A savings protocol represents a collaborative of savers. They can fund stabilizer assets.
Sweep is a savings protocol that provides a reliable base interest rate for the global dollar economy. Stablecoin holders can swap into SWEEP to get improved interest pass-through, proof of reserves, and asset protection. Sweep designers and governors have made a specific set of decisions about asset allocation and redemption.
Stablecoins and yield protocols can use SWEEP directly as a collateral asset.
Stablecoins and yield protocols can use Stabilizers to place money into their own collateralized lending deals.
Savings protocols define themselves most clearly by what they choose to fund. The savings protocol will approve Stabilizers for funding, and keep track of the funding limits and other parameters.
What asset will fund the Stabilizers? Sweep lends SWEEP, a newly minted, dollar-denominated liability. MakerDAO, Aave, and Frax lend DAI, GHO and FRAX as newly minted liabilities.
Protools can also fund Stabilizers from vaults that contain directly redeemable stablecoins such as USDC, USDT, and BUSD.
The savings coin needs governance to control the asset list, other parameters, and software upgrades.
How long does it take to get money back? Can savers get money out quickly, or are they making a long duration investment? Savings coins that attempt to implement a price peg will need a process and an algorithm for handling losses and writedowns.
Savings coins can have transfer restrictions that help them meet various regulatory requirements. The Sweep template includes a link to a pluggable "TransferVerifier." This can implement:
- Blacklist. Restrict addresses that don't meet AML requirements
- Whitelist. Restrict access to addresses matching a known list of qualified participants
- Qualifications. Restrict access to addresses that have on-chain qualifications such as non-transferable NFTs
Savings protocols define themselves with their asset list.
- DeFi only. This is subject to different regulation and risks
- High yield and long duration. This will be a riskier and more volatile instrument
- Borrower collaboratives that seek to increase cash efficiency by building shared pools of on-demand liquidity
- A full bank model with maturity transformation. This uses some liquid assets to handle cash flows, and funds some illiquid and long duration assets. Long duration investments are difficult to fund, but they have a much higher impact than short duration investments, and are much more important in the real economy.
MakerDAO has attempted to use a single DAO to satisfy all of these goals, with an expanding operational payroll. They have reached the limits of DAO governance and run into disputes.
Open source systems can use forking to resolve disputes about the software mission, and to launch new missions. They make a copy of the software and deploy it under new governance. This resolves disputes and results in simplified operation for both the old and the new fork.
A fork of Sweep can satisfy new missions by approving funding for a different list of assets.