Concern of cUSD to be used for Dapp (Metaverse + NFT)

Ecosystem Dapps
1

First of all, I truly like the vision and mission of Celo which is good for the world.

I and my friends are planning on making Dapp about metaverse + NFT, which needs stablecoin for the payment in the Dapp. We are thinking about developing it on Celo blockchain, however, we have some concerns about long-term stability of cUSD.

Today, cUSD marketcap is less than $100 million. The reserve and collateral backed the cUSD seems to be OK (2-4 times of cUSD marketcap).

Assuming, cUSD marketcap increases to $USD billions with Celo, BTC, ETH backed. The collateral/reserve may be only 1-2 times of CUSD marketcap. If there is a market clash and the values of Celo, BTC, ETH are 80% down as happened this year, the reserve/collateral can become less than cUSD marketcap.

May cUSD not stable and encounter the similar problem as what happened to Terra/Luna/UST this year?

Sorry for asking this concerns. I am not expecting Celo, cUSD to have any problem. I am really interested in Celo and want to see Celo grows in the long future, that’s why I want to really understand “CELO”.

Thank you very much.

2

Hi @ekprawees,

Mento, the stability protocol behind cUSD and other cXXX stables, currently aims for 100% USDC+DAI backing of all stable assets to take out the market price risk of the other reserve assets that you described. Please see this governance proposal that passed a while ago for more details: Celo Governance by Staking Fund

Cheers
Roman

3

Thank you for the answer. Please help me another question. In the long run, if people use cStable to pay for gas/transaction fees and cStable is backed by USDC+DAI (not Celo coin), there may be “no demand” for “Celo coin” and there is no need for “Celo coin”. Is it correct?

Thanks.

4

I don’t think this is correct. CELO has utility value as it is used by folks to pay for gas even if other currencies are eligible as well. It also has governance value as holding it allows you to govern the Celo protocol.

2 Likes
5

Thank you so much - I have more clear picture about CELO. Agree that CELO still has value in itself since it can be used to govern the Celo.