Transmuter Launch and Protocol Collateral Swaps

Hey everyone,

Several months ago, after the Euler hack, we’ve started discussions about the steps for restoring agEUR peg, and a new module for agEUR and Angle.

Thanks to the measures that were voted after Euler recovery, agEUR has consistently traded at peg over the last 3 months.
In the meantime, we have relentlessly been working with Angle Labs on a new minting module for agEUR called Transmuter.


This is discussion with thoughts on:

  • the launch system of the Transmuter system as a minting module
  • the parameters and setup with which this module can be launched.

In particular, we suggest to:

  • wind down the protocol core module for agEUR burn
  • swap the USDC, DAI and FRAX backing agEUR (not the one corresponding to SLP funds) into EUROC and bC3M by Backed
  • deposit a portion of the protocol’s reserves into a Transmuter implementation and launch this implementation as a minting module for agEUR on Ethereum.


First things first, what’s the current status of the protocol?

The protocol has several minting modules live:

  • the Core module is partially open:
    • it is possible to burn agEUR within the Core module for USDC but not to mint it
    • the protocol has no hedging mechanism and it is currently exposed to a USD/EUR exchange risk
    • the protocol standard liquidity providers can still deposit or withdraw their liquidity. But there is no strategy in place enabling them to earn from their funds
  • the Borrow module is live on different chains with no restriction
  • the protocol is also engaged in liquidity AMOs where it minted agEUR paired with surplus USDC on Arbitrum, Optimism and BNB Chain to boostrap agEUR liquidity on these chains

In terms of metrics, the exact state of the protocol can be found on this spreasheet.

As of the 4th of July 2023, the system has:

  • 7,119,572.1 EUROC in the protocol Governance multisig
  • 9,835,500 agEUR issued from USDC and an amount of USDC for users equal to 8,691,976.92 USDC (= PoolManager USDC balance - value of SLP claims)
  • 1,499,985 agEUR issued from DAI and an amount of DAI for users equal to 2,677,307.07 DAI
  • 1,708,010 agEUR issued from FRAX and an amount of FRAX for users equal to 1,739,351 FRAX
  • This varies on a day to day basis based on USD/EUR evolutions but the protocol surplus sits at ~ $7m.

As the upcoming minting module we propose does not come with any hedging mechanism, if this came to be finally voted and implemented, it would no longer be safe to back agEUR with USD denominated assets. In this regard, we propose to swap all the USD stablecoins backing agEUR through the Core module into other Euro denominated assets.
In total, 13.042m have been issued from the Core module, and the protocol can afford to swap given the numbers mentionned above:

  • 8,691,976 USDC
  • 2,677,307 DAI
  • 1,739,351 FRAX

So approximately $13.1m worth of assets.

Note that if we’re going that way assets from Standard Liquidity Providers can just remain in the protocol’s Core module so these have the flexibility to leave at any time.

About Transmuter

In this proposal were mentioned some of the limits we’re seeing with the Core module in particular:

  • improper resilience in face of black swan events like the USDC depeg
  • too high dependence on hedging mechanisms.

The Transmuter system was introduced in this whitepaper as a form of price stability module 2.0 for agEUR. For more user friendly details on it, we’ve also written a documentation of the system here.

As a TL;DR, Transmuter is a minting module that can work for agEUR, just like it can work for any other stablecoin. It is conceived as a basket of different assets which can all be used to mint or burn the stablecoin at oracle value.

It comes with automated mechanisms to maintain the exposure to each asset in the reserves within reasonable bounds. This enables the system to properly segregate and diversify the risks between the assets in its backing, and guarantees at the same time that in case of a black swan event the system does not end up over-exposed to the weakest assets of its reserves.

Transmuter supports three main user actions: Mint, Burn and Redeem. The mint and burn actions rely on the idea that each asset in the reserves has a target price used to assess whether the asset is depegging and some conservative measure must be taken or not.

Practically speaking, the three operations work as follows:

  • Mint: Stablecoins can be minted at oracle value from any of the supported assets with adaptive fees provided that the deviation of the asset used with respect to its target price is reasonable.
  • Burn: Stablecoins can be burnt at oracle value for any of the assets in the backing with adaptive fees, provided that the deviation of all assets respective to their target price are reasonable. The idea is to avoid capital outflows changing the exposures of the system in times of uncertainty.
  • Redeem: Stablecoins can be redeemed at any time against a proportional amount of each asset in the backing. Users should have a way to exit at any time, and so this feature is available in any conditions.

Right now Transmuter contracts are being audited by Code4rena and audit report should be released very soon. As soon as it is good, Transmuter will be ready to be onboarded as a new safe and resilient minting module for agEUR.

As the Transmuter is designed to deal with mostly stablecoins pegged to the same currency as the underlying (e.g agEUR), and as the protocol currently controls mostly USD stablecoins, we suggest below to swap the USD stablecoin reserves corresponding to user assets into Euro denominated assets to prepare for the Transmuter launch.

Stablecoins swap

The question is: to which assets should the USD stablecoins be swapped?

Swap Timeline

Provided that Transmuter is launched and voted as a minting module, there’s at first glance nothing obvious about the timeline for the wind down of the Core module and the swaps leading to the launch of Transmuter.
Transmuter could live in parallel to the Core module, and the Core Module is routed on 1inch meaning that when people are swapping agEUR to another token, under the hood 1inch can burn the agEUR if it’s more efficient to do so. At launch, Transmuter will most likely not be routed by aggregators.

There have been very few burns with the Core Module recently. The last burn took place on May 4th. On top of that, the Curve pools with agEUR are currently balanced in a right direction with less agEUR than EUROC, and the agEUR-USDC pool of the protocol is pretty liquid.

All in all, it seems that a valid option can be to fully wind down the Core module for agEUR ahead of launch, and not wait for Transmuter to be routed on 1inch. This will enable the full transition from the old system to the new system to happen quite rapidly.

Asset Assessment

Now comes the question of which stablecoins the protocol should try to acquire.

Transmuter works by tracking its exposures with respect to the assets it has in the backing. And so the proportions of asset to acquire should mirror the exposures the protocol is going to target.

This is a matter of risk, liquidity and opportunities provided by each asset.

Basically the protocol should try to make the most of its revenues to earn a yield while also being liquid enough for all users to come.

On top of this, note that the cost for redemption operations are in Transmuter linear with the amount of assets supported, so while the protocol could support a wide range of different assets, it does not make sense to start adding an asset if there is no plan to scale up a significant chunk of the reserves in it, as it’ll increase the gas cost with no increased diversification.

We have designed an asset allocation framework with the potential and reputable assets to consider. This is a first model that can be refined to include more granular data.

The two assets standing out from the analysis here and that we propose to include into agEUR backing mechanism are:

  • EUROC: Circle Euro stablecoin to which the protocol is already exposed

  • bC3M is a tokenized version by Backed of the C3M ETF by Amundi. This ETF aims at investing in short term European government bonds (32% France, 23% Germany, 20% Italy, 12% Spain, 6% Netherlands, 6% Belgium, 1% Portugal). It is in many ways equivalent the € equivalent of the bIB01 ETF which is accepted as a collateral in Angle Borrowing module on mainnet.

    The yield to maturity of this ETF is 3.55% meaning the protocol could technically earn 3.55% a year from holding this tokenized representation of the asset. There is of course an exposure to the interest rate risk (like if interest rates increase the value of the underlying bonds held by the ETF should decrease and so are the shares of the ETF), but given how low the maturity of the shares are, this shouldn’t pose any risk. The main risk becoming the Backed risk which is assessed in the risk allocation framework above.


With all this analysis in mind, we’re proposing the following for the protocol and using the user assets from the Core module:

  • Acquire €6m of bC3M
  • Acquire €6m of EUROC

We can then launch the Transmuter with two collateral assets as a starter: EUROC and bC3M, and put in the Transmuter: 4.5m€ C3M and 9.5m€ EUROC, and leave the rest on the protocol governor multisig for the time being.

Given that getting fully setup for C3M might take some more time, we could launch in several phases, with first EUROC as a collateral in the Transmuter and then onboard C3M with what has been obtained from the swaps.

The idea here with bC3M is to enable the protocol to generate a revenue on its reserves, and later to structurally distribute it to protocol stakeholders (that is agEUR holders) through a savings contract. While in this setup less than 1/3rd of the assets of the protocol would be related to yield bearing assets, in the future, it’d be worth discussing ways to increase the system’s exposure to other tokenized bonds or very low risk real world assets so its return on assets grows bigger.


For EUROC swaps, we suggest using a similar implementation to what was used after the Euler hack when the protocol had to liquidate some of its ETH holdings, that is to say to perform OTC swaps through Airswap with market makers.
For bC3M acquisition, as the DAO cannot KYC itself with Backed, we propose to buy by filling pre-existing limit orders on CoWSwap.

Other Transmuter Implementation Details


The bC3M product must only be sold directly to qualified investors and licensed resellers. On top of that the tokens must not be made available to U.S Persons or for the account or benefit of U.S. Persons, just like the tokens must not be marketed, offered, or solicited in the U.S. or in any other prohibited jurisdiction.

To this extent, having bC3M in the backing of agEUR means that the protocol needs a way to control the users who can burn or redeem agEUR for bC3M. We propose to rely on third parties controlling the whitelist for this, so that only people with a Backed KYC can participate in these operations. There are currently many potential solutions in place like Keyring or Blue.

With this, it is important to note that if bC3M is accepted as a Transmuter collateral for the protocol, front end interfaces should not make this product available to U.S. Persons.


The oracle question is key in the Transmuter system and assessed in our reserve allocation framework.
While there are no perfect solutions so far for the two assets considered, we suggest using for the time being:

  • for EUROC: whichever oracle between Redstone, Pyth and Chainlink supports EUROC first
  • for bC3M: the C3M oracle provided by Redstone.

Part of what should lead the protocol to increase its exposure to bC3M and other Backed products lies in whether the whitelist and oracle solutions can efficiently scale.

About Liquidity Risks

Having tokenized securities in the backing means that the protocol could face some liquidity risks, in the sense that in case of distress the protocol could end up overexposed to the less liquid Backed assets in its reserves. The advantage with Transmuter with respect to other traditional systems is that agEUR holders have a claim on the reserves of the protocol, and upon redeeming can then deal on their own with the less liquid assets they obtained: in short for every agEUR you have, provided that you’re whitelisted, you may redeem 1€ worth of reserves, without having to wait for the protocol to liquidate at a loss its yield bearing instruments.

So this means that there cannot be any situation where the protocol is facing liquidity risk because any whitelisted user can redeem the less liquid instruments.

Next steps

The gist of what we propose consists in backing agEUR with high quality Euro denominated assets. With this, the protocol would be uniquely positioned to start offering a risk-free savings contract to all its stakeholders.
Intent is that together with Transmuter, not only would agEUR be the safest and most resilient stablecoin of the market effectively diversifying between a range of different assets, it’d also be the most attractive one as it’d be able to structurally pay the market’s risk free yield to its stakeholders.

Transmuter alone will not be sufficient to bootstrap demand for agEUR and kickstart flywheel effects:

  • it needs to be well governed, and this is the reason why we have started this discussion on the roadmap for a fully onchain governance for Angle.
  • offering a savings contract and handling exposures to the different assets of the system means properly assessing and monitoring risks so the protocol does not overpay and manages its liquidity risk. We’ve been working on improved analytics for the protocol and automated toolings so everyone can track the protocol’s exposures to its different underlyings and make up its own mind on the risks of the Angle system. And I guess, all the Angle community should double down its efforts on that so Angle can start emerging as one of the most trusted protocols out there.

This is just a discussion and we’d love to hear everyone’s feedback on this. Given that Transmuter is about to finish its audit, timeline can be pretty quick for this. And before moving forward we’ll need more detailed proposals with exact and initial Transmuter fees to consider.


Thank you, Sogipec, for the well-thought-out proposal. It has prompted some thoughts in my mind regarding the current direction of the protocol with respect to Real-World Assets (RWAs). In order to achieve true decentralization, it is crucial to minimize regulatory risks arising from asset backing in the context of CDP protocols. Therefore, it’s better if Angle Protocol provides a clear perspective on which type of agEUR will be in upcoming period under approval by DAO and veANGLE holders.

I have come across Tangible company’s USDR, which is backed by RWAs. They have faced criticism from the Curve Risk team, highlighting that their stablecoin is highly exposed to regulatory and centralization risks. In response, Tangible has acknowledged that USDR is not a decentralized stablecoin, and users should be aware of the associated risks.

In conclusion, I would like to express my concern regarding the future of agEUR in decentralized finance, as it appears to be increasingly exposed to RWAs while accepting EUROC and bC3M as the initial reserves in the new module.
Thank you.

Overall, I think this is a good path forward. However, my concern is how do we attract capital? The VAST majority of on chain stablecoins are USD denominated. Therefore, in order to grow the protocol, people will need to swap USD stables into EUROC in order to mint participate since you can no longer use USD stables to mint agEUR, and there is only $2m of liquidity in the 3CRV/EUROC. Also, it is important for users to be able to swap out of agEUR back into USD stables, so long as USD stables are so dominant in defi.

I know we have the USDC/agEUR uniV3 pools, but they are dominated by only a few large LP’s, and if a couple of them leave because there isn’t sufficient liquidity to swap out of agEUR back into USDC, that would make things even more difficult to get people to participate. I don’t have a solution yet, but to me this is a big issue. We NEED a path to get people onboarded via USD stables at this juncture in order to get the flywheel moving. Have you guys thought about any possible solutions to this?

Thanks for your thoughts and questions.
It’s true that this proposal is going to increase agEUR’s backing by RWAs, but it’s not substantially going to increase agEUR’s centralized backing so much as a majority of the backing is already from centralized stablecoins.
Overall, whether it’s a RWA (like bC3M) or a centralized stablecoin, I do not think the risk is much higher, especially when the RWAs we’re looking to acquire provide this level of transparency.

These are right concerns but what I believe matters the most is the quality of the processes that help the system to deal with centralized assets and that’s what the Transmuter is here for.
Like a protocol, even if dealing with centralized assets, remains decentralized if its rules are transparent, clear to everyone and many stakeholders can come and have a say on it.

I think the question of attracting capital with this setup with stablecoins with limited DeFi liquidity is a right concern.
But some thoughts:

  • on swapping agEUR back into USD stables: even without secondary market liquidity, I think some of the big protocol stakeholders can still get a Circle KYC and exit with basically very limited fees (even though the process will be more lengthy). The protocol did the acquisition of its EUROC with market makers which had a Circle KYC, so while this makes the UX for redeeming in the worst case not as good as a simple agEUR/USDC swap, it also guarantees all existing agEUR holders that they’ll be able to redeem at a limited cost. On this, note that in the Transmuter system fees can be safely made smaller than the 50bp the protocol was charging for USDC redemptions. The main reason for the high fees was the exposure of the protocol to the oracle frontrunning risk, but now with no exposure to Forex, fees can be made far smaller, I personally had in mind 20bps for EUROC redemption.
  • As for getting people in, same UX problems will happen, but the intent of this proposal is to position Angle to be able to offer a savings yield on agEUR and hence to increase agEUR demand (possibly getting other Euro stablecoin holders to swap their holdings into agEUR). If agEUR is harder to get because it does no longer have primary market liquidity with USDC, then I expect this to benefit providers of liquidity on the secondary market as they’ll get most of the inbound volume: like swap USDC for agEUR on Uniswap, and then get some arbitrageurs to rebalance the pool by minting agEUR with EUROC and add back liquidity in the pool. Probably harder to get in for big holders, but overall, secondary market liquidity should absorb this and benefit from the added volume, with arbitrageurs with a Circle KYC jumping in when needed.

So, this is a question we’ve thought about, but there’s no silver bullet here: it’s going to decrease the UX (in the short term) while making the protocol a lot safer. What ultimately makes me comfortable with situation how it is is that the decrease in UX is not an increase in fees, but just in the worst case an increase in the time needed to redeem (at a lower cost than what was possible before).
Also the Merkl solution is thought as the most efficient solution to keep agEUR liquid with other USD stables.

Here is a balance sheet analysis of before and after the switch to the Transmuter. It’s not 100% accurate but gives you a graphical explanation.


I think it’s a great step in the right direction. The riskiest asset remains below the Surplus of the protocol so agEUR holder have mainly an exposure to EUROC. My view is that EURe and EUROe would be nice addition so agEUR woul be easily swappable for any €-stablecoin. Adn obviously get more productive assets. But all those discussion can be done down the line and are not important for now. They key element is removing the $/€ risk.

On the fees, I would favor low ones. Money must flow, and you can’t put friction on the most liquid stablecoin.

Steakhouse disclaimers


Hello Angle Community,

Thank you for your interest in using bC3M as one of the key assets to form collateral for agEUR. We fully support this initiative.

We’re very excited to bring in another euro-denominated fixed-income product and we’re happy to see a use case already.

bC3M is a price tracker of Amundi ETF Govies 0-6 Months Euro Investment Grade UCITS ETF DR, which seeks to replicate as closely as possible the performance of the FTSE Eurozone Government Bill 0-6 Month Capped Index.

Backed Finance AG (a Swiss company headquartered in Zug) issues EVM-compatible security-tokens via its subsidiary, Backed Assets GmbH, that track the value of RWAs. Backed tokens are fully backed by the underlying, which is held in a secure third-party Swiss custody account, separate from the bank’s balance sheet and thus bankruptcy remote, removing third-party exposure. Backed Assets GmbH has filed and approved a prospectus for the security-tokens with the FMA in Lichtenstein.

There will soon be an official Chainlink oracle in place; until then, Backed will be operating its own oracle, which is updated daily. Chainlink oracles are now live for our other products, and you can read more about them here.

Thank you for considering bC3M as a potential key asset to back agEUR. We hope the community votes in favor of this proposal, and that Angle protocol will find more of Backed’s products useful in the future.

You can find more information here (we are limited to posting 2 links per reply, so additional links will follow):

bC3M Product Page on the Backed Assets website.
Legal Documentation on the Backed Assets website.

Underlying Amundi: C3M

** Disclaimer**

The securities have not been and will not be registered under the U.S. Securities Act of 1933, as amended or with any securities regulatory authority of any State or other jurisdiction of the United States and (i) may not be offered, sold or delivered within the United States to, or for the account or benefit of U.S. Persons, and (ii) may be offered, sold or otherwise delivered at any time only to transferees that are Non-United States Persons (as defined by the U.S. Commodities Futures Trading Commission). The following information may not be distributed outside of jurisdictions where prospectus will be approved and/or passported, in particular not in the United States or any other restricted jurisdiction.The offering or sale of the securities in certain jurisdictions may be restricted by law including because of the underlying(s). For a description of certain restrictions on offers and sales of the securities and on the distribution of this refer to the product documentation.The information does not constitute, and may not be used in connection with, an offer or solicitation in any place where offers or solicitations are not permitted by law. If the laws or regulation of a jurisdiction require that an offering of securities described herein be made by a licensed bank, securities firm or insurance company or any of its affiliates, the offering shall be deemed to be made by such other party or such affiliate on behalf of the Issuer or holders of the applicable securities in such jurisdiction. Some of the information published contains forward-looking statements. Users are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those in the forward-looking statements as a result of various factors. Backed Assets GmbH undertakes no obligation to publicly update or revise any information or opinions published. Backed Assets GmbH reserves the right to amend the information at any time without prior notice. Past performance is not an indication or guarantee of future performance of a Backed product or underlying asset. The value of any investment may be subject to high fluctuations and, in some circumstances, investors may not recover the original amount invested. The information contained may not be considered as being a substitute for economic, legal, tax or other advice and users are cautioned to base investment decisions or other decisions solely on the content delivered herein. An investment decision with respect to Backed equities must only be made on the basis of the official documents published in accordance with applicable securities laws. Users should consult their investment advisers or other advisers prior to making any decisions.

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Additional Links:

bC3M Product Page
Backed Assets legal documentation

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Hey everyone,

In light of this proposal, we’ve prepared an initial fee proposition for the launch of the Transmuter system.
Happy to hear feedback about this one.