Background
TUSD is relaunching a native token (instead of a Binance issued) on BNB Chain. The old TUSD token (currently on AF1.0) will be deprecated, with Binance planning to auto convert all TUSD deposited on the exchange for users.
Source: Crypto Royals Club on Binance Feed: TUSD Launches on BNB Chain as a Native Token | Binance Feed
Rationale
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Even though TUSD is a top-tier, safe stablecoin, if the liquidity in the pool gets too low relative to the position size, there is still a risk of liquidation from price impact when swapping to pay back debt.
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TUSD borrowing amount is already low (< $100k USD), so discontinuing support TUSD will have small impact on the protocol revenue.
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This is only impacting AF1.0. We will plan to support the new TUSD on AF2.0.
Implementation:
We will follow the same implementation structure for when we sunset WaultSwap (Ref.)
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We will upgrade the TUSD farming contracts to allow for a privileged address (i.e., dev controlled address) to liquidate any TUSD’s farming positions
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Given there are still TUSD liquidity left on DEXs, we will swap TUSD to base asset as required to pay back debt. However, if at the time of execution, there isn’t enough TUSD liquidity, we will change the liquidation method. Instead of swapping non-borrowed token in the DEX (this is the cause of bad debt or large slippage due to low liquidity), we will use oracle price and let the new liquidation strategy deduct the necessary amount from our wallet as determined by the Oracle.
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Farming positions will now have all base assets and be able to pay back debt and close the positions
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Any remaining value after debt repayment is sent back to users
Note:
- Given the time sensitivity of this issue and the straightforwardness nature of this topic (we have done this for other farms several times in the past), we decided to make it into an AIP right away.