Add sSwanUSD as Collateral on FiRM

FiRM
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Add sSwanUSD as Collateral on FiRM

Summary

This proposal seeks to onboard sSwanUSD as collateral on FiRM, allowing users to borrow DOLA while continuing to earn SwanUSD staking yield and SWAN rewards.

Current staking yield of approximately 169% is significantly above FiRM borrowing costs. This creates a strong opportunity for leveraged staking, supporting the growth of Monolith while increasing demand for DOLA and DBR.

Background

SwanUSD is a wstETH-backed stablecoin launched on Monolith, the stablecoin protocol developed by Inverse DAO. It combines redeemable, interest-free debt with a paid borrowing option, with an autonomous interest rate controller adjusting rates according to the availability of redemption liquidity.

Users stake SwanUSD to receive sSwanUSD, which earns a share of the interest paid by borrowers through an increasing exchange rate. sSwanUSD can then be deposited into the SWAN rewards contract to earn SwanDAO’s governance token alongside this underlying yield.

SwanUSD also has a USDS peg stability module, with its reserves held in sUSDS, providing an additional route for entering and exiting the stablecoin.

Business Case

1. Strong expected borrow demand

As of 28 October 2026, sSwanUSD staking yield is approximately 169%, with around 168% coming from SWAN rewards. This is significantly above the cost of borrowing on FiRM, creating a strong incentive to borrow DOLA and increase exposure to the position.

Users would be able to deposit sSwanUSD, borrow DOLA and acquire additional sSwanUSD, retaining vault yield and SWAN rewards through the deployed staking escrow. FiRM lets them fix borrowing costs for their chosen period while increasing the amount of capital earning rewards.

The large initial spread leaves room to attract additional capital as SWAN emissions are shared across a larger staking base. Each loop increases the amount of DOLA borrowed and the associated DBR demand, directly connecting Swan’s growth with FiRM usage.

Existing holders would also gain access to DOLA liquidity without selling their sSwanUSD or giving up their rewards.

2. Grow FiRM and Monolith together

FiRM can provide a useful source of demand for SwanUSD at an early stage in its growth. Users acquiring newly issued SwanUSD through the PSM add reserve assets, while users minting against wstETH expand Monolith borrowing. Buying existing SwanUSD supports demand for the token but does not itself create new Monolith debt or PSM reserves. The effect on redemption liquidity will depend on which routes users choose and whether new borrowers select free or paid debt.

For Inverse, this would connect two of the DAO’s products. More sSwanUSD collateral on FiRM can generate additional DOLA borrowing and DBR demand, while a larger SwanUSD ecosystem demonstrates the utility of Monolith to future stablecoin issuers.

3. Direct alignment with Swan’s success

Inverse’s SWAN allocation gives the DAO an economic interest in Swan’s growth alongside the benefits to FiRM and Monolith.

Where growth generates additional interest from paid borrowing or PSM revenue, it can also increase distributions to SWAN stakers. Staking the DAO’s SWAN allocation allows Inverse to participate in those distributions. Income depends on the DAO’s share of stake and the revenue actually generated.

4. Give launch participants a reason to stay

The Swan launch has introduced the ecosystem to existing Curve, Convex, Yearn, Stake DAO and Inverse users. A FiRM integration would give these holders another use for their sSwanUSD after the initial launch campaign, rather than requiring them to exit their position to access liquidity.

Building useful integrations while this attention is still present can help turn initial participation into longer-term borrowing, staking and governance activity.

Pricing

The deployed price feed combines the SwanUSD/USDC Curve EMA with a USDC/USD price source, caps the underlying SwanUSD price at $1, then applies the sSwanUSD vault exchange rate.

Deployed Contracts

Parameters

TBC, following the RWG assessment.

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The Risk Working Group has published its collateral risk assessment of sSwanUSD for FiRM:

FiRM Collateral Risk Assessment: sSwanUSD on FiRM

SWAN DAO is the first DAO-governed instance of Monolith’s Coin DAO layer. Accordingly, this assessment builds on the foundational work established in the sinvUSD Collateral Risk Assessment and its September 30 reassessment, with references provided wherever that groundwork remains relevant.

The focus here is on the additional risk considerations introduced by swanUSD: the Coin DAO governance and rewards layer, a wstETH-backed collateral base rather than sINV, the staking escrow, and the price feed architecture supporting the proposed FiRM market.

Recommended Parameters

The assessment supports listing sSwanUSD on FiRM under a guarded initial deployment. Given the deployment’s limited operating history, the recommended parameters reflect a cautious starting point, subject to reassessment as the market matures.

Parameter Recommendation
Collateral Factor 85%
Liquidation Factor 100%
Liquidation Incentive 5%
Supply Ceiling 500,000 DOLA
Daily Borrow Limit 100,000 DOLA
Minimum Debt 3,000 DOLA
Staleness Threshold 82,900 seconds

Looking Ahead

The assessment also covers the proposed sSwanUSD/DOLA Curve LPT market, expected to follow the initial sSwanUSD listing. Both markets share underlying exposure and are therefore evaluated together, with combined exposure considered when sizing market ceilings to account for correlated risks.

This phased launch will create a reinforcing effect on collateral resilience. As Curve liquidity develops, it provides additional exit capacity and a market-based arbitrage route complementing Monolith’s native repegging mechanisms (PSM reserve and free debt). Greater liquidity and peg resilience will, in turn, strengthen the collateral profile of both markets.

The RWG intends to revisit the initial sSwanUSD market parameters following the LP market’s introduction, informed by liquidity conditions and operating history.

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Following discussion with RWG, we’re moving to a FeedSwitch-based price feed. This uses a fixed $1 SwanUSD reference, with RWG able to switch to EMA-based pricing. While fixed pricing is active, an underlying price below $0.96 flags the feed as stale and blocks new borrowing.

With this design, RWG supports increasing the proposed supply ceiling from 500k to 5m DOLA and the daily borrow limit from 100k to 500k DOLA. Other parameters remain unchanged. The Fed Chair should ramp up funding gradually, pacing expansions against available exit liquidity.