Kushiyaki - sushi stable coins with no liquidation (almost)


Issue stable coins against yield bearing assets and strategies.
APR goes to xSushi holders: ~+$30M per year per each $billion issued.

Slightly longer tl;dr if I picked your interest

Kushiyaki is a formal term that encompasses all kinds of food, skewered and grilled.
Think of kushi (the bamboo thingy) as a pin that holds different yummy goodies (yearn vaults, curve vaults, bentobox LP tokens, deliverable futures via deriswap, badgerdao vaults, ethereumv2 staking, etc) together to make delicious snack in a form of enhanced yield.
You will be able to deposit your vault/LP tokens to Kushiyaki and get up to 100% of their value in sushiUSD/EUR/any_fiat/crypto.
No liquidation is needed for assets that are strong collateral. Your loan will pay for itself. Might take a while, if the underlying yield is low.
All revenue generated from issuing stable coins will go to xSushi holders.
The target: have $1billion in issued stable coins for a year to collect $30M in fees distributed to xSushi holders. Ideally, much more.
We achieve the 1:1 peg by

  1. having diverse set of collateral, where 95%+ is dedicated to physically delivered futures. When the derivative matures, we get the underlying USDC/USDT/etc stablecoin to be traded against sushiUSD at 1:1 parity.
    Although the example of USDT makes it painfully clear, that the market at large is not bothered by the lack of cash reserves, as long as they are redeemed on time to match any outflows.
  2. The assets we chose as collateral produce enough yield to pay for the loan within reasonable time.
  3. For loan repayment, 1 sushiUSD always equals $1 USD (incentive to close debt position with discount).

The Why

One more way to make xSushi even more valuable
Increased capital efficiency
Creating new markets
Seeking safe leverage
Monetize forward curve (never before done, SBF currently trying to do similar thing with perpetual futures as collateral on solana hackathon)

The How:

From xSushi holder standpoint, any income received from Kushiyaki is a net win, because unlike Maker holders, you don’t have to risk your xSushi to be eligible for redistribution of lending fees.
We imbue sushiUSD with value, using outside streams: either through people buying it on the open market, or through locking high-grade collateral within Kushi.
To make sure there are people willing to exchange any of their value for sushiUSD+ at all we propose the following pillars of enticement (c):

  1. Cheap credit for exotic collateral
    The power of 3 make us free*
    At 3% borrow cost per year, we’d be cheaper than MakerDAO and offer more exotic assets to borrow against. Thus the arbitrageurs will seek to originate more → issued value grows → more fees generated → xSushi holders get increased yield.
  2. Transfer the cost of time to the protocol itself to achieve 0 need for liquidation
    Banks and financial institutions can wait much longer, than individuals. Their profit horizons may span decades. I sure hope Sushi should be able to do the same.
    When we accept, that the value of our chosen collateral can fluctuate short-term, but is accruing value with each passing day, there’s no need to be price-sensitive. Alchemix showed that such approach is viable, and alUSD held the peg quite well during recent high volatility.
  3. Monetizing futures curve aka Cash & Carry with a twist
    Up until recent crash, we could observe a peculiar thing: the prices of major crypto coins were
    higher a week/month/quarter from now.
    On centralized exchanges, you could capture a risk free profit via:
  • buy 1 eth
  • sell 1 eth on a futures market for a premium (to current spot price) with specific maturity (weekly/monthly/quarterly).
  • wait for it to expire and collect the premium.
    The premiums could run anywhere from 3% to 20%. Anyone could collect that, provided they were willing to wait (and sacrifice potential upside). But in exchange, the profit you “lock-in” is truly risk-free**. That’s how most of FIs entering the space make their money.
    If 3% per month is too low for your taste, you could discard the safety of your position in favor of more leverage. But with leverage, you expose yourself to risk of liquidation, such as when the spot price would drop lower than your futures price. That’s called basis risk. (and that’s how yours truly got wiped once or twice)
    **by risk-free I mean price direction. The usual risk of glitchy exchange engine or solvency/hack remains.
    unleashing the billions
    We can use Deriswap to do harvest the same premium, on leverage, with 0 liquidation risk, and with added bonus of composability. Sounds enicing?
    Imagine a situation, where 1 eth, deliverable in a month from now, is worth ~3% more than current spot price.
    You would buy 1 eth on spot market, sell it on deriswap monthly contract, then take deriswap LP token to Kushiyaki, and borrow up to $4120 sushiUSD (assuming current eth price is $4000 and the futures price is $4120).
    Once a month has passed, the futures contract is delivered (you give away your 1 eth and receive $4120 usd(c)), and sushiUSD is backed 1:1, regardless if the borrower would want to repay the loan or not.
    If the borrower decides not to repay the loan, the collateral will be deployed to bentobox or any other approved strategy to generate sufficient yield to cover the borrow cost (which is small, 3% apr) and serve as a backing for any issued sushiUSD in the future.
    To replicate the cash&carry with 10x leverage, but without basis risk, we would borrow 4000 sushiUSD against our deriswap tokens 10 times. Thus at expiry our profit will be: 3% premium - 0.25% borrow cost *position size = 1100 USD. That’s a whooping 27.5% return within a single month, and you didn’t have to worry about sudden market movement liquidating your position! This alone can unlock billions of dollars of value!
    Important caveats: the actual profit will be less, due to:
    1)deriswap having fees 2) sushiUSD/USD(X) fees 3)sushiUSD/USD(x) exchange rate.

Pipe Dream

I could ramble more on specifics of attaining the peg for sushiETH or sushiBTC (for badgerDAO case) such as for added complexity:
identify delinquent loans & contract/rebase supply to seek parity, or send them to “purgatory”, waiting for collateral to recover or generate more %% to repay the peg.
Debt ceilings for each assets as a way to mitigate possible loss of peg

The Hope

  • Kushiyaki becomes the go-to place for leveraged yield for time-tested and emerging protocols (how awesome it would be to x10 that 80% APR on badgerdao or stETH)
  • xSushi holders get a new risk-free income stream
  • Tighter integration with DeFi ecosystem through mutual financing and synergetic effects

The Doubt

  • Might not hold 1:1 peg if LTV>50% (see the price history of venus.usd on bsc) AND interest generated is significantly less than loans originated in bursts or over time.
  • Might be too resource intensive to implement
  • Might introduce systemic spillover risk, if significant chunk of underlying assets loses value AND other protocols build on it
  • Assets we chose for collateral might not support the calls from within kushi smart contract (just like some protocols forbid flash loans)

If you read this far - thank you for your time, and sorry for any textual errors that undoubtedly have found its way into this flow of sleep deprived mind. Hopefully, I’m not the only one interested in the subject. Or at least this was a pleasant read.


This is a proposal to gather the public opinion. Especially because the dev team time is limited, it would take significant approval for them to dedicate resources into this proposal.
As much as I’d love to show off my rudimentary solidity skills, it would be better for more experienced individuals to write the contract from scratch, instead of crawling through my bugs. But if this proposal gets a green light, I will provide any assistance requested.
Will likely end up editing this post multiple times.
*This may or may not be a reference to Charmed.

Cast your vote

Shall we?
  • Let’s do this!
  • No, thanks.
  • Have some sleep, child

0 voters


Hey, great to see ideas flourishing like this that would potentially benefit xSUSHI holders. I do have a few questions towards the down side and risk of this strategy.

In these turbulent markets, we are going to see fluctuations and arb opportunities. I think this is what you look to capitalize on. What happens when these opportunities dry up, as other arbs tend to? How would this strategy continue to stay relevant and available for the long term? How would you hedge against <3% spreads? What happens if there was a run on sushiUSD to be claimed, and not deliverable due to waiting for ETH contract in a month?

This would also require interaction with an outside entity (Deriswap) so that takes on risks, fund transfers, contracts, api calls, and oracles. What would need to be in place to mitigate any issues? Seems like a lot of moving parts, and potential exploits. Is there anyway to incorporate this similar strategy internally via Kashi with less risk?


Hey, thanks for checking out the proposal!

Let’s take yearn USDC v2 vault for example. It currently yields ~14% APR.
If we use it as collateral to issue sushiUSD, it will be a profitable trade until USDC v2 yield drops to 3% APR for a whole year or lower.
If the borrower does not repay his sushiUSD to close the position, the contract would be able to redeploy USDC to a place with higher yield.
With the current dynamic, we are years away of constant 3% yield for stablecoin vaults yearn.

“How do you hedge spreads”

For like-kind borrow, as in you use USDC/T/X stablecoin or a yield bearing vault token to issue sushiUSD the price the market may have for sushiUSD/USDC is not relevant. The contract will always treat 1 sushiUSD as $1 for debt repayment. So if you have managed to exchange your sushiUSD at parity for some other stablecoin, and then sushiUSD is suddenly worth $0.5 on the market, - you will be able to redeem your collateral for half the price.

What happens if there was a run on sushiUSD to be claimed, and not deliverable due to waiting for ETH contract in a month?

Then the runners will have to either exchange it on the open market (at a possible loss, if the peg breaks), or wait for the ETH future contract to expire and get the underlying USDC.

This would also require interaction with an outside entity (Deriswap) so that takes on risks, fund transfers, contracts, api calls, and oracles. What would need to be in place to mitigate any issues? Seems like a lot of moving parts, and potential exploits.

Curve contract is battle tested at this point. Their LP tokens can always be redeemed for underlying stable coins, even if they may trade higher or lower on the open market.
We can hard code their value and skip oracle calls for it. The only risk would be curve solvency.

Deriswap is being made by Andre and Sushi devs, so I’m sure it will be a solid product.

We can somewhat juggle the risk by profiling the tokens we accept as collateral. Give more weight to less risky protocols, and diversify the rest. We can utilize debt ceilings, in case some protocol we chose is a bit more risky than others.

Is there anyway to incorporate this similar strategy internally via Kashi with less risk?

We will have to ask @BoringCrypto that question. If he would be interested to make this a part of Kashi - I’d be very happy. Iirc, current kashi contract has floating interest rates, so perhaps a modified version of the contract can be made to accommodate new collateral and fixed borrow costs.

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Hey! This sounds pretty interesting. I am pretty new to DEFI and getting familiar with it. My question might be a little off-topic, sorry about that if it seems like so, but still hope if you could help me out. Is there some readings or anything that you could point out to me to better understand all of this Finance terms? I’d love to keep learning to better understand these topics and be able to better contribute to the community. Thanks in advance!

There’s a great article by Messari as an introduction: What is Defi .
If there’s something very specific that is not explained, you might want to create a separate topic for convenience.

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thank you so much. i’ll totally check that out!! :grinning: