This proposal aims to deploy a new decentralized Angle stablecoin pegged to one ounce of gold.
More specifically, we are aiming to do this while decreasing the potential role and impact governance can have on the stablecoin. Angle’s gold stablecoin will be governance minimized, close to how Liquity’s LUSD works.
On another note, Jim Cramer recently stated that investors should “stay away from crypto and look into gold”. As we all know informed investors should always trade against Jim, Angle Gold stablecoin vaults gives people a way to counter trade his announcement.
Angle started in November 2021 as a decentralized stablecoins protocol by launching agEUR. It quickly became the largest decentralized euro stablecoin, and the most traded EUR stablecoin altogether. The protocol was designed from scratch to be able to launch different stablecoins.
After careful considerations, we think Angle is now ready to welcome a gold pegged stablecoin alongside agEUR.
Argument #1: The gold market is a great opportunity, both on-chain and off-chain
PAXG & XAUt, the two biggest gold stablecoins, represent a close to $1B market for gold on-chain. Off-chain, gold is a ~$12T market. These two numbers represent both a great opportunity for gold stablecoins, and a acknowledgement that there is some demand for it on-chain.
As a comparison, the total euro supply (M2) was around 15T€ in November 2022 (source: ecb) for an on-chain euro market of $250M (source: Euro-stablecoins dashboard by SebVentures).
Argument #2: There is no decentralized gold stablecoin yet
One of the most prominent argument for an Angle Gold stablecoin might simply be that there is no decentralized gold stablecoin on-chain yet. This offers an interesting opportunity for Angle to lead DeFi forward.
On another front, this is also a great argument to push Angle gold even further in terms of decentralization. This means updating the current agToken and VaultManager implementation to remove multiple setters that are usually under governance supervision. This would make of Angle Gold stablecoin even more permissionless than agEUR, with no or very little governance intervention possible.
Argument #3: It creates a great opportunity to expand Angle to something bigger than a Euro-only protocol
Looking beyond this proposal, the addition of a new stablecoin to Angle allows the protocol to move from the “Euro decentralized stablecoin protocol” corner to the “DeFi products and infrastructure provider” one.
This is in line with the vision laid out for the protocol in our Beyond 2022 article: developing new DeFi products and infrastructure that provide better services and reach more people.
From a marketing standpoint, a truly decentralized gold stablecoin can therefore be quite positive for the protocol.
The first debt-based gold stablecoin
Angle has two ways of issuing stablecoins: the original Core module, and the more recent Borrowing module.
Though the Core module brings a lot of value, it relies on a complex equilibrium to be sustainable. On the other hand, the Borrowing module has a different value proposition (stablecoins are minted as debt collateralized by crypto deposits), but requires much less maintenance.
We think it would be more efficient for the Angle Protocol to launch a gold stablecoin with the Borrowing module, that can be minted against permissionless assets, like ETH or LUSD. Like for agEUR vaults, people would deposit crypto assets to borrow up to a certain quantity of Angle’s gold stablecoin.
Angle Borrowing module contracts have been audited, and nothing apart from changing setters would need to be changed to the existing infrastructure for a gold stablecoin. As such with the already existing design, launch cost would be little to none.
The first permissionless gold stablecoin on-chain
Currently, the main gold stablecoins are PAX Gold and XAUt, two centralized tokens from Paxos and Tether respectively. Because of their clear centralization, the two on-chain versions are far from being permissionless. Paxos implemented a fee on PAXG transfers, and both can blacklist addresses to limit who has the right to hold these tokens.
What we propose is to make of Angle’s gold stablecoin the first permissionless version of gold on-chain. In that regard, we are planning to propose a slightly revised version of the agToken and VaultManagers implementations to reduce the impact a wrongful governance could have on the stablecoin.
While there would still be some parameters that can be updated by governance, like the debt ceiling or the possibility to add new collateral assets, most of the parameters would be immutable, and contracts would not be upgradeable. In particular, it would be impossible for governance to add new minters that are not specific
VaultManager contracts, and the governance will not be able to engage into AMOs with Angle gold stablecoin or mint it through other means than borrowing. Governance will not be able to pause contracts or to add repayment fees.
Making Angle’s gold stablecoin permissionless also means only accepting assets that fit this criteria as collateral. As such, we propose launching the stablecoin with wETH and LUSD as collateral to mint the token. Though other assets can technically be added, the plan is not to add as many as possible, but rather to be restrictive and only keep safe permissionless assets to stick to the promise of building censorship resistant gold on-chain.
We propose to use Chainlink oracles to estimate the gold value of the collateral assets.
In terms of growth, the main use cases for Angle’s gold stablecoin should be for holding gold on-chain in a permissionless way, and to trade gold against other crypto assets. Beyond that, borrowing the gold stablecoin from Angle could be used by traders to short Gold against the vault collateral.
The first step for growing it will be to create a Curve pool with PAXG and push to have a gauge, and a Uniswap V3 pool with agEUR to have access to all of agEUR’s liquidity. Once the stablecoin is launched, we will launch a vote to add an Angle gauge and send ANGLE incentives to the pool.
With time, PAXG and XAUt holders looking for a more trustless alternative should progressively move towards Angle’s gold decentralized stablecoin.
The main risk for the protocol is that it accumulates bad debt due to a failure in liquidations of vaults having issued the gold stablecoin. On our side, we will adapt our keeper infrastructure so that it is ready to liquidate these vaults and repay gold debt like it does for agEUR.
Other than that, there is the reputation risk that the stablecoin doesn’t maintain its peg. Though this would be negative, there would be no direct consequence for agEUR or other working parts of the protocol itself outside damaging the reputation.
As always, the goal of this post is to foster discussions and hear everyone’s opinion about this. Please comment the post and share any thoughts or feedback!
Next steps would be to have this proposal voted to officially launch the efforts for an Angle Gold stablecoin. This would need to be followed by another governance vote to validate the implementation and the launch parameters.