USDs is the Answer to Stablecoin Problems
USDs stands out in three ways:
Dynamic Swap Fee, Constant Stable Yield, Dynamic Collateral Ratio.
USDs growth will also lead to SPA appreciation
as more SPA is burnt to mint USDs.
Why did stablecoins come into existence?
Cryptocurrencies, primarily adopted for speculation and investment, have not become a widely adopted medium of exchange due to their volatility, until stablecoins came along.
There are three main types of stablecoins: fiat-backed, crypto-backed, and algorithmic.
- Fiat-backed stablecoins: USDT, USDS. Fiat-backed stablecoins’ issuers peg the stablecoins’ prices 1:1 to the fiat in reserve. Though deterring high volatility, the reserve is centralized: it is hard to verify the issuers. USDT’s latest report shows that only 4% of its reserve is cash, with 65% of commercial paper.
- Crypto-backed stablecoins: MakerDAO, Synthetix. Users deposit one cryptocurrency to get stablecoins as a debt. Though more transparent, they require overcollateralization to ensure that the collateral’s fluctuations do not affect the stablecoins’. As a result, they are capital inefficient and non-scalable.
- Algorithmic-backed stablecoins: Ampleforth, Basis, Terra. Without any collaterals, algo stablecoins rely on algorithms to keep the price stable. Though scalable and trustless, they are hard to bootstrap and prone to periodic volatility led by high-frequency rebase.
No stablecoin was perfect, until USDs.
To create a truly functional stablecoin, Sperax invented USDs.
Think of USDs as a hybrid of DAI and Terra.
USDs’ dynamic collateral ratio makes it more like Terra under favorable market conditions and more like DAI under unfavorable market conditions.
TLDR on USDs👇
USDs v. FRAX: which is the better hybrid stablecoin?
1. Collateral Type
- FRAX: USDC as crypto collateral and FXS (FRAX governance token) the algorithmic component.
- USDs: A basket of crypto collaterals (USDC, USDT, ETH, WBTC, and UST) and SPA (Sperax governance token) at genesis. The protocol will add more collaterals in the future, which are determined by Sperax DAO. USDs is fully fungible.
2. Collateral Ratio
- FRAX: Incentivizes users to maintain the collateral ratio through buyback, re-collateralization, and AMO (Algorithmic Market Operations Controller).
- USDs: The protocol’s algorithm determines the ratio and will be more decisive when USDs trades close to the peg & matures as an asset, reinforcing the stability. USDs starts at a high ratio (95%), so the worst case scenario is that the peg breaks by only 5 cents. If USDs trades below the peg, collateral ratio will increase, making USDs much more tightly collateralized.
If undercollateralized, Sperax changes the ratio of return/collateral ratio when USDs is burned, while the minting process stays the same.
If overcollateralized, there will be no change. Sperax still uses users’ collateral and gives back the regular returns from yields.
3. Arbitrage and Price Stabilization
- FRAX: Executes it via arbitrage algorithm with buyback and AMO
- USDs: Doesn’t execute the arbitrage. Sperax leaves it to the market participants to call it. USDs also incorporates a dynamic swap fee to guarantee the protocol’s solvency:
a. Redemption fee enforces capital control and prevents flash attack. If a massive dumping happens, it will be more profitable for users to stay in the protocol because withdrawal fee will be higher.
b. Minting fee guarantees that the money supply won’t change drastically. If USDs trades below the peg, minting fees will skyrocket. It will become much harder to dump a massive amount of USDs, leading to less SPA dumping.
Killer feature: USDs is the world’s first yield-bearing stablecoin.
Holding USDs is the same as holding a savings account.
We will first deploy the collaterals on external DeFi aggregators (i.e. yEarn) to help users earn passive income. In addition, the protocol will incentivize users with SPA (dynamically adjusted) to guarantee users a stable yield income of around 15% on their USDs holdings.
As more people use USDs, the yield rate will serve as a second-layer protection from a high selling pressure, further empowering a mass adoption in various use cases including payment, derivatives, and portfolio construction.
Sperax is dedicated to benefiting all financial lives with blockchain technology.
Sperax builds modern money with blockchain technology. With the Sperax token ($SPA) at its core, Sperax builds a crypto-collateralized algorithmic stablecoin, $USDs, and a suite of DeFi apps including a cloud earning mobile app, Sperax Play.
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