One of the ZKsync core dev teams, Matter Labs, is proposing that Venus include the USDC stablecoin as a core lending market within the Venus Core pool on the ZKsync Era blockchain.
Rationale
With native USDC now available on ZKsync Era, its liquidity is expanding and starting to replace the bridged USDC liquidity from Ethereum (USDC.e).
Motivations
USDC is designed to represent U.S. dollars on-chain, fully backed by cash and cash-equivalent assets and can be redeemed at a 1:1 ratio through Circle. Circle provides monthly attestation reports regarding USDC reserves on its Transparency page.
Currently, USDC.e is available on the Venus Core pool of ZKsync Era which is a bridged version of USDC from Ethereum. USDC.e differs from native USDC and is not supported by Circle’s products. USDC.e cannot be sent to a Circle deposit address, and to off-ramp to fiat currency, you would need to “unbridge” it back to the Ethereum blockchain. This leads to increased fees and a subpar user experience.
By adding native USDC, Venus can offer the version that Circle customers can mint directly on ZKsync Era via their Circle accounts and APIs. Circle customers can also seamlessly off-ramp this version to fiat from their Circle accounts. Also, if/when the Cross-Chain Transfer Protocol (CCTP) is implemented on ZKsync Era, the bridging to and from different blockchains and capital efficiency would be improved.
Ultimately, as native USDC becomes more widely used on ZKsync Era, it can enhance the liquidity, usage, and user-friendliness of the Venus protocol.
Chaos Labs supports listing native USDC on Venus’s ZkSync deployment.
ZkSync Liquidity
USDC is one of the most trusted assets in DeFi, thus not requiring a detailed analysis. However, we provide information on its ZkSync liquidity in this section. Native USDC currently has a total on-chain supply of 8.599M.
Blockscout
Encouragingly, its liquidity is well distributed, with large swaps routed across a variety of DEXes and pools.
This ensures that no single user, DEX, or pool, is largely responsible for USDC’s on-chain liquidity.
Collateral Factor and IR Curve Parameters
We recommend setting all CF and IR Curve parameters equivalent to USDC.e’s, finding that they are essentially the same assets, albeit USDC.e does carry some bridging risk.
Supply and Borrow Cap
Chaos Labs’ approach to initial supply caps involves setting the Supply Cap at 2x the liquidity available under the Liquidity Penalty (set at 10%) price impact. This leads to a recommendation of 1.25M for the supply cap, with the borrow cap set at 80% of this value.
Given that USDC.e remains the larger of the two assets as of this writing, we recommend not altering that market. However, should native USDC grow relative to USDC.e, we may recommend actions to deprecate the USDC.e market, as it carries inherent bridging risk.
Blockscout
Recommendations
Parameter
Value
Pool
ZkSync Core
Collateral Factor
72%
Liquidation Threshold
75%
Supply Cap
1,250,000
Borrow Cap
1,000,000
Kink
80%
Base
0.0
Multiplier
0.0875
Jump Multiplier
0.8
Reserve Factor
10%
Disclaimer
Chaos Labs has not been compensated by any third party for publishing this recommendation.
