A couple of weeks ago, the Circle team announced that it would be launching a centralized Euro stablecoin called EUROC.
Circle is the company behind USDC one of the most robust and used USD stablecoin in the market. They’re known for the efficiency of their API which allows for super efficient redemptions and issuance of USDC from USD at a 1:1 rate.
There are other centralized EUR stablecoins in the market (EURs and EURt), but given Circle’s expertise and reputation among institutional investors, EUROC may probably take a very serious lead in the market at their launch.
While EUROC will be a competitor for Angle’s agEUR, this may bring a lot of attention to the Euro stablecoin space, and having this new asset in the space can be a great opportunity for the future development of the protocol.
In this post, we’re exploring how we could leverage the launch of EUROC to grow agEUR and Angle more broadly.
To start with, Curve is a top place where the presence of EUROC could be leveraged. agEUR is involved in 2 different gauges on Curve (one with ibEUR, and one with agEUR/EURs and EURt).
So far, agEUR has been helping EURs and EURt keep their peg thanks to the deep liquidity pool we had there.
On top of that, Angle has been helping a lot EURs and EURt through bribes without much help on their side, making them gain liquidity.
Pool has been severely imbalanced towards agEUR and EURt, meaning most of the CRV and CVX incentives going to LPs of the pool have in fact gone to EURs holders.
We thus have a need to start working with assets which are more easily redeemable, but also with projects that can support on their side the growth of the pool.
As such, one plan could be to build and support one new pool on Curve with either assets from protocols that are ready to support and/or with just EUROC.
The 3CRV pool on Curve has become a standard for USD stablecoins, and we want agEUR to be part of the creation of a new standard for the Euro, like DAI in the 3CRV pool.
To give legitimacy to this pool, we should have this pool as a basepool so that other Euro stablecoins that’ll appear would have to create pools not with agEUR/EUROc individually but rather with the LP tokens of the base pool.
Overall, we should leverage EUROC’s launch to increase our presence on Curve and make agEUR the de-facto decentralized stablecoin there.
Next step could be for the protocol to expand its algorithmic market operations (AMOs) on Curve, in a way similar to what FRAX has been doing by directly minting FRAX in the Curve pool.
There are different ways with which EUROC could be incorporated in the protocol.
Before going in details, it makes sense to understand some trade-offs here.
EUROC will be a centralized asset for which a company will have the possibility to freeze balances. As such, and like Maker’s DAI with USDC, keeping a lot of EUROC in reserves would lead Angle to be more subject to a counterparty risk, if Circle decides to freeze Angle balance.
On the other hand, EUROC is going to be an interesting tool to on-ramp and off-ramp from fiat to crypto: 1 EUR, you get 1 EUROC, 1 EUROC you get 1 EUR in your bank account.
At the moment, getting agEUR from fiat is a bit more complex, since the stablecoin is not listed on centralized exchanges at the moment. Best route consists in getting USDC (at a 1:1 rate) and then swapping USDC for agEUR at 0.01%.
This is cheap but still a hurdle for many institutions, companies which want to provide services in agEUR for people wanting to get exposed to the €.
Moreover like USDC, EUROC should be super stable. Using this asset as a stability layer for the protocol is less risky than all the other collateral types we’re using, and on other chains where the Core module does not natively exists, it could help provide a more immediate peg for agEUR.
With that in mind, here are some opportunities and things we could do in the protocol with EUROC.
We could use EUROC to mint agEUR at a 1:1 rate (with potentially some fees). This could work on any chain and provide a free-on ramp to agEUR.
There are different technical ways in which we can have that:
We could have directly as a custom asset that can be used to bridge agEUR 1:1, similar to a bridge token in this implementation.
Other solution could be to have it as a collateral of the core module. This enables us to invest the EUROC in yield strategies. And interface for this is pretty smooth
Advantage of both solutions is that it is what is going to provide a free on/off-ramp for agEUR and help us onboard institutional money coming to the protocol.
Angle has built a lot of integrations around many places of DeFi for agEUR. Enabling the use of EUROC as a collateral could allow all EUROC holders to access DeFi through the already existing integrations for agEUR.
This would enable agEUR to become the de facto asset to use when you want to get a yield on agEUR.
We could choose either of the two options (or the two options), but the second one seems to be giving a bit more of flexibility here: beyond the strategies, we can have some fees, incorporate an oracle, …
We may see a bit less utilization in the potential Curve pool from implementing this, since they serve the same use case in the end
Another option possible is involving EUROC in the borrowing module of the protocol. Once again, there are different ways with which we can onboard EUROC in this module.
The first option is to have it as a simple collateral from which people can borrow and at a very low collateral ratio: like 100.5%.
This makes the UX from swapping from/to agEUR with EUROC a bit more difficult but in this sense it’d be similar to Maker’s DAI.
As mentionned in this governance post, we’re working on our own ERC4626 implementation of yield aggregators. While the idea for building this is to get an agEUR savings rate product, we could leverage the infrastructure we are developing to build an EUROC savings rate product as well.
There may not be many yield opportunities possible for EUROC at their launch, but Angle could be the best positioned to provide a yield on this, making Angle the best place possible to make a yield on Euros (either agEUR or EUROC).
Pushing even further, we could imagine the yield bearing EUROC to be used as a collateral for agEUR: in some way we would be providing self repaying loans in EUROC where the yield on EUROC repays the agEUR loan taken.
This is similar to what Alchemix does, we would be doing this for the Euro.
This is something that has been done a lot by the Maker team since in some way it artificially increases the DAI circulating supply, but we could use G-UNI (wrapped Uniswap LP tokens) agEUR-EUROC as a collateral of the borrowing module to allow people to get huge leverage on this and drastically increase the agEUR-EUROC liquidity.
Essentially what we could do is let people provide these G-UNI tokens, borrow agEUR, let them obtain even more G-UNi tokens and so on with up to a 50x leverage.
This is another way of growing liquidity for agEUR on Uniswap without much difficulty.
Having liquidity both on Curve and Uniswap would multiply visibility for both tokens, but in some way it also fragments liquidity for everyone.
EUROC is not here yet, but will soon be! While it’s uncertain what the scale and liquidity for it will be at launch, it’s important to have in mind the levers and the value we can propose around this when it launches.
It’s also important to remember the value we are bringing in with agEUR. So far, decentralized stablecoins have never been as efficient as centralized stablecoin to onboard users.
USDC can be minted at a 1:1 rate, it’s smooth and just another standard for the dollar. As for DAI to create 1 DAI, you need to borrow it, pay an interest rate on it, pay attention to your collateral ratio to avoid being liquidated. There are frictions which increase the cost of onboarding. Angle has the same with agEUR, and if the goal is to onboard billions of users to DeFi, we need to be as competitive as these assets.
One solution is to work from scratch with them.
What do we bring in then?
First, decentralized stablecoin protocols function in a transparent manner, which make them more trustable than their centralized counterpart.
We also have the opportunity to build native use cases and for cheap around our asset. It’s like being a bank developing its own product. You can do it natively in DeFi without relying on others. Our borrowing module is a case in point.
And then, we have the opportunity to open lines of credit in multiple places more easily through Algorithmic Market Operations than centralized stablecoins.
There’s a lot of other reason but the fact that around a decentralized stablecoin you can little by little build the elements of a crypto bank makes me super confident that even if new centralized assets are coming, there will always be a need for decentralized stablecoins working in tandem with these assets
We’ve built a tremendous network of integrations around agEUR, now let’s take advantage of current market conditions to reinforce and expand agEUR position in DeFi.