Well boys, think I figured out (part of) the scam, and it is a doozy. Strap in. TLDR: Stream (xUSD) and Elixir (deUSD), and likely more, are recursively minting each other tokens in order to inflate there own TVL and create a ponzu the likes of which we haven't seen for awhile
@Schlagonia Great write up, but they aren't unbacked. I have no affiliation with the team, but I've done this math before with both Frax and Reservoir to test their backing. Here's a simplified example to show that all user-held xUSD is 1:1 backed. In short, the strategy you illustrated
@phtevenstrong Yes I understand that this is the logic behind why they think it’s okay. But even if we were to accept the accounting practice of counting the backing of your token with itself, it is still reliant on 1. The protocol itself unwinding its full position before everyone else. 2.
@Schlagonia How can you sell collateralized xUSD? Moreover, if stream swaps their own minted xUSD for USDC, backing is unaffected because they've exchanged the backing for something of equal value. It would only be affected if they minted xUSD with the USDC deposit directly. I.e. double
@phtevenstrong @Schlagonia Yes true, but the redemption crunch could occur and panic sale And depeg caused because of that ( like usdc panic 2 years ago) Which could cause some more liquidation I suppose ?