sitting in non-upgradable contracts does not rebase, instead the interest generated from those tokens is provided as a boost to those that can rebase

Current and historical OUSD yields can be seen via the OUSD analytics page at all times. Proof of Yield tracks every OUSD yield event as the yield is distributed.

There is no set emission schedule for OUSD - similar to superOETHb within the yield DTF bsdETH, OUSD is minted on demand when users deposit their stablecoin into the protocol, and burned on demand when users redeem OUSD for the collateral USDC. OUSD is completely non-custodial, there are no lock-ups, terms, or conditions. Any web3 wallet can support OUSD and its rebasing function, including hardware wallets and multi-sigs.

A visual representation of OUSD’s design appears as follows:

Similar to superOETHb, there is a corresponding tokenized vault version of OUSD, which is wOUSD. wOUSD is a ERC-4626 tokenized vault designed to accrue yield in price rather than in quantity. When you wrap OUSD, you get back a fixed number of wOUSD tokens. This number will not go up - you will have the same number of wOUSD tokens tomorrow as you have today. However, the number of OUSD tokens that you can unwrap to will go up over time, as wOUSD earns yield at the same rate as standard OUSD. The wOUSD to OUSD exchange rate can be read from the wOUSD contract (previewRedeem, function number 17), or via the OUSD dapp. There is not currently any liquidity pools for wOUSD, as DEX aggregators treat wrapping/unwrapping OUSD as a swap route.

Current exchange rate as of 8/24/26: 1 wOUSD = 1.30354954 OUSD

Problem Statement & Rationale

The eUSD collateral basket is currently made up of only two platforms for yield generation, limiting the potential eUSD yield. There is a simple and straightforward opportunity to both further diversify eUSD yield generation strategies, while also increasing its blended yield output.

The current APY for wOUSD stands at 5.15%, which is higher than eUSD’s existing components. It seems to be a logical next step to integrate a product such as this into the eUSD collateral basket.

OUSD received a B+ rating from Bluechip, which is equal to the rating USDC received and therefore would not lower the average rating of eUSD by being added as a collateral. Adding OUSD would actually increase the blended rating of eUSD if some USDT was shifted into USDC to be allocated to OUSD, since the USDT rating is currently a D.

New eUSD Collateral Basket

I have modeled several options for including wOUSD within the eUSD basket that would agree with the eUSD V2 Mandate & Methodology using sources Reserve.org and Originprotocol.com.

Assuming eUSD total MC is $22,373,716 (some figures may differ slightly between options depending on decimal places used):

Option 1: Equal amounts shifted from current eUSD constituents:

Token	Allocation	APY
AAVE USDC	32.6%	3.77%
Compound USDC	32.6%	3.55%
Compound USDT	32.6%	3.15%
wOUSD	2.235%	5.15%
Total blended yield		3.527%

In this basket, some USDT will be swapped into USDC.
Total basket USDC: $15,087,715 (increase from current eUSD basket)
Total basket USDT: $7,293,831 (decrease from current eUSD basket)
Total OUSD exposure: $500,052

Option 2: Equal weighting among USDC constituents

Token	Allocation	APY
AAVE USDC	32.2137%	3.77%
Compound USDC	32.2137%	3.55%
Compound USDT	33.34%	3.15%
wOUSD	2.235%	5.15%
Total blended yield		3.5233%

In this basket, no USDT will be swapped into USDC.
Total basket USDC: $14,914,319 (no change from current eUSD basket)
Total basket USDT: $ 7,458,859 (no change from current eUSD basket)
Total OUSD exposure: $500,052

Option 3: All USDC constituents, without entirely removing a yield protocol

Token	Allocation	APY
AAVE USDC	48.8825%	3.77%
Compound USDC	48.8825%	3.55%
Compound USDT	0%	3.15%
wOUSD	2.235%	5.15%
Total blended yield		3.693%

In this basket, ALL USDT will be swapped into USDC.
Total basket USDC: $22,373,716 (increase from current eUSD basket)
Total basket USDT: $ 0 (decrease from current eUSD basket)
Total OUSD exposure: $500,052

---

I have also included additional higher yielding options with larger amounts of OUSD that may not entirely agree with the eUSD methodology section 2.3.1.2:

Option 4: Equal waiting among ALL constituents

Token	Allocation	APY
AAVE USDC	25%	3.77%
Compound USDC	25%	3.55%
Compound USDT	25%	3.15%
wOUSD	25%	5.15%
Total blended yield		3.905%

In this basket, some USDT will be swapped into USDC.
Total basket USDC: $16,780,287 (increase from current eUSD basket)
Total basket USDT: $5,593,429 (decrease from current eUSD basket)
Total OUSD exposure: $5,593,429

Option 5: Equal waiting among USDC constituents

Token	Allocation	APY
AAVE USDC	22.22%	3.77%
Compound USDC	22.22%	3.55%
Compound USDT	33.34%	3.15%
wOUSD	22.22%	5.15%
Total blended yield		3.82%

In this basket, no USDT will be swapped into OUSD.
Total basket USDC: $14,914,319 (no change from current eUSD basket)
Total basket USDT: $ 7,458,859 (no change from current eUSD basket)
Total OUSD exposure: $4,971,439

Option 6: All USDC constituents, highest yielding without entirely removing a yield protocol

Token	Allocation	APY
AAVE USDC	33.33%	3.77%
Compound USDC	33.33%	3.55%
Compound USDT	0%	3.15%
wOUSD	33.34%	5.15%
Total blended yield		4.1568%

In this basket, ALL USDT will be swapped into USDC.
Total basket USDC: $22,373,716 (increase from current eUSD basket)
Total basket USDT: $ 0 (decrease from current eUSD basket)
Total OUSD exposure: $7,459,396

Risks

There are three risks when using OUSD, and Origin is making sure to reduce each risk as much as possible:

Smart contract risk of the yield strategies - Origin is only using platforms for yield generation that have a proven track record, have been audited, have billions in TVL, maintain a bug bounty program, and provide over-collateralized loans. Over-collateralization in itself, combined with liquidations, provides a reasonable level of security for lenders.

Stablecoin risk - Origin has chosen USDC, one of the largest stablecoins to ever exist, to back OUSD, and it has stood the test of time and maintained its peg quite well through multiple bull and bear cycles. It has also demonstrated significant growth in circulating supply, so the Origin team is confident that USDC will maintain its peg and that OUSD will remain stable. OUSD also uses a Chainlink oracle for pricing data for USDC to ensure accurate pricing at all times. If USDC falls below its $1 peg, OIP-4 disables minting of additional OUSD tokens using the de-pegged asset.

Smart contract risk of OUSD - Origin is taking every step possible to be proactive and lessen the chance of losing funds. Security reviews of OUSD are prioritized over new feature development, with regular audits being done, and multiple engineers are required to review each code change with a detailed checklist. A 48-hour timelock goes into effect before protocol upgrades are launched, and deep dives into the exploits of other protocols are constantly being done to make sure the same exploits don’t exist on Origin contracts. Security is extremely important to the Origin team. 12+ audits have been done on the OUSD codebase since 2020, all of which can be seen on Audits - OUSD. Origin also holds a top three spot on the Immunefi leaderboard for average response time for bug bounty submissions, and maintains a $1m bug bounty.

Conclusion

A plugin has not yet been built to add wOUSD to the registry, but Origin engineers have confirmed it can be done easily by reusing some of the work from the wsuperOETHb and wOETH plugins. Origin engineers have also confirmed that a wOUSD plugin would not face the 3 issues @pmckelvy mentioned when reviewing adding Morpho vaults as eligible collateral to eUSD.

We would be happy to adjust the above basket weights based on feedback from the community, core Reserve team, ABC Labs, and Best Friend Finance, and would be happy to answer any questions on Origin Protocol, OUSD, or the proposal itself. Adding OUSD as a collateral for eUSD will be mutually beneficial for both Reserve and Origin Protocol, as it will increase the utility for OUSD, while also increasing the diversity and blended yield of eUSD. The Origin team can be reached at any time via the Origin Discord server.

Poll

Add Wrapped OUSD (wOUSD) to the eUSD Collateral Basket?

• I am in favor of adding wOUSD to eUSD collateral using one of the options above
• I am in favor of adding wOUSD to eUSD collateral with a different basket
• I am NOT in favor of adding wOUSD to eUSD collateral

Which basket(s) would you prefer?

• Option 1 - mandate compliant
• Option 2 - mandate compliant
• Option 3 - mandate compliant
• Option 4 - not mandate compliant
• Option 5 - not mandate compliant
• Option 6 - not mandate compliant
• Option X - I have an alternate basket suggestion not listed
• None - I do not support

[0xJMG]

Higher yield for eUSD stakeholders on a Bluechip rated B+ stablecoin. Looks interesting.

[0xd15co]

Thanks @pete, this is a useful contribution, and I welcome proposals that try to raise eUSD’s blended yield and diversify the sources of that yield. I agree eUSD can benefit from a broader universe than Aave + Compound alone.

That said, as a delegate I will vote against any basket change that is not mandate-compliant.

wOUSD is not in the Eligible Collateral Universe today. Under Mandate & Methodology v2, eligibility and basket construction are separate steps. Approval for the universe does not require an allocation, but an allocation does require prior universe approval and a bucket assignment. Until that happens, there is nothing for governors to vote into the prime basket.

The first step should therefore be a separate RFC/IP: add wOUSD to the Eligible Collateral Universe, assigned to the Opportunistic bucket (≤10%). That RFC should also cover the plugin (which does not exist yet), redemption/liquidity under stress, and the 2.3.1.2 cap that the basket not hold more than 10% of the constituent’s TVL/supply. On current OUSD size, I think that cap would roughly be ~$600k, if I am not mistaken.

Only after that listing would a basket-change RFC be in order. Of the six weights above, Option 2 is the one I would personally expect to have the best chance: mandate-shaped, smallest operational change, no forced USDT → USDC swap. Options 4–6 are not compliant with 2.3.1.2 and I would vote against them as well.

I am also curious as to what @R72’s and @Ham’s thoughts are.

[ham]

Thanks for the post @pete. I appreciate you modelling the options against the eUSD V2 Mandate & Methodology document. While this hasn’t yet been ratified onchain, largely due to the eligible collateral universe depending heavily on Morpho plugins, it’s definitely the framework I’d like to see eUSD adopt going forward.

The headline yield profile for OUSD is certainly favourable, but unfortunately I think the odds of inclusion are stacked against it.

Firstly, as @0xd15co has pointed out, OUSD has a relatively small market cap. At ~$6m, the proposed methodology would cap an OUSD allocation at ~$600k, equivalent to around 2.5% of eUSD’s current market cap. At that size, the improvement to eUSD’s blended yield would be fairly marginal. I’m also not sure engineering would be keen to allocate resources to building and supporting a new plugin for such a small allocation, particularly when you consider the ongoing maintenance and monitoring required after inclusion.

This becomes increasingly difficult as eUSD grows. Governors would need to progressively reduce OUSD’s proportional allocation to remain within the methodology limits, while also deciding on acceptable tolerances before a rebalance is triggered. That creates additional engineering and governance overhead for an allocation that makes a relatively small contribution to the overall yield profile.

Secondly, as eUSD increasingly becomes a fintech-first product, we need to ensure that the compliance requirements of external partners and regulators have been considered before assets enter the basket. This is one of the reasons I think inclusion in the eligible collateral universe should remain the first step before proceeding towards a rebalance.

Direct allocations into established lending markets such as Aave, Compound and Morpho, or DEXs such as Uniswap and Curve, are likely to receive regulatory approval relatively easily, if they haven’t already. I’m less convinced fintech partners would be prepared to engage regulators over a longer-tail stablecoin that would ultimately be capped at a ~$600k allocation and would not meaningfully change eUSD’s overall yield profile.

None of this is necessarily a criticism of OUSD itself. The yield profile is attractive. I just think the combination of allocation constraints, engineering overhead, governance burden and regulatory considerations makes the cost-benefit case for inclusion difficult at its current size.

Tagging @pmckelvy and @josh for visibility. Any thoughts directly from eng and fintech perspectives or corrections to the above would be appreciated.

[pete]

Thank you @ham and @0xd15co for the helpful input. Is there any reason this RFC thread could not be used for both adding wOUSD to the to the Eligible Collateral Universe, and for onboarding as collateral to eUSD with suggested basket weights? I am happy to update the name of the RFC. Previous basket change proposals, such as @Sawyer’s [RFC] eUSD Collateral Basket Change Proposal 5 included details on both the new asset being added as well as the proposed basket weights.

Yes a plugin has not been built yet, but as I mentioned in the RFC above, Origin engineers believe a wOUSD plugin would be quick to build, using work from the existing Origin collateral plugins. We can wait to hear from @pmckelvy before building the plugin in case there are other compatibility issues to account for or other edge cases to be aware of with the Yield Protocol architecture. I modeled the basket options above with the 2.3.1.2 10% cap in mind, so we are aligned there. A $600k allocation to OUSD is $100k more than the options I modeled above, at that amount the blended yield of eUSD would be even higher.

Regarding compliance - multiple legal opinions for OUSD exist from reputable law firms domiciled both inside and outside of the USA confirming OUSD’s status as not a security - I am happy to share them privately with parties that may need them when onboarding an asset to eUSD, such as ABC Labs, BFF, and possibly SENTZ and UGLYCASH. These documents are typically not included in public governance proposals since they are confidential legal documents.

[0xd15co]

@pete No, a separate RFC is overkill now. I was referring to the fact that we first need to discuss eligibility before discussing weights.

And as @ham pointed out, the main issue now seems to be this:

Aave, Compound and Morpho, or DEXs such as Uniswap and Curve, are likely to receive regulatory approval relatively easily, if they haven’t already. I’m less convinced fintech partners would be prepared to engage regulators over a longer-tail stablecoin that would ultimately be capped at a ~$600k allocation.

I too hope that @josh and @pmckelvy can give us more insights.

[ham]

A 2.5%, ~$560k, allocation to OUSD would increase the blended yield of eUSD by ~6bps.

Even if the above governance and regulatory considerations are ignored and we focus purely on the benefit to the yield profile, the opportunity / cost doesn’t support it’s inclusion.

Therefore I wouldn’t be happy to support it’s inclusion into the eligible asset universe, especially when Nevin discuss in the latest CC that Morpho plugins may be available soon as we will be able to allocate much larger sizes there and are far more likely to be regulator compliant.

[pete]

@ham @0xd15co I just had a thought, what do you think about proposing wOUSD for inclusion into USD3 instead of eUSD? It could be considered an introduction of OUSD to the Reserve community and ecosystem. Steakhouse has instructed users to withdraw from their v1 vault due to the donation attack vulnerability, so removing Steakhouse Morpho v1 for OUSD both reduces the risk that a v1 vault is still in USD3, while also increasing the yield. A $500k-$600k inclusion of wOUSD in the USD3 basket could make up 25-35% of that basket while remaining USD3 mandate compliant.

Possible new USD3 baskets:

New Basket option 1: Equal weighting
25% wOUSD
25% Sky Savings USDS
25% Compound USDC
25% Aave USDC
Total basket APY: 4.2625%

New Basket option 2: Higher yielding
35% wOUSD
10% Sky Savings USDS
30% Compound USDC
25% Aave USDC
Total basket APY: 4.4955%

New Basket option 3: Highest yielding
33% wOUSD
33% Compound USDC
33% Aave USDC
Total basket APY: 4.510099%

[josh]

Correct we have not brought this up to our core regulator, CNAD out of El Salvador. They have either approved / no actioned Aave, Compound & Morpho. We are in an unusually long backlog for more approvals due to an existing complex approval we’re in progress on (separate from related to eUSD collateral). So even if there was one that made sense, 2-4 months out probably.

And yes would agree that if we’re going to bring up new basket assets, especially if the bring new yield bearing concepts / flow of fund for them to get behind, we’d have to weight well the upside.

Agreed tough if it’s at a 2.5% cap

[pete]

It would be useful if recognized delegates covering USD3 (@0xd15co, @R72, and @Sixty) could chime in on the idea of shifting this proposal to a proposal for onboarding to USD3

[0xd15co]

USD3 is a better home for this than eUSD, and I would personally be open to adding wOUSD there.

The real constraint, as with eUSD, is integration, not delegate appetite. We need a reviewed plugin, and ABC Labs would have to audit it and add it to Reserve. Coding the plugin is one thing; that integration work by the team is not something governors can vote into existence.

Once wOUSD is fully integrated with Reserve, I would vote to add it to the USD3 basket at a conservative weight. Until then I would keep the conversation here rather than turning this into a USD3 basket vote.

[R72]

Apologies for not being able to provide my feedback / point of view on this. First of all, many thanks for your proposal @pete. I welcome your thoughtful and interesting proposal. My perspective, however, is similar to the other delegates: For eUSD it provides challenges related to regulators’ eUSD approval for the most important FinTech utilizing eUSD. Even from that perspective alone, proposing to introduce something outside the Eligible Collateral Universe is not a realistic path to take at this time. And even if that were possible: the upward potential (6bps) is not sufficient to spend time building integrating/building the required plugin - especially since engineering time at Reserve seems to be quite limited due to pursuing other initiatives right now. So, all in all, don’t see wOUSD realistically become part of eUSD.

Considering wOUSD for USD3 does seem to be a more realistic path. We would still, though, have to deal with the limited engineering capability availability due to other priorities to get the required plugin realized. I too would support a modest weight of wOUSD in USD3, should such a plugin exist.

[Sixty]

Thanks for the in-depth proposal @pete , I believe enough has been said on the eUSD side. So I will focus solely on the USD3 inclusion.

1. Given the current size of USD3, an equal-weighted inclusion of OUSD would be around $340k , and this would improve the current blended yield by about 34 bps to 4.20%. The US 3M T-Bill rate is currently sitting at ~3.9%, so the OUSD addition here definitely makes sense. The yield profile will improve, although not by much compared to what is considered the risk-free rate. We would advocate for inclusion here, as we would like to see the current yield of USD3 beat the risk-free rate.

2. The main concern for us is the increased USDC exposure. The current collateral underlying token exposure sits at 75% USDC, with OUSD inclusion increasing this to 80%. We would have liked to see a better diversification and dependency profile for USD3 , but we believe the +34 bps of yield in exchange for +5% USDC concentration and additional OUSD protocol/strategy risk is fair.

[pete]

@0xd15co

that integration work by the team is not something governors can vote into existence.

@R72

We would still, though, have to deal with the limited engineering capability availability due to other priorities to get the required plugin realized

Yes, understandable. The wOUSD plugin is a plugin that the Origin team would build, we are not asking the engineering team at Reserve to build it.

@Sixty

1. Given the current size of USD3, an equal-weighted inclusion of OUSD would be around $340k , and this would improve the current blended yield by about 34 bps to 4.20%. The US 3M T-Bill rate is currently sitting at ~3.9%, so the OUSD addition here definitely makes sense. The yield profile will improve, although not by much compared to what is considered the risk-free rate. We would advocate for inclusion here, as we would like to see the current yield of USD3 beat the risk-free rate.

2. The main concern for us is the increased USDC exposure. The current collateral underlying token exposure sits at 75% USDC, with OUSD inclusion increasing this to 80%. We would have liked to see a better diversification and dependency profile for USD3 , but we believe the +34 bps of yield in exchange for +5% USDC concentration and additional OUSD protocol/strategy risk is fair.

It might make sense to replace the Steakhouse vault with OUSD for the reasons I stated above, but we can discuss more specific USD3 basket options with OUSD included that would beat the risk free rate once the plugin is complete and onboarded to Reserve’s collateral catalog. Origin engineers will finish scoping the work, we can share updates to this when they are available.