TIP-102: thUSD Enters Autonomous Maintenance Mode

Proposals
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Summary

As Threshold DAO continues its strategic focus on tBTC growth (TIP-100), with recommendations outlined following forum discussions the DAO will also take necessary steps to transition thUSD into Autonomous Maintenance Mode. This means removing direct DAO funding, ending active development and ceasing thUSD’s role in DAO financial planning, while ensuring the protocol remains fully operational for users.

Under this new model, thUSD will remain functional, allowing users to open and close troves, while maintaining limited liquidity support in the 3CRV pool. The system will also transition to a single-collateral model, supporting only tBTC, which strengthens protocol security and aligns thUSD with Threshold’s core mission.

This transition ensures that thUSD remains a decentralized, censorship-resistant stablecoin, while the DAO removes financial and operational overhead. Any future governance decisions related to thUSD will continue to follow the standard forum discussion, Snapshot vote and on-chain governance process but due to the lack of direct DAO resources or active focus, changes may take longer to execute.

Why This Transition Benefits the DAO and the Community

thUSD has been a unique, decentralized stablecoin, offering:

  • 0% Interest Borrowing – Unlike USDT, USDC, or DAI, thUSD provides fee-free borrowing, making it a capital-efficient option for users.
  • Censorship Resistance – Centralized stablecoins face increasing regulatory scrutiny, while thUSD remains non-custodial and resistant to blacklisting or freezing.
  • tBTC-Backed Stability – With tBTC as the sole collateral, thUSD will be fully aligned with Threshold’s mission of integrating decentralized Bitcoin into DeFi.
  • Minimal DAO Financial Burden – This transition removes ongoing costs, ensuring sustainability while keeping thUSD accessible.
  • Sustainable Market Presence – The DAO will leave some liquidity in the 3CRV pool, allowing for organic growth and potential future use cases.

Key Aspects of Autonomous Maintenance Mode

1. thUSD Remains Operational Without Direct DAO Involvement

  • Users can continue borrowing, redeeming, and closing troves.
  • Liquidity incentives will cease and no new DAO funding will be allocated to thUSD.
  • No structured DeFi integrations will be pursued.

2. Transition to a Single-Collateral Model (tBTC Only)

  • ETH will no longer be accepted as collateral, reducing risk and simplifying protocol mechanics.
  • The system will focus solely on tBTC, ensuring better security and stronger alignment with Threshold’s vision.
  • A formal governance on-chain execution will be required to enact this transition.

3. DAO-Owned Liquidity in the 3CRV Pool

  • The DAO will leave ~$200K of POL in the 3CRV pool to support market depth.
  • The tBTC/thUSD pool will no longer be maintained, eliminating low-utilization liquidity.

4. Future Governance Flexibility

  • Any further modifications to thUSD will follow the current governance process, requiring:
    • A forum proposal to outline any suggested changes.
    • A Snapshot vote to gauge DAO consensus.
    • An on-chain governance vote for final implementation.
  • However, due to this proposal’s implementation and the lack of dedicated DAO resources, governance actions related to thUSD may take longer to execute.
  1. thUSD Bug bounty - Cantina Bounty Coverage

Continue Cantina’s Bug Bounty coverage for the thUSD protocol to proactively identify and address any new or evolving threats with minimal overhead.

  • Proactive Protection: Swiftly detect and resolve vulnerabilities to safeguard TVL and maintain trust.
  • Cost-Efficient: Pay only for validated findings, reducing unnecessary expenses and time commitments.

Restructured Plan – DAO Holdings & Liquidity Allocations

Under the Autonomous Maintenance Mode, the DAO currently plans to retain the following allocations, subject to change based on Treasury Committee’s expense management planning:

The Protocol-Owned Liquidity (POL) in the 3CRV pool will be maintained to some extent to support liquidity. Within the DAO Vault, a certain quantity of tBTC will be retained as collateral, while a designated amount of ETH currently held in the vault is planned to be retrieved.

This ensures that some liquidity remains, while the DAO retains assets in the treasury to be redeployed as needed in the future.

Final Considerations & Next Steps

This decision represents a sustainable and cost-effective approach to ensuring thUSD remains operational while eliminating unnecessary financial burdens on the DAO.

  • thUSD will remain available for borrowing and redemption.
  • tBTC will become the sole collateral, strengthening alignment with Threshold’s mission.
  • Use Cantina bounty coverage to maintain robust security coverage.
  • DAO financial support will be removed, but some liquidity will remain to sustain market depth.
  • Future changes to thUSD will require formal governance proposals through the existing on-chain process, which may take longer due to the lack of active DAO resources focused on thUSD.

This transition balances sustainability, decentralization and financial efficiency, ensuring that thUSD continues to exist while no longer being a direct financial responsibility for the DAO.

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What is the reasoning behind removing ETH as collateral? In what way will that improve the situation? What are the costs or downsides to keep ETH as collateral?

The economic analysis provided by Liquity and B.Protocol shows ETH collateral as being profitable long term. The argument of improved security is valid insofar as ETH having higher volatility than bitcoin, but if there is no practical impact on Threshold USD I don’t see why we should remove it.

Removing ETH will reduce the possibility of scaling Threshold USD for benefits that are not entirely clear to me. Threshold USD is, after all, hosted on Ethereum and there’s no purer collateral than ETH, not even tBTC can beat ETH as collateral from a native security standpoint. In other words, technical security (attack surface) is made worse by removing exposure to ETH since tBTC or any other wrappers for that matter will be risker than the native asset of the chain Threshold USD is hosted on.

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Hey @Agoristen fren - Great points! The decision to move thUSD to a tBTC-only model is primarily about simplifying risk a little while ensuring greater overall stability in this supposed autonomous maintenance mode. ETH is undoubtedly strong collateral and I am a huge fan but in the proposed autonomous mode minimizing volatility and reduce complexity in the protocol offers a chance for an easier roll on, especially since active risk management won’t be in place.

You’re absolutely right that ETH brings scaling potential and deep liquidity and this shift doesn’t mean we’re permanently against ETH collateral, I feel once things can take again a more active development approach we can enable back.

There isn’t in my view an ultimate risk assessment or any technicalities involved in the decision, instead, it’s a chance to test a long-discussed idea: making thUSD fully backed by tBTC. Later on, sure it will makes sense, we can revisit adding ETH back or even explore other BTC variants.

Appreciate your insights!

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Hi

Thanks for all who worked in this proposal following the recent DAO moves that require it.

I get the current need to go into Autonomous Maintenence Mode and reduce DAO spendings related to thUSD while keeping it operational and overall it is a good plan.
However like @Agoristen I have a view that removing ETH as a collateral is not good nor I get the reasoning for the risks mentioned associated to it as an collateral.
I get the concern about PCV and B.Protocol but has that been analysed and evaluated in numbers of possible scenarios ?

While thUSD is tighten to the same ecosystem as tBTC it should not be solely dependent on it.
It is good and positive if in the future the DAO chooses to give incentives to those who put tBTC as collateral to borrow thUSD, but if a borrower chose not to do with tBTC, thUSD should still welcome ETH as collateral considering that perhaps it is one of most abundant assets on people’s wallets that may seek for a stablecoin with thUSD characteristics.

A natural way for a stablecoin to succeed and get market interest is by growing its market cap and removing ETH as a collateral restricts this and reduces possibility of scaling thUSD.

Also worth to mention that by removing it now and re-adding it later may not show a good direction to the market, specially to those who trusted thUSD so far to deposit their ETH (244 ETH currently and a peak of 384 ETH).

If I am missing the point and not being able to see the burden and all risks associated to keeping ETH as a collateral I would be happy if someone could share any scenarios or numbers that show benefits to thUSD by making this move.

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Another related topic I would like to raise is if thUSD will continue to be used to pay for expenses, contractors and other possible DAO costs.

If the DAO has chosen to continue with thUSD, even in Autonomous Maintenance Mode it should still show usage for it, otherwise it would show a bad message to the market and possible borrowers.

That would probably require that DAO to maintain a LP of thUSD/USDC/DAI for a while to make it possible and monitor it in order to avoid it get too unbalanced and causing a price impact.

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Hey @FREDY thanks for your comments, as stated in previous answer there isn’t any reason related to risk or technicalities, its purely to focuse on tBTC and give thUSD a simple nuance that being fully and solely backed by BTC,

I am noting down this feedback and will be taken into consideration before posting proposal to snapshot.

Regarding DAO use of thUSD for expenses it has been mentioned among the first lines but admit it should be highlighted further which again will be taken into consideration and reiterated in the final state before snapshot.

Thank you for your feedback and insight!

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I support moving thUSD to maintenance mode but I agree with not bundling ETH collateral removal into the same proposal. It can be discussed and voted on as a separate proposal if there’s sufficient support.

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I second separating transitioning thUSD to maintenance mode from the modification of collaterals.

The main concerns regarding this proposal have been around ETH collateral, therefore we can remove any modifications of collateral from TIP-102 and proceed with the vote to enable maintenance mode.

Regarding the questions around using thUSD for expenses, please note that the recommendation to stop the thUSD program for expenses (TIP-079) came after thorough deliberations from TTG and POL manager. This decision, although hard, is designed to facilitate other lines of treasury management that will enable TIP-100 and tLabs funding.

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Hi Luna
Thanks for the clarification.

DAO has chosen to continue with thUSD existence but not even the DAO wishes to use it anymore, then who will ? It just doesn’t sound much coherent.

Even if this decision is kept as is, should it not be voted by T holders in order to overwrite TIP-079 previous decision ? As TIP-079 was a decision taken by the T holders, a decision from TTG could not overwrite it and to formalise would either need to go into a another TIP terminating it, or amended in this TIP-102.

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Gm, Psaul here representing Bunni - a DEX on uni v4 (hook) optimising yields in any market condition.

I applaud what seems like a difficult decision being made by the DAO in deprioritising thUSD however the goal of sustainability is positive. Since sustainability is a goal for the DAO in this regard, i’m sure capital efficiency would also make sense for such a conservative stance.

The proposal as it stands offboards ETH collateral, preserves some liquidity in a Curve 3pool, maintains security via Bug Bounty, and removes liquidity incentives alongside further integrations for thUSD. The above moves serve to reduce costs for the DAO however there are still areas where value returned can be maximised while generating additional revenue for the DAO.

Firstly, thUSD POL could sit on Bunni where it can be made more capital efficient and contribute to Thresholds’ ecosystem. a thUSD-USDC pool for example can rehypothecate USDC to Euler earning base yields of ~3-5% at current rates while pool auctions recapture MEV for LPs.

Similarly, a vault can be created on a lending market like Euler where thUSD can be rehypothecated. tBTC holders can enjoy 0% interest borrowing while the protocol and DAO charges a market set premium for thUSD loans against exogenous collateral like steBTC, LBTC, or stBTC for its censorship-resistance. Fees generated from this can be split between the DAO and liquidity incentives.

Secondly, Bunni has a native referral program that is currently paying out 50% revenue share to referrers. A further program can be introduced on top of this to incentivise the community to introduce liquidity for the pool serving as income for LPs, users, and the DAO. If thUSD is going to be deprioritised at least allow it to be left in a structure that can generate some returns giving the community a way to support.

Notes
Revenue from our referral program and fees on the underlying lending market vault can be redistributed as liquidity incentives for the pool or redistributed to other protocols agreeing to BTC collateral listings.
Each development suggested utilises a permissionless structure with Simple UX to setup.
If the DAO pivots in the future, there is already a flywheel in place to incentivise with token emissions should be considered as an option.

Additional links:

Site: https://bunni.xyz
Documentation: https://docs.bunni.xyz

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Gm Psaul! Appreciate the thoughtful take on capital efficiency. The move to Autonomous Maintenance Mode is all about keeping thUSD alive without draining DAO resources so yeah agree sustainability is the goal.

That’s exactly why I feel 3CRV is the best home for thUSD. Curve’s StableSwap gives it low slippage and zero maintenance, perfect for a stablecoin in “set it and forget it” mode. Unlike Uniswap-style AMMs, StableSwap keeps trades close to peg without constantly needing incentives or active management. Just plug it in and let the math do the work.

I’ve been following Bunni’s yield plays for a littlee and sure, cool idea but rehypothecation = risk. The DAO is cutting on thUSD incentives so setting up a lending vault or complex strategy goes against the entire low-touch plan. Plus, security matters. 3CRV is battle-tested, handling billions in stablecoin swaps while staying rock solid, a little adamant to propose more moving parts.

Users also win he, 3CRV is DeFi’s stablecoin hub, meaning easy swaps and zero friction for anyone still rolling with thUSD. Even with the DAO stepping back, it stays tradable with minimal effort.

TL;DR—thUSD needs stability, not complexity imho. 3CRV keeps it liquid, decentralized and fully operational with zero hand-holding. Appreciate the ideas and if the DAO ever pivots back to yield strategies and more thUSD focus definetly worth revisiting Bunni as an option, I’m a fan, will keep it close for future reference !

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So the proposal can move to Snapshot the following additions to TIP-102 based on community feedback have been added below:

Separation of thUSD Maintenance Mode & Collateral Modifications

Based on feedback from previous comunity members, TIP-102 will now focus solely on transitioning thUSD into maintenance mode, removing any changes to collateral from this proposal.
ETH collateral discussions will be addressed in a separate proposal if there is sufficient support from the community.

Clarification on thUSD for DAO Expenses

The decision to stop using thUSD for DAO expenses (TIP-079) was made after thorough discussions within the Treasury Guild (TTG) and POL Coordinators.
This shift is designed to facilitate alternative treasury management strategies, enabling TIP-100 implementation and future tLabs funding.

Next Steps for thUSD on BOB

thUSD hasn’t seen strong adoption on BOB and with the move to maintenance mode, we will start reducing support across the board.
Pausing thUSD minting on BOB follows a simple multisig approval process (no on-chain voting) with a few steps to complete by new Council Committee to be future formed by TIP-103.

Step 1: A multisig transaction starts the revocation, triggering a 90-day contract-enforced delay.
Step 2: After 90 days, a second multisig transaction finalizes the revocation, fully pausing minting.
Total duration: ~90 days, with minimal action needed beyond multisig approvals.

With the above amendments Steering Committee recommends that proposal can move to snapshot.

Special thanks @Leonardo_Saturnino for drafting necessary research regarding process on BOB!

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