As announced a few days, Paxos will stop minting new BUSD tokens: https://www.prnewswire.com/news-releases/paxos-will-halt-minting-new-busd-tokens-301744964.html
As BUSD is still redeemable for at least one year into USD, it has been actively redeemed and circulation has been decreaisng quickly.
According to Defillama (https://defillama.com/stablecoins), there is now $13.4bn BUSD in circulation. While this still makes BUSD the top #3 stables, this is down 17% in a week.
It is widely expected that circulation is bound to decrease in the coming days/weeks/months as demand for BUSD will continue to reduce.
Synapse currently incorporates BUSD in one pool, on BNB Chain, as this was historically the stable the most used there. That pool also includes nUSD, USDC and USDT.
As a result, it makes sense to remove BUSD from that pool.
Few routes are in theory possible
- Replace BUSD with DAI and have a pool with nUSD/USDT/USDC/DAI
- Remove BUSD and have a pool with nUSD/USDT/USDC
- Remove BUSD and either USDT or USDC and have a pool with nUSD/USDT or nUSD/USDC
- Wait until one new stable replaces BUSD
It feels to me that the logical option, as things currently stands, would be to operate with a pool that includes nUSD, USDT and USDC. Reasons for that position are as follows
- DAI is currently not really used on BNB Chain. For example Ellipsis Finance only pool that includes DAI saw less than $1 (!) of volume in the last 24h. As such it currently makes little sense to replace BUSD with DAI
- Choosing between USDT and USDC would force Synapse to make a bet on what will be the most used stable on BNB Chain going forward. While USDC is obviously different on mainnet / L2, it is unclear on what route BNB Chain would take here given difference in user base & likely influence of actions taken by Binance. As a result, USDT could potentially become the leading stable there or Binance could push another stable (e.g. TUSD or a new stable)
- Having another stable in the pool allows Synapse to also capture stableswap revenues. This may still be valuable on a chain where Curve does not exist
- As circulation of BUSD reduces, some liquidity providers may not feel comfortable in providing liquidity in a BUSD pool. This would lead to less liquidity provided in the pool, requiring either an increase in SYN emissions (running the pool at a higher APR) or leaving this unchanged, leading to less liquidity on the bridge
Main negative is that having three stables in the pool would be less efficient, from a bridge perspective, than having just one. While this is quite a strong argument to go for nUSD + one stable, we cannot really know what the most used stable on BNB Chain will be. If we make the wrong decision, we would then have to force users to swap again whatever they receive (either done directly through Synapse which routes it through DEX, as we do on some chains or the user would do it himself), leading to the bridge being less competitive. And ultimately having to redeploy.
From that perspective, I think switching to a nUSD/USDT/USDC pool makes the most sense and can be revisited, in the future, if one stable becomes more prevalent on BNB Chain, for example if Binance decides to replace BUSD with a new Binance-labelled stable.
Keen to get others views
