How the USDB ecosystem benefits FHM
The Balance ecosystem / organization is formed to carry out the purpose of its name– to balance FHM & USDB against one another in a way that feeds value into the continued use case of both assets. FHM, as a value capturing mechanism, feeds the minting of USDB through a proof of burn mechanism similar to UST on Luna. When market volume is high, FHM captures value through the use of bonds that undercut the protocol’s exchange value. When market volume is low, this captured value allows more business and investor solutions to be made, each of which alleviate pressure from USDB’s peg. As USDB’s peg is tested, the mechanisms in place to restabilize its peg work to bring the exchange price and book value of FHM to equilibrium. Through these market dynamics, the entire ecosystem grows in value; and a rising tide carries all ships.
By the end of this article, you should have a clear understanding of how each part of our current and future ecosystem developments contribute value to you as an end user and investor. If you have a question on any of the concepts covered, leave a comment below or get in touch on other social channels:
FHM
FHM is a Reserve & Rewards Protocol inspired by the Protocol Owned Liquidity software developments of OHM. FHM features compounding, single disbursement bonds as the safest possible bonding mechanism to ensure the longevity of exchange liquidity in relation to neighboring protocols with similar principles. FHM’s primary use case to a long term investor is to be held for long term value, as FHM’s staking rewards are meant to unwind the value of its treasury into the open market for exchange. In a perfect world, where USDB had gained broader adoption and development of all products listed below are complete, there would be no need to sell FHM on the open market as FHM can be burnt to form USDB – a stablecoin with market use cases which serve to back the value of FHM by providing ample liquidity for investors to move freely, without slippage.
Compounding Bonds
FHM’s Compounding Bonds are a dual convenience, offering both a discount on the open market value of FHM as well as compounding rewards. This is achieved through smart contracts which allow a user to interact directly with the FHM protocol to provide liquidity in return for minted FHM. This minted FHM is disbursed and staked automatically over the course of five days before being delivered to the investor as staked FHM after a smart contract confirmation of receipt.
Any liquidity garnered in this way is owned entirely by the FHM Treasury, which is administered toward rewards at a fluctuating APY determined by a group of financial engineers, whose decisions and expertise are trusted in concurrence with early governance by FHM stakeholders. This liquidity has also been used to bootstrap, test, and fully launch USDB in its current form, which provides contact between FHM and the market at large through its use as a dollar-pegged algorithmic stablecoin.
Staking (& Accelerated Staking)
Staking, currently, is a system that offers the maximum possible APY from the FHM protocol. Users may stake or unstake as often as they wish at no penalty to themselves. They may transfer sFHM across networks to maintain their rewards while accessing other liquidity options in DeFI. In the near future, however, things are going to change for the better. Users who take part in the current model of staking will receive much less when compared to previous rewards, while users who choose to lock their staked tokens in 30 day increments will receive the full amount of FHM’s calculated APY. This system will be built upon further, offering 60 day, 90 day, and higher locking times with rewards that increase alongside the investor’s long-term commitment. On an even more exciting note, these locked staking periods can and will be intermixed with our compounding bond model to produce the maximum competitive long term potential as an investment.
USDB Minting
As FHM is minted to unwind the value of its treasury and staking rewards are produced, exchange liquidity becomes a problem over time due to overinflation of the FHM token. Our solution to this is USDB, which can be minted by burning FHM and creating 1 USDB per USD of FHM’s cost at that moment. This allows USDB minters, both internally in the case of our Treasury and externally in the case of our investors, to shift out of their FHM position without incurring slippage or harming exchange liquidity.
USDB is dual purpose, from the perspective of Balance, in that this proof of burn capability enables the conversion of FHM’s value into stable liquidity which can be more readily used for investment and partnership acquisition. As more partnerships are solidified and the liquidity maintaining USDBs peg is made thicker with more numerous pairs, USDB will become more stable against the sell pressure of USDB minters who may choose to diversify after exiting their FHM position.
Rather than using the liquidity of new investors to pay old investors, the Balance group can create use cases in liquidity backed by FHMs value as a reserve asset without fundamentally affecting FHM’s token price on the open market. This means that FHM functions as a banking protocol attached to a vehicle of commerce in the long term: in other words, a self-contained market, able to sustain itself through the deft implementation of an adaptive strategy.
Now that we’ve covered the most basic principles of the Balance ecosystem, from FHM bond to USDB mint, it’s time to go into the current and future mechanisms in place for thickening USDBs liquidity. Keep in mind that without these products, FHM holders wouldn’t be able to exit their positions in a slippage-free environment!
USDB Peg Maintenance Bonds
As a first form of defense for USDB’s peg, the Balance ecosystem features additional entry points through USDB bonds which can adjust the market value of USDB to the upside or downside.
When USDB sustains price action above $1 USD, users may mint USDB at 1 USDB per DAI and sell the USDB on the open market to capture value for themselves and scale up the supply of USDB. This is a crucial function, as it allows users of products that benefit FHM holders to take part in the scalability of USDB while ensuring the future of our ecosystem through their arbitrage.
When USDB sustains price action below $1, users may purchase an FHM bond that accepts USDB as if it were actually worth $1. This allows the FHM treasury to use the garnered USDB for future peg maintenance through the addition of financial products based in liquidity thickening systems. This is another key function, as it allows USDB that would otherwise be sold at a loss to be compounded into returns which can then be re-minted into USDB under better market conditions for the imagined holder.
Stablecoin Farming
Single-Sided Staking is a smart contract solution that allows users to pair DAI from their wallet with USDB from the FHM treasury. This liquidity pairing uses our Beethoven-X integrated pool and offers returns of 20% APR to investors. As a further benefit, investors who thicken USDB’s liquidity in this way are protected from impermanent loss. We feel this system is the pinnacle of performance in terms of sustainability within our system and would like to thank all who have already participated in safeguarding the USDB peg.
Traditional Finance Bonds
Traditional Finance Bonds can be seen as the other half of our scalability to solution, which begins with USDB’s peg safety mechanism for depegging to the downside. The DAI garnered through these bonds is used to increase the stability of USDB, while returns are paid out in USDB accrued in the FHM treasury. Investors in TradFi bonds may lock their DAI for 3 or 6 months in order to gain 21.55–32.25% APY, paid out in USDB. Through this method, DAI can be repurposed most effectively to the adapting needs of peg maintenance and the future of USDB as the end result of FHM’s process is cemented.
What’s Next
We have now reached the end of all currently available products. Let’s take a look at what’s coming:
- Financial NFTs
- eCommerce
- NFT Marketplace (but not just any)
- USDB Staking
- Lending and Borrowing
- xFHM
- Terra Bridge
Do note that all of these future implementations are intended to increase USDBs viability as a slippage free vehicle for FHM investors while increasing our value proposition through additional revenue streams.
Financial NFTs
We are building a financial NFTs that will act as a receipt for a new game-changing financial product.
Because the NFTs will be built and traded using USDB this will lead to the first true consumer use case of USDB. As USDB trading volume increases, our peg maintenance bonds will take over to regulate the system or FHM holders will mint USDB to take advantage of high market prices. This will begin a process that, over time, causes the FHM supply to become inflationary for scalability or deflationary for consolidation as the market churns.
eCommerce
Users will soon receive rewards in USDB for shopping, giving USDB another landmark commercial use. The eCommerce market is abundant with opportunities, and using USDB as a consumer reward mechanism gives us direct access to the billions of dollars in revenue generated by the eCommerce industry each year. If we can tap into even a fraction of this volume it will lead to more USDB trading.
NFT Marketplace
We are working on an NFT marketplace, with our own little twist. Users will be able to acquire NFTs of many varieties and use cases through the purchasing power of USDB.
USDB Staking
Users will be fitted with yield bearing opportunities for otherwise unengaged stablecoin holders.
Lending and Borrowing
We are building a lending and borrowing structure that will fall under our USDBank which you may have already seen teased in the usdbalance.com site ui.
xFHM
Will allow sFHM to be used as a tool for funding and seeding USDB lp pools as a business development tool and consumer investment option. This means every FHM stakeholder has access to everything necessary to new startups on the blockchain.
Terra Bridge
USDB and FHM are expanding beyond the EVM realm with the first bridge to Terra being completed in the near future. We have successfully bridged both ways and are now awaiting the completion of audits to confirm our capability in this regard.
To follow, USDB and other revenue generating tokens will be bridged as well to facilitate continued growth. This exposes us to the IBC network and its attached possibilities for application specific products in the future.
Balance Profits
The Balance Organization was formed to administrate business development in service to the greater vision of the interplay between FHM and USDB. As such, profits from all ventures engaging USDB as a commercial exchange of value will be used to buy back and burn FHM in order to increase our deflationary velocity at a rate tied to our business success in product developments.
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