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[BIP-31] Decommission USDC as collateral for baoUSD - Governance Proposals - Bao Finance Governance.html
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<title>[BIP-31] Decommission USDC as collateral for baoUSD - Governance Proposals - Bao Finance Governance</title>
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The proposal aims to decommission USDC as collateral for Bao Markets.
Background
USDC was included as collateral for baoUSD during alpha testing before bSTBL was launched, and the community decided on what the&hellip;">
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<meta property="og:description" content="Summary The proposal aims to decommission USDC as collateral for Bao Markets. Background USDC was included as collateral for baoUSD during alpha testing before bSTBL was launched, and the community decided on what the finished product for baoUSD should look like. As the community aims to make baoUSD the best-decentralized stablecoin, the collaterals that can be used should be restricted to ones that will always have liquidity on Ethereum and are decentralized. While USDC is a market leader, t..." />
<meta name="twitter:description" content="Summary The proposal aims to decommission USDC as collateral for Bao Markets. Background USDC was included as collateral for baoUSD during alpha testing before bSTBL was launched, and the community decided on what the finished product for baoUSD should look like. As the community aims to make baoUSD the best-decentralized stablecoin, the collaterals that can be used should be restricted to ones that will always have liquidity on Ethereum and are decentralized. While USDC is a market leader, t..." />
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Bao Finance Governance
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<a href="/t/bip-31-decommission-usdc-as-collateral-for-baousd/1218">[BIP-31] Decommission USDC as collateral for baoUSD</a>
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<h1>
<a name="summary-1" class="anchor" href="#summary-1"></a>Summary</h1>
<p>The proposal aims to decommission USDC as collateral for Bao Markets.</p>
<h1>
<a name="background-2" class="anchor" href="#background-2"></a>Background</h1>
<p>USDC was included as collateral for baoUSD during alpha testing before bSTBL was launched, and the community decided on what the finished product for baoUSD should look like. As the community aims to make baoUSD the best-decentralized stablecoin, the collaterals that can be used should be restricted to ones that will always have liquidity on Ethereum and are decentralized. While USDC is a market leader, there is no guarantee that it will always be. Additionally, USDC is centralized and controlled by an organization that must adhere to requests from regulators or law enforcement in their jurisdiction. It will be easier to remove it as collateral now than in the future when many positions are using it to mint baoUSD that will have no reason to close their positions. This prevents the community from altering the collaterals that back baoUSD if needed, as they can with bSTBL.</p>
<p>Instead of using USDC to mint baoUSD, users will need to use bSTBL, which can change its underlying assets to any stablecoins the community chooses to have backing baoUSD. While this includes USDC for the time being, it will be easy for the community to change to a more decentralized option when the time is right.</p>
<p>Decentralized stablecoins that use centralized collateral are subject to the same risks as centralized stables. Removing USDC collateral will solidify our intentions to become a market-leading decentralized stablecoin.</p>
<h1>
<a name="goals-3" class="anchor" href="#goals-3"></a>Goals</h1>
<ul>
<li>Improve decentralization of collaterals for baoUSD by removing USDC before it becomes widely used.</li>
</ul>
<h3>
<a name="proposed-solution-4" class="anchor" href="#proposed-solution-4"></a>Proposed Solution</h3>
<ul>
<li>On the comptroller, use the setmintpaused function for bdUSDC (0x7749f9f3206A49d4c47b60db05716409dC3A4149) to false. This will prevent more USDC from being deposited as collateral by preventing bdUSDC (bao deposited USDC) tokens from being minted <a href="https://etherscan.io/address/0x61d25e9c65fb3bd2aa54e426b3044020dd339b8d#writeContract" class="inline-onebox">Comptroller | Address 0x61d25e9c65fb3bd2aa54e426b3044020dd339b8d | Etherscan</a>
</li>
<li>Remove USDC from the front end.</li>
</ul>
<h3>
<a name="risks-5" class="anchor" href="#risks-5"></a>Risks</h3>
<p>bSTBL is less widely used than USDC. Removing USDC may increase the barrier to entry for baoUSD, however, we have seen most of the baoUSD minted using bSTBL collateral, so the impact is expected to be minimal.</p>
<p><strong>please note this proposal refers to USDC collateral directly within bao markets and does not effect bSTBL</strong></p>
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