LUSD is a successful decentralized stablecoin and its adoption has consistently been growing in the last 12 months.
Benefits
Adding LUSD as collateral will offer a few benefits. It will improve collateral diversification of the system, making it more resilient against a single collateral failure. It will increase TAI liquidity and also increase user exposure to TAI, expanding the target user to include LUSD users.
Low c-ratio LUSD safes could also alleviate any extreme market demand scenario for TAI until the TAI rate controller is enabled.
Risks
Volatility
LUSD has shown a stable market price since launch with < 5% deviation from $1.00.
Qualitative Risk:
LUSD is immutable so governance and rug-pull risk is non-existent. The code is audited has been running for 2 years in prod.
Audits:
Trail of Bits Liquity
Trail of Bits Liquity Proxy Contracts
Trail of Bits Liquity Stability Pool
Liquidity Risk
There is currently $16M in LUSD against DAI, USDC, and USDT in Curve and $4M LUSD in the Uniswap V3 LUSD/USDC pool, among others.
Exposure Risk
Very low due to the proliferation of LUSD. Not a limiting factor with a smallish debt ceiling.
Correlation Risk
LUSD is a stablecoin so will have minimal correlation with other collaterals.
Price Feed
No Chainlink feed is available, but there is a Redstone feed.
https://app.redstone.finance/#/app/token/LUSD
Parameters
Recommend LUSD-A with identical parameters as RAI-A, except a debt ceiling of 2M.