With BTC moving potentially on-chain I wanted to open up discussion of a tBTC asset again (perhaps with higher tax rates than the regular fiat coins because we don’t want it to be used for general trading). I was originally against it, because I saw it as a BTC denominated debt against LUNA hodlers, however if we will have $1B of BTC liquidity moving on-chain it could make sense to have the liquidity on astroport in BTC/tBTC. This would allow us to better match our assets/liabilities while still gaining the liquidity from BTC. This would also allow the astroport pool to use the stable invariant formula which i believe should make liquidity even deeper and more effective.
The alternative is of course doing the giant BTC/UST liquidity pool on astroport, but the downside here is that it will make UST market cap and thus LUNA more highly correlated with BTC. The other huge downside is that we would be using that generalized AMM formula which isn’t nearly as effective in terms of depth of liquidity and the pool will surely lose BTC over time due to impermanent loss as the US dollar is under pressure. Doing tBTC as the LP instead has us effectively hedged and offering deeper liquidity, and could even have the pool accumulate BTC over time from trading fees.
The ultimate result is that because of the hedging it is like we gaining fiat liquidity (long and shorts cancel out) but with decentralization benefits of on chain BTC.