Improved USDX Price Stability
Decentralized Governance in Action
USDX price stability around $1 has been an objective for the Kava community from the beginning. A stablecoin is an important cornerstone of all DeFi projects. USDX price is ultimately decided by market forces, but Kava Governance has tools to affect USDX market flows which may affect price. Kava Labs & the community saw the need to take action in a decentralized manner. This article will summarize the steps taken over the last few months that have drastically improved USDX price stability around $1.
When KAVA rewards for USDX minting launched in October 2020, USDX price started around 1 USD. After a few months of usage, the price started to become more variant in the range of ~$0.80–$0.90. As more users opened Kava CDP’s and minted USDX in the months that followed, it was expected that increased growth and usage would improve price stability, but that did not occur. USDX continued to trade in the range of ~$0.70–$0.90. Kava Governance saw the need to take action.
In April 2021, a plan was announced to the community to stabilize USDX price: gradually shift the same amount of KAVA rewards that users received from USDX minting to USDX supplying on Hard Protocol. By doing this shift gradually, the team was able to monitor the effects on the system, inform the community, and gather feedback from users.
The Plan and Results
April 14th— Plan is announced to the community (USDX price: ~$0.73)
April 27th — Introduce KAVA rewards for USDX supplying on Hard Protocol (USDX price: ~$0.78)
May 31st— Shift 50% of KAVA rewards from USDX minting to USDX supplying (USDX price: ~$0.79)
June 10th— Shift all remaining KAVA rewards to USDX supplying (USDX price: ~$0.99)
Summary
Improved USDX stability is a huge win for the Kava community. How we arrived at this point is also a victory: our community saw a problem, devised a plan of action, and enacted it through in an open and decentralized fashion. This level of community engagement is necessary for a successful DeFi project. As Kava Labs continues to optimize our existing infrastructure and innovate new products (like Kava Swap), community support and governance will be cornerstones of that growth.
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