I fully support the idea of building a stablecoin backstop to offset default losses.
Building a protocol treasury/backstop from the protocol’s earned fees could improve TrueFi’s risk management and make TRU more attractive (i.e. this could get us to a buy-and-burn or similar model).
As a starting point, TrueFi could direct 10% of interest earned by TrueFi pools into this treasury/backstop (i.e. divert the 10% currently going to stakers). This treasury/backstop would grow steadily over time and once it grew large enough, “excess reserves” could be used to buy-and-burn TRU or distribute funds to TRU stakers (governance would decide what to do with the funds).
While 10% might seem like a trickle today, it can easily build up to $1M+ within a few months. So far in 2021, over $2M has been repaid in interest (i.e. such a treasury would have ~$200k worth of stablecoins had it started in Jan).
My rationale is that “building a warchest and reinvesting into growth” (quoting Hasu here) is the best use of today’s TrueFi protocol fees. Imo, there’s little lost in building the warchest today as governance can always decide to distribute the funds at a later point in time.
Such a system would be similar to MakerDAO’s, which I’d written a bit about earlier this year: