Onboard Brale and Glo Dollar to Kusama AssetHub v2

0.0 Context

Kusama’s purpose as a ‘canary net’ is twofold:

  • Test experimental ideas under real economic conditions ahead of arriving on Polkadot.
  • Advance concepts that may only ever exist within Kusama.

Watch Gavin talk about Kusama’s role here.

1.0 Summary

1.1 TL;DR

Phase 1 of the branded stablecoin strategy seeks to introduce a fully backed stable coin Glo Dollar into the Kusama ecosystem via Asset Hub.

Glo Dollar’s unique value proposition is that it uses returns on yield to support charitable initiatives via its partner Give Directly.

The stablecoin is issued by Brale a regulated US entity authorised to provide such services and to enable the creation of branded stablecoins.

Kusama gains a valuable utility function in Glo Dollar:

Kusama gains a valuable utility function in Brale:

  • The opportunity to experiment with other natively minted branded stablecoins beginning with Kusama-USD and Polkadot-USD in phase 2.

  • Kusama and Polkadot communities receive income from yield on issued stablecoins compared to USDT/C where revenues are entirely privatised and do not stay within the ecosystem.

  • Community initiated stablecoins launched in phase 3.

1.2 Integration

Glo Dollar will be available on Asset Hub
Swap pools can be created within Asset Conversion Pallet.
There will be on and off ramps to fiat pairs via Glo Consortium partners.

1.3 Initial market making

Intitial liquidity for the pool will be c. $25k KSM and $25k USDGLO.
There are plans to introduce further liquidity but this is out of scope for this initial proposal.

1.4 Marketing

Kusama will become a tier 1 member of the emerging Glo Consortium that currently includes 30 partner organisations across a wide range of domains.

1.5 Costs

The total grant requested is US$250,000.00.

This is paid in two (2) scheduled payments to Brale and Glo Dollar verified addresses.

First payment is on approval, second is 16 weeks later.

A 10% network services fee of $25,000 is paid on top of the grant in two scheduled payments to Decent Partners including VAT at 20%.

Each beneficiary receives a 10% volatility buffer to cover any price moves and will be refunded if unused.

2.0 Meet the teams

2.1 Glo Dollar

Glo Dollar was founded in late 2021 with funding from the Sijbrandij Foundationj the family foundation of Sid Sijbrandij the founder of Gitlab and launched in August of this year.

It has a current market cap of $2.4m.

Glo currently supports a number of Ethereum Layer 2 networks (CELO, BASE, Optimism, Polygon, Arbitrum) as well as the Ethereum mainnet.

Liquidity for holders into other assets is primarily handled through Uniswap pools, although direct redemptions can be handled with Glo’s issuer Brale and partner OTCs such as 1Konto.

The Glo Foundation is beginning to earn revenue that is then directed towards charitable causes.

Initially, Glo’s partner organisation for these disbursements is GiveDirectly, which was chosen for its low cost of operations and high level of transparency and accountability.

Glo’s objective is to scale its stablecoin to be one of the largest stablecoins globally.

At scale, holding approximately $20,000 of Glo for a year can pull one person out of extreme poverty.

By the end of next year, Glo aims to be supporting more than 10,000 people a year with basic incomes.

If successful, Glo, through its partners, hopes to eliminate a significant portion of extreme poverty.

2.2 Brale

Brale enables the creation of branded stablecoins from partner organisations sharing revenues on yield.

Brale’s leadership team has developed regulated financial products for over a decade.

At Dwolla, we helped invent Banking-as-a-Service (BaaS), facilitating tens of billions per year in transaction volume for more than 10 million end users.

Our partners built the BSA/AML programs banks and FinTechs rely on to operate their businesses.

As a registered Money Services Business (See NMLS ID 2376957) and a licensed money transmitter in the US, Brale is licensed to offer stablecoin issuance, redemption, exchange, and custody services.

As of December 2023, Brale has acquired Money Transmitter Licenses or exemptions to offer regulated services in the following 36 U.S. states:

Alabama, Alaska, Arizona, Arkansas, California, Colorado, District of Columbia, Georgia, Illinois, Indiana, Iowa, Kansas, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Carolina, North Dakota, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Utah, West Virginia, Wisconsin, Wyoming.

Stablecoins are fully backed by cash, cash equivalents, and U.S. treasuries, subject to daily reporting and monthly attestations performed by an independent accounting firm according to standards set by the American Institute of Certified Public Accountants (AICPA).

Reserves are held in a number of U.S. regulated financial institutions that have FDIC insurance, ensuring that the funds remain available for disbursements irrespective of the health of the underlying banking institutions.

Treasury yield on stablecoin reserves is evaluated monthly and based on average daily market cap in the previous month.

2.3 Decent Partners

Decent Partners provide Network Services to on-chain governed networks, fusing independent research, strategy and development, building bridges between on and off-chain talent, assets and resources to release the creative potential of connected minds.

Our strategy is rooted in the assumption that direct contribution and experimentation across all aspects of live on-chain governed networks will lead to insights not revealed through more traditional top down education.

We co-stewarded the development of the Edgeware incubated Kusama parachain Kabocha that is set to experiment with identity, rights management and collective creation.

We are structured as a UK based on/off chain organisation with experience operating across Edgeware and Kusama networks as well as contributing to Decred - perhaps the oldest on-chain governed network.

Our network covers a wide range of experience from finance, investment, regulation, media, advertising, brands, digital development, events and talent development.

The company has existed since 2016 with the intention of building a network based business that could develop sustainable new revenue models for advancing network public media, goods and services, aligning stakeholder incentives over the long term.

We first engaged with Gavin and Ethcore (ahead of the formation of Parity) in 2016, and later participated in the original Polkadot ICO and Edgeware lockdrop.

Returns have been used to fund operations and to bootstrap a range of grass-roots initiatives with the intention of onboarding these to Substrate based networks over time.

2.4 Appearances

Watch AAG appearance here.

3.0 Problem definition

Kusama’s direction is informed by the contributions of an emerging contributor set who propose spending to the collective’s treasury denominated in KSM.

Stablecoins are important to counter volatility of crypto assets, this can be useful to support budgeting and expenditure by collectives and to ensure a consistent baseline when assessing the relative impact and performance of treasury spending over time.

The recently passed HydraDX proposal to acquire USDT for the salaries of Polkadot based salaries speaks to this need.

With the Polkadot 1.1 upgrade it is now possible for the treasury to spend any asset which unlocks new possibilities within Kusama for a native stablecoin related to spending, management and diversification.

With Tether removing support for USDT, Kusama is reliant on bridged USDT and USDC from Polkadot.

Tether has never been a good fit for the Web3 philosophy given its murky origins and continuing lack of transparency in terms of its ownership, reserves and profit.

Circle’s USDC is native to Polkadot and is managed more transparently, however yield from its growing reserves is entirely privatised and directed to opaque ends.

Given its founding mandate, it makes sense for Kusama to experiment with more innovative approaches as part of a move towards a more structured approach to kickstarting ecosystem innovation.

4.0 Risks, Compliance and Regulatory

Reserves backing USDGLO are fully backed 1:1 with supply and are held in Brale’s treasury infrastructure in segregated accounts in U.S. financial institutions.

Reserves are reported on daily, subject to monthly reserve report attestations performed by an independent accounting firm. Reserves are also directly reported to U.S. regulators.

As a regulated entity, Brale is committed to managing reserves in line with all laws and regulations, and would face severe legal action for any unintended use of reserves.

USDGLO can be off-ramped to USD through Brale for registered U.S. businesses.

As part of the go-to-market strategy, USDGLO will also be made available for off-ramping through additional custodians and OTCs. Consumer off-ramping will be supported through a partner once sufficient volume and depth is established in on-chain liquidity.

MiCA is expected to go into effect in late 2024, and Brale expects to apply for European licensing. We believe that Brale’s current treasury and transparency practices are consistent with MiCA’s requirements for asset-backed tokens.

5.0 Potential benefits to Kusama

Glo will support Kusama long term and aims to bring significant marketing and capital commitments to the ecosystem.

Glo and Kusama both share a common concern for the public goods aspect of crypto.

Not only is Glo run and founded by long time believers in the traditional crypto ethos but its core mission is to do good with crypto.

As the Glo Foundation is not seeking to deliver economic profits to shareholders, fundraising and other funds it earns are invested back into the broader crypto economy and, specifically, the ecosystems that Glo has partnered with.

Glo is attracting capital and buyers to crypto that have traditionally eschewed investment in the space; in particular, non-profit funds and conservative large business organisations.

As these organisations become familiar with crypto, they will likely look to expand their purchases beyond stablecoin assets.

Glo is committed to sharing with these partners the value within the Kusama ecosystem and encouraging their investment of funds into partner projects that are developed on top of Kusama.

Glo has a significant number of partners interested in yield earning products that hold Glo.

These partners are chain agnostic; if this proposal moves ahead, Glo would prioritise driving these capital inflows to products that hold Glo on Kusama.

6.0 Glo ecosystem

7.0 Functionality at launch

  • Swap KSM for Glo Dollar (USDGLO) via AssetHub DEX
  • Fiat On/Off ramps
  • Other integrations within Glo Consortium TBC.

8.0 Initial market making

Glo Dollar work with Keyrock for market making - they charge a monthly fee to manage pools. They supply the pool with funds sent from the Glo Foundation and then they adjust the pools when needed based on how much is swapped on each side.

This will be the approach for a KSM:USDGLO pool.

The grant funds will cover the market making fees and provide us with funds to contribute to the pool via the market maker.

Intitial liquidity for the pool will be c. $25k KSM and $25k USDGLO.

9.0 Marketing

When launching a coin on a new chain, the Glo Foundation dedicates significant efforts to developing organic demand for the coin within that ecosystem.

At the core of this work is the Glo Consortium which now numbers 28 organisations across a wide range of specialities all related to furthering the groups philanthropic ambitions.

Marketing via the Glo Consortium inc integrations will be c. $75k.

The Glo Consortium will be central to driving Kusama adoption and activating integrations.

Kusama would join the consortium as a tier 1 partner and will co-market alongside Glo to create awareness and impact.

Glo will work with the ecosystem to find partners in the Kusama community to join the consortium and integrate Glo Dollar creating a positive feedback loop.

Glo commits to engaging in regular and meaningful communication with the community.

10.0 Deliverables

10.1 Core integration

To be delivered within 12 weeks per payout structure.

  • Technical integration of Brale with AssetHub
  • Issue Glo Dollar on AssetHub
  • Add Glo Dollar to Kusama DEX via Asset Conversion Pallet
  • Launch liquidity pool on Kusama DEX
  • Enable users to swap KSM for Glo Dollar
  • Initial options for GloDollar on/off ramps to fiat

10.2 Additional deliverables

Will run through the 12 week period and potentially beyond therefore more fluid.

  • GloDollar marketing campaign.
  • Add Kusama to Glo Dollar consortium.
  • Various articles and publishing.
  • Social media promotion and posts
  • Appearance on industry podcasts.
  • Articles with industry publishers.

11.0 Timelines

Project delivered ~16 weeks from receipt of first payment.

Brale GloDollar
6-8 Weeks for Brale to integrate Kusama, which will allow issuing USDGLO natively and support mints and redemptions. Technical audits may require an additional ~4 weeks. After Brale integrates Kusama, we’d need approximately one week to set up the pool on Kusama DEX and provide initial liquidity in partnership with a market maker.

12.0 Grants

12.1

Brale
Verified address F9ob8GJg7CCMpUKrR6PJdS9tpgDBKSw4CWNjGpEPgahnTVJ
Issuer Issuance, regulations, insurance, redemptions, custody, audits.
Grant $125,000
Volatility buffer 10% $12,500
Total $137,500
Date 2024-01-24
KSM EMA30 $40
Total KSM 3438

12.2

GloDollar
Verified address Fy3bL9Qw8LUpQCvv8tsoWNQcH8onZggg2PYT7bdL5LbhDTn
Stablecoin Marketing, market making, partnerships and integrations
Initial liquidity $25k KSM and $25k USDGLO
Glo consortium integrations & announcements $75k
Total grant $125,000
Volatility buffer 10% $12,500
Total $137,500
Date 2024-01-24
KSM EMA30 $40
Total KSM 3438

12.3

Total grant
Total USD $275,000
Total KSM 6876

Unused volatility buffer returned to treasury.

13.0 Network Services

Decent Partners
Verified address FvrbaMus8iASyrQYkajQWDxsYvG5gb72PFPuvy8TvkFFVGn
Network Services Research, strategy, business development, stakeholder relations, proposal development.
10% Network Service Fee (NSF) $25,000
+10% volatility buffer $27,500
– GBP £21,750
– VAT @ 20% £4,350
– Total GBP £26,100
Total USD £33,100
Date 2024-01-24
KSM EMA30 $40
Total KSM 828

14.0 Total spend to be approved

Spend
Grants $275,000 (inc volatility buffer)
Network Services $33,100 (inc VAT, volatility buffer)
Total $308,100

15.0 Payment structure

Spend sent in parallel to three separate verified beneficiary accounts.

15.1 Schedule

  • 50% paid out to addresses 1 block after confirmation.

  • 50% paid out 1612800 blocks after confirmation (16 weeks).

Note: 112 days x 24 hours x 60 minutes x 60 seconds / 6s blocks

15.2 Scheduled spend amounts

Brale:

  • Approval payment: 1719 KSM
  • Delivery payment: 1719 KSM

Glo Dollar:

  • Approval payment: 1719 KSM
  • Delivery payment: 1719 KSM

Decent Partners:

  • Approval payment: 414 KSM
  • Delivery payment: 414 KSM

15.3 Optimistic payout

The second scheduled payments are optimistic - they assume the core integration and launch functions will be complete within 16 weeks.

Marketing elements inc Glo Consortium are likely to continue beyond the 12 weeks.

Any delays will be reported at least 2 weeks ahead of payment due date.

Kusama governance retains oversight of second payment.

If necessary second payment will be rescheduled or cancelled.

16.0 On-chain invoice

Invoice included as system remarks alongside on-chain proposal to assure data persistence related to the grant.

17.0 Preimage call data

This is a fairly complex call and utilises the scheduler pallet on the Treasurer track

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18.0 Conflicts of interest

None.

19.0 Looking further forward

19.1 Launching collective based branded stable coins

Web3 democratizes the ability to issue currency that was traditionally available only to central governments.

Branded stablecoins are mission-based community monies, allowing value-aligned users to contribute and access the general benefits of on-chain tokenization (self-custody, transparency, 24/7 settlement, etc.).

- Traditional currencies Traditional stablecoins Branded stablecoins
Revenue generating :x: :x: :white_check_mark:
Mission aligned :x: :x: :white_check_mark:
Community governed :x: :x: :white_check_mark:
Open access :x: :white_check_mark: :white_check_mark:
Transparent :x: :white_check_mark: :white_check_mark:
Composable :x: :white_check_mark: :white_check_mark:

With Brale and Glo supporting Kusama, this will enable established organisations within the ecosystem and new entrants to issue their own branded stable coins.

They can then grow their own local economy through membership to the Glo Consortium and direct yield on reserves to whatever purpose their community sees fit.

They will benefit from issuing branded stablecoins through:

  • Generating Revenue: earn yield on the underlying treasury reserves, to cover operational overheads, invest in the community or direct to mission-aligned causes

  • Growth & Retention: community currencies foster a sense of solidarity, and the brand attracts mission-aligned members as money moves through the ecosystem.

  • Control: communities manage the features of the currency through their own governance frameworks, as self-sovereign money

  • Programmability: branded stablecoins unlock interesting use cases not possible with analogue currencies in terms of their programmability.

  • Fungibility: community monies are fluid between each other enabling a more cooperative economy to emerge over time.

As the cost to issue branded stablecoins trends to zero over time, we can re-imagine issuers as any collective with a mission-aligned following, including local, philanthropic, religious, and political communities, protocols, DAOs, network states, metaverses, and traditional businesses.

19.2 Increasing issuance and liquidity

A structured finance offering from ABO Digital is in the works for early 2024, offering an alternative but complementary approach to dollar cost averaging KSM into a stable coin to maximise both the potency of the treasury and its spending effectiveness.

Original forum post here.

Brale are also working on enabling fee-less 1:1 swaps between branded stablecoins.