The amount of ZUSD in the BabelFish aggregator has reached ~92% of the total balance of stablecoins. The BabelFish governance multisig signers have decided to use the emergency deposit pause feature to temporarily pause ZUSD deposits.
As with the RDOC deposit pause, this is another important step towards proper management of the BabelFish stablecoin aggregator. Since the staking contract is paused and currently being worked on, we cannot implement the pause through the desired method of a community vote on the basket balancing incentive mechanism. While there are no other tools in place, multisig signers who are guarding the BabelFish protocol will be more hands-on in managing the aggregated stablecoins.
After the launch of the Sovryn Dollar (DLLR), ZUSD will be aggregated by Mynt — a bitcoin-backed stablecoin aggregator — to mint DLLR. The Sovryn Dollar will become the main stablecoin in the Sovryn ecosystem. This will generate additional use cases for ZUSD, which, at this moment, are limited to paying off loans, redemptions, depositing ZUSD in the Zero Stability Pool and converting ZUSD to XUSD. Recently, an increase in the exchange of ZUSD for XUSD caused a significant increase in the outflow of other aggregated stablecoins, mainly on the ETH and BSC networks. It will take time to recover liquidity in other stablecoins and reduce the amount of ZUSD in the aggregator, relative to other stablecoins. Withdrawals of ZUSD through BabelFish (converting XUSD to ZUSD) are still possible.
While the deposit pause is in place, ZUSD holders will be unable to deposit ZUSD into the BabelFish aggregator. However, they will still be able to deposit ZUSD into the Zero Stability Pool and potentially profit from liquidations on the Zero protocol. They will also be able to use ZUSD to pay off Zero lines of credit, or redeem ZUSD for RBTC using the Zero protocol. And as mentioned above, it’s still possible to convert XUSD to ZUSD using BabelFish (via Zero early access UI, and soon, the new BabelFish UI) to pay off Zero lines of credit.
From a risk management perspective, ZUSD is one of the safest and most censorship resistant stablecoins to hodl, as it is directly tied to bitcoin. It is significantly overcollateralized with sophisticated, yet easy to understand mechanisms to maintain its USD peg. But, from an overall liquidity and user perspective, we need other stablecoins in our aggregator.
We believe that ultimately this decision is in favor of all users of the Rootstock and Sovryn ecosystems.