Unlike other stablecoins, USDs achieves stability and scalability without the capital inefficiency of overcollateralization. This becomes possible by having the protocol utilize SPA to algorithmically stabilize a component of the money supply. The exact composition of the algorithmically- stabilized and explicitly-collateralised components will initially be fixed, but we will dynamically determine it on-chain.
to incentivise inflow of crytpo collateral, we offer an ongoing dynamic interest rate that will be determined as a function of the aggregate collateral ratio and the collateral composition. Those interest rates will be funded by investing the collateral in a DeFi yield aggregator and further subsidizing it with SPA inflation.
As demand for USDs rises, more SPAs will be burned. In the event that future governance votes in favor allocation of protocol fees, more fees will be distributed across each SPA. SPA’s scarcity can eventually increase cash flow for SPA holders and stabilize the staking returns. Such mechanisms will further decentralize the Sperax network and make USDs truly permissionless, censorship-resistant, and scalable.