DEI: Cross-chain liquidity with a fractional reserve stablecoin
This article takes a close look at our new stablecoin, DEI, diving into what it is, how it works, and its role in the DEUS Finance ecosystem.
What is DEI?
$DEI is an advanced algorithmic cross-chain fractional-reserve stablecoin, with one native bridge that will connect to all chains within the DEUS ecosystem.
DEI’s composition is free-flowing, comprising roughly 10% DEUS tokens and 90% of another trusted stable, depending on the chain in question. The collateral ratio of DEI is constantly monitored and adjusted via arbitrage bots.
- No over-collateralization required
- Cross-chain via one unified bridge
DEI’s vision is to be the stablecoin of choice for users across all chains. Currently, there is an industry-wide dilemma in that users require a different stablecoin for each chain they wish to operate on. With DEI, users will have access to a stablecoin that is usable and redeemable across all chains.
Another issue that DEI addresses is cross-chain liquidity. Bridging tokens to other chains can often be a very slow and sometimes risky process. Adding to that, bridges are only as useful as the liquidity on the other side.
DEI’s mission is to bridge liquidity across all blockchains in a scalable and decentralized way. DEI will enable users to send a stablecoin to any chain and claim it on the other side with no slippage.
How does it all work?
Due to its fractional reserve properties, DEI does not require over-collateralization. Many stables require more funds to be locked up than the tokens are worth so that fluctuations in value can be absorbed.
DEI is majority-backed by the collateral of a trusted stablecoin and fractionally backed by DEUS tokens. As mentioned previously, this ratio is dynamic and is kept in check by arbitrage bots. It is important to note that DEI’s behaviour and characteristics are isolated per chain. For instance, if for some reason USDC on Mainnet were to collapse, the circulating DEI on other chains would be unaffected. In such a rare event, the only users negatively affected would be those attempting to bridge to and from the compromised chain during the window of instability. The DEI bridges will have a decentralized failsafe mechanism to shut down during such an occurrence.
Buying DEI burns DEUS tokens
If the collateral ratio of DEI is 90/10, every DEI minted requires $0.90 worth of collateral (e.g. USDC) and $0.10 worth of DEUS tokens. During this process, the fractional portion of DEI (the DEUS tokens) is burned. As demand for DEI increases, minting it burns a portion of DEUS tokens from the total supply.
Empowering cross-chain liquidity
DEI’s ultimate vision is to create cross-chain liquidity, such that users can bridge DEI to any chain and redeem it with zero slippage.
This is achieved in two ways. Firstly, due to DEI’s free-flowing composition, users can always redeem DEI for $1 by tapping into the currently existing stablecoin liquidity of external protocols. Additionally, users are incentivized to add to this liquidity by providing their own through yield farms that will reside on all chains within the DEUS Finance ecosystem.
The stablefarm is a low-risk, high reward farming pool designed to incentivize users to provide liquidity and suffer zero impermanent loss. The LP tokens are created by providing 50% DEI and 50% of a trusted stable, depending on the chain.
This pool yields 50% APY with no downside.
The DEUS/DEI pool yields 100% APY and is targeted at those wishing to invest further in the DEUS ecosystem.
Both pools reward liquidity providers in DEUS tokens. $DEUS is the protocol and governance token of DEUS Finance. DEUS Finance is a decentralized derivatives clearinghouse and provides the infrastructure and support for third-party protocols to develop and build financial instruments, such as exchanges or lending protocols.
An example of this is dSynths, which is a synthetic stock and crypto asset trading exchange. All synthetics on dSynths will be paired with DEI, on all chains.
DEI will be utilized as the collateral mechanism for all third-party applications built on DEUS. For every DEI minted, $DEUS is burned, so there is a direct benefit for DEUS token holders and liquidity providers as the adoption of DEI expands.
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Stablefarms — 50% APY | $DEUS/$DEI pools — 100% APY