Neutrino Protocol FAQ

Neutrino Protocol
Nov 21, 2019 · 8 min read

What is the Neutrino protocol?

Neutrino is an algorithmic price-stable assetization protocol acting as an accessible DeFi toolkit built on Waves. It enables the creation of stablecoins pegged to specific real-world assets, such as national currencies or commodities.

What is Neutrino USD (USDN)?

Neutrino USD (USDN) is an algorithmic stablecoin pegged to the US dollar and collateralized by the WAVES token. All operations involving USDN, such as issuance, staking and reward payouts, are fully transparent and governed by a smart contract.

Any deviations from the 1:1 ratio can be counteracted by arbitration bots, given that every USDN token is backed by WAVES.

USDN’s sustainability is ensured with Neutrino Token (NSBT) through issuing, trading and liquidation mechanics.

When the value of WAVES against USD rises, a reserve fund is formed to provide backing in case WAVES’ price drops. When the reserve fund is not sufficient to compensate for a decline in value, the smart contract issues and sells NSBT with a discount, enabling users to collect a profit by selling the token in the future.

USDN on Coinmarketcap

USDN on Coingecko

What is DeFo?

DeFo (Decentralized Forex) is an extension built on top of the Neutrino protocol that enables instant swaps between stable-price assets tied to popular national currencies, indices or commodities. Swaps are carried out by a smart contract, which ensures reliability, transparency and virtually unlimited liquidity at a predetermined rate. All DeFo assets leverage the underlying Waves blockchain’s consensus algorithm to enable staking and thus provide asset holders with attractive annual interest rates.

DeFo is an open source solution that can also be integrated into any other interface. The first DeFo interface is available on Waves.Exchange.

DeFo is aimed at providing a frictionless bridge between fiat and crypto. It enables easy access to financial instruments (i.e. savings, investments and currency exchange) for residents of those countries where local banking systems are inadequate or offer unfavorable conditions.

What are Neutrino stable assets?

Neutrino stable assets are digital assets that serve as an equivalent to their underlying fiat analogs. For example, EURN is pegged to the Euro in a 1 to 1 ratio. Each asset is backed by USDN. Currently, there are 9 assets, excluding USDN:

What assets are going to be issued via Neutrino protocol in the future?

Neutrino assets are chosen by the community. Voting for prospective stablecoins is regularly carried out on the Neutrino website with the NSBT token. Everyone in the community is welcome to share their ideas about future assets to participate in the voting.

How does Neutrino interact with other blockchain networks?

The Neutrino protocol aims for its assets to be accessible across various blockchain networks. At the moment, USDN token is available in the Ethereum and Binance Smart Chain ecosystems through gateways launched by Waves.Exchange.

The address of ERC-20 USDN is: 0x674C6Ad92Fd080e4004b2312b45f796a192D27a0. It is available for trading on various decentralized exchanges, including Curve, Uniswap and Mooniswap.

The address of BSC USDN is: 0x03ab98f5dc94996F8C33E15cD4468794d12d41f9

How to transfer USDN from Waves to Ethereum?

To transfer 1 USDN to the Ethereum network, you have to lock 1 USDN on the Waves smart contract through the Waves.Exchange interface. Here is a step-by-step guide for doing this.

If you already have an Ethereum wallet, you can obtain USDN directly on Curve, Uniswap or Mooniswap.

What is USDN staking and how much can I earn from staking?

In the current implementation, all WAVES from the collateral are leased to a Neutrino node. Those WAVES tokens mined under the LPoS consensus algorithm are transferred back to the Neutrino smart contract and automatically converted to USDN tokens. Finally, those new Neutrino tokens are transferred to USDN stakers.

The amount of earnings in USDN depends on when the staking started, on the share of staked USDNs in the total USDN supply and on changes in the WAVES market capitalization.

Example: at a specific moment, WAVES has a 6.5% annual yield for leasing. Only 30% of the total USDN supply is staked by USDN holders. For 1,000 WAVES in leasing, there are 65 WAVES earned back from mining activity. Using a simple formula, 1,000*0.065 = 300*x, we arrive at x = 21.7% annual yield for USDN staking . Let’s assume the WAVES price has been increasing gradually and has doubled over the past year, making the average price 1.5x compared to the beginning of the year. The average staking reward is also multiplied by 1.5, which makes the estimated annual yield for staking equal to 32.6%. In an opposite situation, the reward would decrease accordingly.

Where can I stake USDN?

You can stake USDN through the following interfaces:

Waves.Exchange

Kucoin

MXC

Hotbit

Mycointainer

To stake USDN in the Ethereum network, you don’t have to do anything except just holding the coins in your wallet. ERC-20 USDN is staked automatically. You will receive daily payouts right to your wallet (e.g. Metamask).

Buy ERC-20 USDN:

Curve

Uniswap

Mooniswap

Here is a step-by-step guide on how to transfer USDN from Waves to the Ethereum network.

Where can I use USDN as a payment token?

USDN can be used on exchanges for buying other coins or in dApps built on the Waves protocol, such as Waves.Exchange, Swop.fi, Dice Roller and others.

What does “decentralized” stablecoin mean?

Unlike centralized fiat-collateralized stablecoins based on all holders’ trust in the issuer, an algorithmic (decentralized) stablecoin is issued by a smart contract. Its stability is also maintained by algorithms and various stakeholders from the community.

How does the price stability algorithm work?

Let’s consider the example of USDN. When the price of WAVES against the US dollar rises, a reserve fund is formed to maintain the backing in an event when WAVES’ price drops. If the reserve fund is not large enough to compensate for a decline in price, the smart contract issues Neutrino Tokens (NSBTs). These tokens can be purchased for USDN at a market rate (e.g. 10 NSBTs for 8 USDNs) and then liquidated at a ratio of 1 NSBT for 1 USDN under the First in — First out (FIFO) model.

Market makers and arbitration bots, launched by volunteers from the Neutrino community, also help to keep the rate stable at different exchanges.

How is USDN collateralized by WAVES tokens?

The backing of the USDN token is stored on Neutrino’s smart contract and can be replenished or exchanged back for WAVES tokens at a rate of 1 USDN for 1 US dollar. The WAVES tokens are locked on this smart contract: 3PC9BfRwJWWiw9AREE2B3eWzCks3CYtg4yo

What is the difference between buying USDN via smart contract and on exchanges?

The price on the smart contract corresponds to 1 USDN : 1 USD relatively to WAVES at the moment of USDN withdrawal to a user’s account. Buying USDN on the smart contract takes two steps.

1. You send an order to buy USDN for a certain amount in WAVES tokens.

2. The smart contract releases USDNs to the buyer’s account at a rate valid at the moment of withdrawal (after about one block/one minute).

Buying USDN via the smart contract is more advantageous, as it allows you to buy any USDN amounts without a spread-related loss.

You can obtain USDN via the smart contract on the Neutrino website or via Waves.Exchange. Please bear in mind there is a 2% fee for each swap operation. This is a base value, which NSBT holders will be able to change by voting.

Who is maintaining price oracles and other oracles?

All system actors, including price oracles or emergency oracles are managed by Neutrino stakeholders and the open-source community.

Who is maintaining the source code and servers of the Neutrino dApp?

Neutrino is an open-source project and its development is carried out by various teams. The community can influence the protocol’s roadmap by means of on-chain governance. Currently, most work on Neutrino is implemented by the Waves.Exchange team.

From which nodes will I receive USDN staking rewards? Can I choose a custom node?

A node dedicated specifically to USDN staking is: 3PMj3yGPBEa1Sx9X4TSBFeJCMMaE3wvKR4N. This is a temporary solution, and, at later stages, USDN stakers will have the ability to select a node they want to stake with.

What is NSBT and how is it used?

Neutrino Token or NSBT (stands for Neutrino System Base Token) is a recapitalization and governance token for the Neutrino system.

As a recapitalization token, NSBT ensures the stability of collateral reserves in Neutrino’s smart contract. New NSBTs are issued for locking WAVES on a contract, serving as an additional backing and insuring the system against deficit. As a governance token, NSBT allows voting for issuing new Neutrino assets and updating protocol’s features and parameters. NSBT is also a stakable asset enabling holders to earn on WAVES to USDN swap fees.

This article provides more information about NSBT token’s recapitalization and governance mechanics.

What does the NSBT price depend on?

The price of NSBT depends on the NSBT curve, which, in turn, is determined by the Backing Ratio (BR) parameter — the ratio of collateral reserves on Neutrino’s smart contract to the total USDN supply. In a state of equilibrium, when the value of reserves equals to the value of supply (e.g. 30,000,000 USDN are backed by WAVES tokens worth $30,000,000), the backing would be 100% and BR=1. The value below this level means under-collateralization (or deficit) and the value above it means over-collateralization (or surplus).

What happens if there is a surplus on the contract? If the BR parameter is equal to or greater than 1.5, the NSBT price on the smart contract will grow exponentially, according to this formula:

Where

usdnSupply = current USDN supply (amount of issued USDN tokens)

price = WAVES to USD price

a = a static parameter, which by default equals to 3 and can be changed by the community via Neutrino protocol voting

wRes = WAVES reserves on the Neutrino smart contract

Are there any risks associated with smart contracts and cryptocurrencies?

There is always a risk of malfunctions or attacks that will result in a loss of assets by Neutrino dApp users. However, all source code, as well as the smart contract code, is open to monitoring and auditing. Security audits of Neutrino smart contracts were successfully provided by Beosin and Quantstamp.

For more information, please, read our Terms of Service.

If you still have questions, we will be happy to see you in the Telegram group of the Neutrino Protocol.