OpenDAO USDO Stable Coin Collapses
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OpenDAO launched with the ambitious goal of creating a stablecoin that was intended to be widely adopted throughout decentralized finance. Unlike other coins, the OpenDao was intending to be backed also by real world assets in addition to digital assets, promising a liquidation handling method for dealing with potential defaults. The protocol maintained a peg through to March 7th, 2022. It doesn't appear that any response to the depegging has been issued by the OpenDAO team on Twitter, and no new posts have appeared on Medium. The OpenDAO Reddit has been taken over by posts related to an unrelated project TheOpenDao. GitHub commits have stopped as of July. Overall, it appears that this project has potentially been abandoned, and it's unclear how that's resulted in a price drop since the project claims to have overcollateralized liquidity backing all tokens.
About OpenDAO
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"The Permissionless Stablecoin Minting Protocol. Mint USDO with the tokens you own. Trade USDO for the tokens you want."
"USDO (USD Open Dollar) is a multi-collateral backed stablecoin by OpenDAO. USDO takes the multi collateral and overcollateralized philosophy of DAI and scales it to support an ever growing collateral list of both crypto and real world assets in a permissionless manner." "Whilst USDO’s purpose is simple, its ecosystem is rich and deep. Minters can participate in all stages of the minting lifecycle, from staking their assets right through to liquidity farming. New applications of USDO get added regularly."
"The OpenDAO stablecoin, tentatively named $USDO, will be built into the already-functioning Cashbox System and Open Market Protocol, so it will be used for and backed by a growing selection of assets. As more kinds of collateral are added, it will be increasingly diverse and strong backing for a stablecoin."
"The Open Project seeks to connect real world assets to DeFi. Our suit of stablecoins, which covers many denominations including the US dollar, the Euro, the Australian dollar, and the Indian Rupee, serves as the key bridge for this process. These stablecoins are backed by a range of collateral that includes both on-chain and off-chain assets."
"OpenDAO has developed seemless, trust-minimized, programmatic liquidation processes, to handle offchain defaults, thus allowing for the inclusion of stocks, commodities, real estate, and more, as collateral. The OpenDAO controls the Open Project by administering grants and funding ventures that are synergistic with the mission of connecting real world assets to DeFi. This includes on-chain applications such as minters, trading AMMs, lending and borrowing platforms, fiat exchanges, as well as on and off ramps that facilitate the adoption of the USDO stablecoin suite."
"Market liquidity is an important aspect of decentralized finance and investing in general. If you have something valuable but nobody is buying, it may as well be dirt, right? Platforms like Uniswap solve this with Liquidity Providers who agree to arbitrate the trading of a pair of coins in exchange for a portion of each trade fee. OpenDAO seeks to make liquid markets for a wide array of different real-world assets, and lack of liquidity could be a major problem."
"The solution is Cash Boxes. A cash box is designed for one individual asset or fund to tie it into the blockchain. For example, an Australian Real Estate Trust cash box has been running during the beta for several months. On one end, a fund or investment group etc could approach OpenDAO to have their shares tokenized and listed on the Open Market. They agree to back these tokens with actual shares of a real-world asset and handle details related to their asset's connections. You can provide a stablecoin as liquidity in exchange for cashbox tokens which can be redeemed at anytime for equal parts of the asset token."
"All the functions of OpenDAO are designed to be decentralized and transparent, and they have a clear vision for the future of the Cash Box technology, including DeFi liquid markets for stocks like AAPL and TESLA, real estate, and more. The next leg of the journey, expected to begin by the end of 2020, is to roll out their stablecoin which can be minted when collateral is added to the chain. "
"The OpenDAO stablecoin, tentatively named $USDO, will be built into the already-functioning Cashbox System and Open Market Protocol, so it will be used for and backed by a growing selection of assets. As more kinds of collateral are added, it will be increasingly diverse and strong backing for a stablecoin."
"When liquidity is locked into a market between the OpenDAO stablecoin and a tokenized stock or real estate fund, it essentially confirms that stablecoin being valuable in relation to real markets. The incentives and stable growth of real-world markets can entice larger groups to prefer $USDO to competitor stablecoins."
"Over 67% of total supply is locked in Team Finance token lock contracts for 12 months." "All of our code is open source and viewable on github." "Our contracts have been audited as well as those of our partner's which we utilise." "Key pieces of our architecture are built on battle-tested code with our partners." "Pancake Swap Yield Farming contracts locked for 3 months."
The Reality
There is a long history of stablecoin failures. A high degree of care and oversight is needed to ensure that any collateral is available for redemption when needed.
TBD
What Happened
After launching the USDO stablecoin, it appears that the team has subsequently abandoned redemptions. The price started collapsing below the $1 USD peg on March 7th, 2022.
Date | Event | Description |
---|---|---|
December 22nd, 2020 11:01:18 PM MST | New Yield Dollar Interface | Bitcoin News publishes a press release announcing the OpenDAO building a new yield dollar[20][31]. TBD more information. |
January 27th, 2021 2:09:00 PM MST | DOGEO Stablecoin Proposal | "OpenDAO recently announced a collaboration with the token wrapping protocol, Ren. ... the companies are minting a dollar-pegged and doggy themed stablecoin called DOGEO. For this, Dogecoin will be used as collateral."[27] |
February 24th, 2021 9:06:24 AM MST | OpenDAO Algorand Partnership | OpenDAO and Algorand announce a partnership[11]. TBD review more. |
January 19th, 2022 7:06:55 PM MST | USDO Stablecoin on Metis | An original article is posted on Medium[7][8]. TBD review. |
February 3rd, 2022 4:00:00 PM MST | BeInCrypto OpenDAO Mentioned | The OpenDAO project receives mention on a BeInCrypto article[6]. TBD old version of article, relevance? |
February 27th, 2022 11:30:00 PM MST | USDO Stablecoin on Metis | The OpenDAO protocol again announces that the USDO stablecoin is now available on the AgoraDeFi Money Market[32]. A community member questions whether the team is alive or not. TBD are you alive tweet |
March 7th, 2022 | Price Drops Below Peg | The price of the USD Open Dollar drops to $0.9123 USD[1][3]. |
March 29th, 2022 8:30:00 PM MDT | USDO Stablecoin on Metis | The OpenDAO protocol again announces that the USDO stablecoin is now available on the AgoraDeFi Money Market[33]. TBD |
May 21st, 2022 12:31:04 AM MDT | CryptoSec List Addition | The OpenDAO stablecoin failure is first captured on the ChainSec (formerly CryptoSec) list of failed stablecoins[34][35]. |
July 13th, 2022 4:26:00 AM MDT | Honourable Mention | Twitter user Proof of No Work mentioned this case along with other failed stablecoin projects in his Tweet[36]. |
Total Amount Lost
The total amount lost has been estimated at $24,349,000 USD based on the peak market cap of the stablecoin.
Immediate Reactions
How did the various parties involved (firm, platform, management, and/or affected individual(s)) deal with the events? Were services shut down? Were announcements made? Were groups formed?
It doesn't appear that any response to the depegging has been issued by the OpenDAO team on Twitter, and no new posts have appeared on Medium. The development of OpenDao ended after July, with lead developer Akshay Srivastav appearing to shift to other projects such as a name registry and Infinix Finance.
"USD Open Dollar Price (USDO) [as of November 4th, 2022]: $0.1068" "The live USD Open Dollar price [as of November 14th, 2022] is $0.123759 USD with a 24-hour trading volume of $277.69 USD".
Ultimate Outcome
It doesn't appear that any effort was made to recover the peg. Developers of the project continued to work on other projects.
Total Amount Recovered
While the exact aspects of the redemption are not yet known, it appears clear that the redemption of USDO is likely not possible at this time.
Ongoing Developments
TBD - Update later to see if this project has ever recovered.
Individual Prevention Policies
While the project has undergone many audits, it doesn't appear any of them included the USDO mechanisms. Users should require a more thorough third party review prior, ensuring that there is a full backing and redeem ability of assets, prior to investing.
Avoid the use of smart contracts unless necessary. Minimize the level of exposure by removing or withdrawing assets whenever possible. Aim to choose smart contracts which have obtained third party security audits, preferably having been audited by at least three separate reputable firms. Pay attention to the audit reports, which smart contracts are covered, and whether the smart contract has been upgraded or modified since the report. Ensure that any administrative functions with the ability to remove funds from the smart contract are under the authority of a multi-signature wallet which is controlled by at least three separate and reputable entities.
The USDO stablecoin was supposedly backed by "stocks, commodities, real estate, and more". Scrutiny is required to ensure this is factual.
When using any third party custodial platform (such as for trading), it is important to verify that the platform has a full backing of all assets, and that assets have been secured in a proper multi-signature wallet held by several trusted and trained individuals. If this can't be validated, then users should avoid using that platform. Unfortunately, most centralized platforms today still do not provide the level of transparency and third party validation which would be necessary to ensure that assets have been kept secure and properly backed. Therefore, the most effective strategy at present remains to learn proper self custody practices and avoid using any third party custodial platforms whenever possible.
For the full list of how to protect your funds as an individual, check our Prevention Policies for Individuals guide.
Platform Prevention Policies
Platforms operating a stablecoin with collateral should ensure that all collateral is stored securely and no single individual can have access to the funds. This can be achieved through transparency into which assets back the funds, regular audits and reviews of the collateral, and the implementation of requiring multiple individuals to sign off on all key transactions.
Do not take customer assets and performing highly risky trades and investments without giving visibility to customers.
All aspects of any platform should undergo a regular validation/inspection by experts. This validation should include a security audit of any smart contracts, reporting any risks to the backing (of any customer assets, ensuring treasuries or minting functions are properly secured under the control of a multi-signature wallet, and finding any inadequacies in the level of training or integrity of the team. The recommended interval is twice prior to launch or significant system upgrade, once after 3 months, and every 6 months thereafter. It is recommended that the third party performing the inspection not be repeated within a 14 month period.
All wallets, minting functions, and critical infrastructure should be implemented with a multi-signature requirement, with a recommended minimum of 3 signatures required. This means that making important changes or approving spending will require the keys held by at least 3 separate individuals within the organization to approve. The multi-signature should be implemented at the lowest layer possible, all key holders should have security training, and all key holders should be empowered and encouraged to exercise diligence.
An industry insurance fund could provide assistance with events like this, and also help to establish the list of validators.
Work with other industry platforms to set up a multi-signature wallet with private keys held separately by delegate signatories from seven prominent platforms and services within the industry. Establish requirements for contributions by all platforms and services, designed to be affordable for small platforms yet large enough to cover anticipated breach events. Any breach event can be brought forth by a member platform or a petition of 100 signatures for consideration by the delegate signatories. A vote of 4 or more delegate signatures is required to release any funds, which could partially or fully restore lost funds based on their assessment.
For the full list of how to protect your funds as a financial service, check our Prevention Policies for Platforms guide.
Regulatory Prevention Policies
While the project underwent more than one audit, it doesn't appear any of them included the USDO redemption mechanisms. A more thorough third party review prior to launching would ensure that there is a full backing and redeem ability of assets.
All platforms should undergo published security and risk assessments by independent third parties. Two assessments are required at founding or major upgrade, one after 3 months, and one every 6 months thereafter. The third parties must not repeat within the past 14 months. A risk assessment needs to include what assets back customer deposits and the risk of default from any third parties being lent to. The security assessment must include ensuring a proper multi-signature wallet, and that all signatories are properly trained. Assessments must be performed on social media, databases, and DNS security.
An industry insurance fund could then also be made available to assist in unexpected situations that still made it through the review process.
Set up a multi-signature wallet with private keys held separately by delegate signatories from seven prominent platforms and services within the industry. Establish requirements for contributions by all platforms and services within the country, designed to be affordable for small platforms yet large enough to cover anticipated breach events. Any breach event can be brought forth by a member platform or a petition of 100 signatures for consideration by the delegate signatories. A vote of 4 or more delegate signatures is required to release any funds, which could partially or fully restore lost funds based on their assessment.
For the full list of regulatory policies that can prevent loss, check our Prevention Policies for Regulators guide.
References
- ↑ 1.0 1.1 USD Open Dollar price today, USDO to USD live, marketcap and chart - CoinMarketCap (Nov 3, 2022)
- ↑ OpenDAO: USDO Token | Address 0xc79358de3868a7c751f52cfeecd650595aee8b18 | PolygonScan (Nov 3, 2022)
- ↑ 3.0 3.1 USD Open Dollar Price in USD: USDO Live Price Chart & News - CoinGecko (Nov 14, 2022)
- ↑ OpenDAO - The Permissionless Stablecoin Minting Protocol (Nov 15, 2022)
- ↑ OpenDAO – Medium (Nov 15, 2022)
- ↑ 6.0 6.1 The Rising Standards of DeFi Amidst A Bear Market - BeInCrypto (Nov 14, 2022)
- ↑ 7.0 7.1 USDO Stablecoin on Metis Via AgoraDeFi Money Market - Team OpenDAO Medium (Nov 15, 2022)
- ↑ 8.0 8.1 USDO Stablecoin on Metis Via AgoraDeFi Money Market - Team OpenDAO Medium Archive January 19th, 2022 7:06:55 PM MST (Apr 26, 2023)
- ↑ Telegram: Contact @opendao (Nov 15, 2022)
- ↑ OpenDAO (Nov 15, 2022)
- ↑ 11.0 11.1 Algorand and OpenDAO — Joining Forces (Nov 15, 2022)
- ↑ @opendaoprotocol Twitter (Nov 15, 2022)
- ↑ OpenDAO · GitHub (Nov 15, 2022)
- ↑ akshaysrivastav (Akshay Srivastav) · GitHub (Nov 15, 2022)
- ↑ Commits · opendao-protocols/open-mint-react · GitHub (Nov 15, 2022)
- ↑ Summary - Whitepaper v2 (Nov 15, 2022)
- ↑ Introduction - Transparency (Nov 15, 2022)
- ↑ OpenDAO - YouTube (Nov 15, 2022)
- ↑ Security - Transparency (Nov 15, 2022)
- ↑ 20.0 20.1 OpenDAO Builds New Yield Dollar Interface on Top of UMA, Accepts BTC as Collateral – Bitcoin News Press Release (Nov 15, 2022)
- ↑ OpenDAO - Real World Assets for DeFi (Nov 15, 2022)
- ↑ OpenDAO Price Today (Official) | Live OPEN Price Chart in USD | CryptoRank.io (Nov 15, 2022)
- ↑ Morioh (Nov 15, 2022)
- ↑ OpenDAO - Bridging Real World Assets to DeFi (Nov 15, 2022)
- ↑ https://www.publish0x.com/crypto-thoughts/how-opendao-plans-to-make-a-strong-stablecoin-xrylprk (Nov 15, 2022)
- ↑ https://www.publish0x.com/crypto-thoughts/what-are-opendao-cash-boxes-for-xnqeemm (Nov 15, 2022)
- ↑ 27.0 27.1 OpenDAO enables Dogecoin’s use as a stablecoin called DOGEO - The Coin Republic: Cryptocurrency , Bitcoin, Ethereum & Blockchain News (Nov 16, 2022)
- ↑ Audits - Transparency (Nov 16, 2022)
- ↑ audits/CashBox-v1 Quillhash Audit Report October 2020.pdf at master · opendao-protocols/audits · GitHub (Nov 16, 2022)
- ↑ OpenDAO: A DeFi Bank (Nov 24, 2022)
- ↑ OpenDAO Builds New Yield Dollar Interface on Top of UMA, Accepts BTC as Collateral - Bitcoin News Press Release Archive December 22nd, 2020 11:01:18 PM MST (Apr 26, 2023)
- ↑ opendaoprotocol - "MISS THE BIG NEWS?️ There's still time. Check article below... USDO Stablecoin on Metis via AgoraDeFi Money Market" - Twitter (Nov 14, 2022)
- ↑ opendaoprotocol - "MISS THE BIG NEWS?️ There's still time. Check article below... USDO Stablecoin on Metis via AgoraDeFi Money Market" - Twitter (Nov 14, 2022)
- ↑ Comprehensive List of Failed Stablecoins - CryptoSec (Oct 28, 2022)
- ↑ Documented Timeline of Failed Stablecoins - CryptoSec Archive May 21st, 2022 12:31:04 AM MDT (Apr 26, 2023)
- ↑ ABettaMeta - "Yeah flexUSD, UST, DEI, TITAN, BitUSD, NuBits, Basecoin, One Cash, Dynamic Set Dollar, unified Stable Dollar, bDollar, Midas Dollar, Freeliquid, Stand Cash, BondAppetite, Empty Set Dollar, Coffin Dollar, OpenDAO, Wault Finance, BeanStalk, & DefiDollar holders are all doing great!" - Twitter (Jul 13, 2022)
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