Tangible - REKT

Tangible’s RWA experiment has got out of hand.

And USDR is slipping through their fingers…

The Polygon-based, real-estate-backed stablecoin began to depeg on Wednesday after users scrambled to redeem DAI from the token’s reserves.

The remaining collateral was left looking… less than tangible.

While the team claims to have a plan, it seems the market is still sceptical, at least when it comes to pricing USDR:

USDR is currently 84% collateralized if we mark $TNGBL and the insurance fund to zero.

But the token is trading at just $0.52.

Earlier this year, ‘Real Yield’ and ‘RWA’ were the buzzwords which promised to kick off a new cycle, bringing TradFi dollars on-chain, after the money printing spree came to an end.

Then, during Silicon Valley Bank’s meltdown back in March, we got a glimpse of the chaos in TradFi, mirroring the volatility of our own sector.

But to a crypto community in crisis, and with the memory of a goldfish, outsized yields on a supposedly ‘stable’ coin are always tempting.

A stablecoin promising well above-market yields, backed (in part) by endogenous collateral, suddenly depegging due to a run on backing assets…

Where have we heard that before?

With interest rates through the roof and global instability on the rise, real-estate markets are no longer looking ‘safe as houses’.

While Tangible’s off-chain assets also include wines, gold bars, and watches, the main focus is a portfolio of UK properties, which supposedly paid out juicy yields based on rental income.

But given that real estate is not exactly the most liquid of assets, it is surprising that the USDR reserves value that portion of collateral (currently ~78%) at full price.

In addition to the off-chain assets, USDR’s backing includes DAI (now fully depleted), the project’s own TNGBL tokens (LUNA, anyone?), protocol-owned liquidity (including USDR LP tokens) and an insurance fund (made up of even more USDR, TNGBL, and locked tokens).

Stablecoin-rating agency Bluechip provides a detailed breakdown of the problems with each of these.

Given the above, it’s not surprising that users panicked at the first signs of trouble.

A full risk report from LlamaRisk published in April was met with pushback from Tangible team on many of the issues highlighted.

Then, over the intervening months came multiple warnings over the situation, as well as doubts about whether the ‘Real Yield’ was, in fact, really real.

But Tangible clearly knew a run like this was possible, and have published a recovery plan, aiming to eventually make users whole via selling down real estate.

According to infamous RFVoor/value investor 0xWismerhill, each USDR should be redeemable for:

$0.052 of stables

$0.78 of face-value RE asset (in the form of baskets = REIT)

$0.168 of locked TNGBL (that receive yield from rents)

But the plan came too late for one user who, presumably worried about a UST-style death spiral, panic-sold and made their worst nightmares come true; 131,350 USDR sold for less than a penny.

It remains to be seen whether the plan will lead to a recovery, but in the meantime, anyone hoping to arb a gold bar or luxury watch from the Tangible store will be disappointed to learn that the ToS state:

Purchases of TNFT are subject to the availability of the respective Asset. Tangible does not guarantee that any particular TNFT will be available.

Tangible’s idea of putting real estate on the blockchain is the kind of aspirational use-case that seemed like a logical next step during the highs of crypto’s 2021 bull market.

But as the last 18 months have shown, just because you can, doesn’t mean you should (especially when considering who runs the verification system).

It’s easy to see the merits of any buzzword-laden idea when easy money makes a success of every innovation.

But now, with trust at an all time low, anyone left in the market is jumpy, quick to run for the exit at any sign of danger.

A protocol won’t weather the storm if it isn’t built on sturdy foundations.

Have you checked yours, anon?

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