Dropping a quick note here on the OUSD performance during the weekend of 3/10/23:
Since OUSD is partially backed by USDC and DAI, the price of OUSD also fell below $1 for a period of time. During this time, arbitrageurs were able to buy OUSD at the cheaper price on AMMs, then redeem the OUSD via the dApp into a basket of stables (USDC, USDT and DAI), which they sold back to the market for a profit. With each dApp redemption, OUSD collected a fee (#3 on yield generation in section 2 above), and there were lots of redemptions during this weekend. When the price for USDC and DAI returned to peg, the entire cost was borne by those that sold their USDC and DAI for less than $1. If the price stayed down, LP’s will have traded more valuable OUSD for the less valuable USDC, and will have taken a loss.
In either case, OUSD holders have more stablecoins than they started with, with external parties bearing both the risk and the loss. OUSD holders made a total of $120K in yield during the market events. OUSD APY increased from ~4.6% to ~42% (7-day trailing) and was trading back at 0.99 within 17 hours of losing its peg. The 1/3 backing of OUSD by USDT helped prevent the OUSD peg from falling as low, and for as long, as USDC and DAI.
In situations where the price of DAI, USDC or USDT fall below $0.998, OIP-4 disables minting of additional OUSD tokens using the de-pegged asset. OUSD fully restored to $1 within 36 hours as opposed to USDC and DAI which remained severely depegged for almost 3 days.