What is USN?

Stablecoins — What are They?

What is USN?

Key points

• Stablecoins are an integral part of the crypto industry. They help users to avoid volatility and unlock new DeFi opportunities.
• The NEAR ecosystem has its own stablecoin called USN.
• MyNearWallet lets users store and mint USN coins.

Let’s learn more about USN and its benefits!

What is a Stablecoin?

A stablecoin is a crypto with its value tied to the value of another asset — it could be a crypto asset or fiat currency.

The key reason why stablecoins exist is to help avoid market volatility. As their prices are pegged to those of other currencies, stablecoins achieve stability.

Users can mint a stablecoin by exchanging it for an equivalent amount of another asset. When users convert a stablecoin to the original asset, the stablecoin gets destroyed.

What are the types of stablecoins?

There are several types of stablecoins:

• Backed by fiat: These stablecoins have reserve funds full of fiat currencies such as the dollar or euro. Each coin has a fiat coin to back it. Example: USDT.
• Backed by crypto: These stablecoins have cryptocurrency reserves. Example: Wrapped Bitcoin.
• Semi-algorithmic: These stablecoins have crypto reserves and are also partly dependent on another cryptocurrency. Example: FRAX.
• Fully algorithmic: These stablecoins are pegged to other assets such as dollars through an algorithmic mechanism. They are completely uncollateralized. Their mechanisms are right in the protocol, visible on the blockchain. Example: FEI.

What are the advantages of stablecoins?

Here are the reasons why stablecoins are popular:

• People are more willing to accept stablecoin payments as they are less volatile.
• Stablecoins are necessary for blockchain projects that offer DeFi products.
• Stablecoins are used to avoid market fluctuations.

USN — overview

What is it?

USN is a NEAR-native stablecoin which is tied to the US dollar’s value. USN was launched by Decentral Bank, a decentralized organization that develops and supports NEAR-based stablecoins.

How does it work?

Initially, USN was double-collateralized by the NEAR crypto and USDT. Recent developments resulted in some changes, and now USN is backed by USDT only. NEAR tokens in the Reserve Fund are staked to secure the NEAR blockchain. The staking rewards will be distributed to users that participate with USN in the NEAR/AURORA DeFi ecosystems. This is Phase I.

Phase II will add non-stable asset ($NEAR, $BTC or $ETH) to the Reserve Fund.

How to use it?

Stabilization makes USN a viable means for everyday transactions and a perfect store of value. For instance, USN is particularly convenient for payments.

The utility potential of USN is massive. Users may take out loans in USN, trade USN on exchanges, and perform swaps between the NEAR coin and USN in wallets such as MyNearWallet.

Users might want to use USN as a base asset outside of any staked NEAR, so they can budget/purchase with an asset that isn’t volatile.

USN minting

USN has a simple but reliable minting mechanism. Minting, in other words, is when users generate a new token via mining or staking.

Right now, with Phase I, users can mint and redeem USN only with USDT. A native yield, or, simply put, rewards you get from making your funds work for you, will be generated sustainably from NEAR staking.

Apart from minting, users also can swap their NEAR to get USN on several exchanges. For instance, Ref Finance lets users swap their wrapped NEAR for USN. Alternatively, they can swap between USN and USDT on Ref Finance’s StableSwap.

Same goes for MyNearWallet: you can swap NEAR and get USN: the process is the same: NEAR — wNEAR — USN.

USN is a user-friendly stablecoin. To avoid sanctioning users selling USN during market fluctuations, USN espouses a fixed commission rate. USN was launched with a commission of 0.5% per transaction for the exchange of the NEAR token for USN.

How does USN work?

On-chain arbitrage and the self-balancing Reserve Fund ensure the stability of USN.

Reserve Fund

The Currency Board principle regulates the work of the Reserve Fund and maintains the exchange rate. Whenever USN tokens are minted or burned, the stablecoins in the Reserve Fund increase or decrease correspondingly. The Reserve Fund automatically balances to maintain a backing of USN at a rate greater than 100% at all times. So, the issuer of USN can buy back the entire supply of USN in extreme scenarios such as a panic sale.

On-chain arbitrage

USN retains its value through a smart contract. When USN loses its value, arbitrageurs exploit the price difference between the on-chain smart contract and the exchanges’ rate to ensure that USN returns to its standard price.

Decentral Bank DAO — overview

The Decentral Bank is a decentralized organization (DAO) that manages all the Reserve Fund’s aspects. It also controls the main smart contract operations. The NEAR community can participate in the decision-making of Decentral Bank. The DAO uses stake-weighted voting as a way to impact or reverse decisions of Decentral Bank.

The Decentral Bank DAO members can vote on:

• Volume of the initial funding of USN;
• Volume of the funding of USN during the project development;
• Size of commissions;
• Rules of quotes;
• Treasury Management rules and principles;
• Dev fund setup and distribution.

How to get USN?

• Go to MyNearWallet and log into your account.
• Once you’ve logged in, click “Swap” on the wallet homepage.
• Then click on the arrow to choose an asset you want to swap to. There are two options: wrapped NEAR and USN. Choose “USN”.
• Then enter the amount of NEAR you want to swap for USN and click “Review Swap”.
• Here you can check the transaction information really carefully. If everything is okay, click “Confirm & Swap”.

Congratulations! Your transaction is completed!

Here is a full guide: “How to get USN”.

How to swap NEAR to USN?

Conclusion

USN is the best stablecoin in the NEAR ecosystem and it is expected to bring a lot of utility to the DeFi segment.

MyNearWallet provides users with a chance to mint USN coins by swapping NEAR for it.

Learn more!

• Check out out Crypto Education category!
• See how to get USN with MyNearWallet.

New to crypto? Here’s the vocab for this article!

• Stablecoin: a crypto with its value tied to the value of another asset — it could be a crypto asset or fiat currency.
• Reserve fund: a savings account of sorts to cover unexpected costs
• Minting: when users generate a new token via mining or staking
• Yield: rewards you get from staking or other processes