⭐USDs Stability Mechanism
USDs’ stability mechanism has three key aspects.
While trust-minimized and scalable, most algorithmic stablecoins are hard to grow and can experience long periods of volatility or rely on excessive premine. USDs resolves these by borrowing insights from crypto stablecoins and algorithmic stablecoins.
Crypto Collateral.
Arbitrage Price Discovery.
Capital Protected Liquidity Providing in fiat.
This ensures that, in the worst case scenario, USDs has value equal to the collateral, creating a price floor for USDs. Locked collateral will be deployed in our yield aggregator, seeking the highest yield at any given time for each pair.
When USDs trades at 85 cents, the protocol will still allow people to cash out USDs for 1$ (collateral+SPA), which then can be sold for 15 cents profit. This allows arbitrageurs to both make money and stabilise the network. This process will keep going until arbitrageurs increase USDs back to one dollar.
We offer a guaranteed yield and principal protection in fiat. They can always close their position and receive initial capital in fiat under all market conditions. The protocol can use SPA to ensure solvency in extremely adverse scenarios.
Example: x% of the money supply is collateralised via external cryptos and (1-x)% is stabilised algorithmically. For simplicity, let’s assume that Dai is the only eligible collateral.
To mint one USDs:
To burn one USDs:
users send the protocol x Dai (locked in a smart contract, which offers ongoing interest in USDs)
and (1-x) SPA (getting burned).
users send the protocol 1 USDs and receive x Dai and (1-x) newly minted SPA.
Conclusion: The protocol always guarantees $1 worth of cryptocurrencies for 1 USDs.
In the adverse scenario when locked collaterals depreciate in value, the protocol will mint more SPAs to ensure 1:1 dollar to USDs redeemability. Initially, we will rely on external collaterals. As SPA liquidity increases, we will reduce the collateral ratio and rely more on algorithmic stabilisation, which will ensure SPA’s high deflationary pressure and significant value accrual.
Last modified 6mo ago
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