We’ve pulled together some simple answers to questions we commonly get from our community on the design, operation and risks to our new stablecoin, Real USD.
Is Real USD an algorithmic stablecoin?
Real USD is a fully collateralized stablecoin, not an algorithmic one. For every dollar of market cap, there is equal to or greater than that amount of money in the treasury. Treasury assets include DAI, tokenized real estate, protocol-owned liquidity (DAI-USDR pool on Uniswap v3) and our native token TNGBL.
New Real USD is created when either DAI or TNGBL are used to mint USDR. For every $1 of DAI or $2 of TNGBL deposited, the USDR market cap expands by $1. For every $1 of USDR that’s redeemed, the market cap contracts by $1. The $1 price of 1 USDR is always tied to the number of USDR in circulation being equal to the market cap of Real USD.
What backs Real USD?
Real USD is backed by four primary buckets of assets:
- Tokenized, yield-producing real estate — The core of Real USD is the treasury of tokenized real estate. The rental yield from these assets supply the yield for USDR.
- DAI — Some of the DAI used to mint Real USD is held as DAI in the treasury for redemptions.
- Protocol-owned liquidity — 20% of the market cap of USDR is held as protocol-owned liquidity. 15% in the USDR-3Crv pool on Curve and 5% in the TNGBL-DAI pool on Uni v3. Any time new USDR is minted and POL is below 20% of market cap, the LP is topped up. This ensures that there’s always sufficient liquidity for swaps in and out of USDR and TNGBL.
- Tangible’s governance token TNGBL — TNGBL is used to mint Real USD at a 1:1 value ratio and is used by the protocol to provide various incentives. Up to 10% of amount of USDR minus USDR redeemed can be minted with unlocked TNGBL.
The market cap of Real USD is the 1:1 relationship between the total number of USDR in circulation and the various assets at their representative percentages backing each token.
The total backing of Real USD will exceed 100% with some assets represented at a higher percentage in the total backing than they are in the market cap.
How does Real USD maintain its peg?
The price of 1 Real USD is always equal to $1. This is managed by the number of USDR in circulation and the market cap of Real USD which is fully collateralized by assets in the treasury. As DAI and TNGBL are deposited into the treasury or we mint against system gains, new USDR are minted 1:1 to the expansion of the market cap. As USDR is redeemed, the market cap shrinks 1:1 for every USDR burned. There is no peg to maintain at the protocol level.
Real USD may trade on a DEX above or below $1 based on market demand. A higher demand for USDR may cause the token to trade at a premium. The opposite may be true if sales of the token are higher than normal. However, the spread in the market is not the protocol peg. The peg is based on the USDR in circulation and the fully collateralized market cap, which is aways at a 1:1 ratio, holding the $1 peg.
What is the Real USD supply based on?
The Real USD supply is primarily based on minting and redemptions. For every $1 of DAI or TNGBL that goes in, the supply increases by 1 token. For every $1 redeemed, the supply reduces by 1 token.
Another source of supply is rental income. The money that comes into the treasury each month as rent from tenants is converted to DAI and then used to mint Real USD. This new supply is distributed to holders through the daily rebase.
Lastly, Real USD launched with an update that allows the treasury to automatically mint new USDR for every 1% gain in treasury value above 100% collateralization. The USDR supply will expand by that total and will be immediately spent on new real estate that now backs the expanded supply.
How does minting against gains to treasury value make the system stronger?
Minting against gains to TNGBL allows us to shift value from a volatile digital asset into the stability of a yield-producing physical asset.
Gains to the price of TNGBL and overcollateralization from TNGBL in the Real USD treasury have the benefit of giving the system some collateralization cushion, but digital assets can fall in price just as quickly as the gain value. By shifting that value from TNGBL into real estate, we’re able to lock it into the stability of a real world asset, a property which is much less likely than TNGBL to lose significant value. If the price of TNGBL falls, those gains have already been locked into new property and the collateralization is more secure.
Further, TNGBL does not offer any yield to the system. Holding excess value in TNGBL does not make USDR more attractive to investors and new users. By realizing the gains to TNGBL and using those funds to purchase more real estate, we can turn that value into incremental yield for USDR, which has a lasting, permanent benefit.
Minting gains in real estate into new properties serves a similar function. In this case, we’re not as worried about the volatility in the price of real estate as we are with TNGBL, however we do want to use gains to boost yield whenever we responsibly can.
If we have a property that’s gone up in value, we can realize that increase in price and use those funds to purchase more properties. By using overcollateralization to add new properties to the backing we’re able to use that value to boost the yield.
At times, some of the Real USD minted against gains will be used to incentivize yield by swapping it for DAI and adding that money to the incentive vault.
Where does the Real USD yield come from? What is the rebasing mechanism?
Real USD yield comes from the rental income of tokenized real estate. Each month rent is collected from tenants. That money is converted to DAI and placed into a smart contract which distributes the income to USDR holders through a daily rebase.
As the price of TNGBL or our tokenized properties increase in value, we’ll immediately realize those gains and use them to buy more properties, boosting the yield for holders. For each 10% gain in treasury value, we can add about 85 basis points to the yield (.85%)
The Real USD yield should be largely unaffected by drops to the price of the tokenized properties. Rent will continue to be collected regardless of property valuations. Only once the collateralization of USDR falls below 100% will yield be diverted to the treasury to regain 100% collateralization.
What happened to staking and sUSDR?
With the launch of Real USD (USDR v2) and the shift of our USDR liquidity from Uni v3 to Curve, we were able to redeploy as a natively rebasing, single token.
There is no longer a need to stake USDR to receive the daily rebase. USDR holders will receive the rebase directly to their DeFi wallet.
This is a huge improvement to the user experience and a massive step forward in building a retail-ready savings token.
USDR v1 can be swapped to Real USD here.
How does Tangible manage the Real USD protocol-owned liquidity?
20% of all of Real USD’s market cap is held in the protocol-owned liquidity.
15% is held in a USDR-3Crv pool on Curve. 5% is held in a TNGBL-DAI pool on Uni v3.
When new Real USD is minted, up to 20% of new market cap is automatically taken from the treasury and added to our protocol owned liquidity. This ensures that there’s always sufficient liquidity for swaps in and out of USDR and TNGBL.
If user liquidity is added to the pool and it exceeds the 20% required by the protocol, new funds added to the treasury will be diverted elsewhere until the 20% needs to be topped off again.
Why was Real USD liquidity moved from Uni v3 to Curve?
Curve is the stablecoin nucleus of DeFi. From a product placement perspective, this feels like the best place to build exposure for USDR and the most natural location for liquidity to live moving forward.
From a yield perspective, the USDR-3Crv pair will vastly outperform any other stable pair on Curve, leading to new adoption. The Aave 3pool is Curve’s highest yielding stable pool on Polygon, currently returning 1.4%. At launch, the USDR-3Crv pool will return ~10% APY, the highest yielding pool on Curve. We view this as a major driver to growth.
The 3pool itself brings a user experience benefit, allowing DAI, USDC and USDT holders to more easily and cheaply swap to USDR.
Lastly, Curve does not restrict the deployment of rebasing tokens into liquidity pools. We wanted to redeploy USDR v2 as a single-token system and Curve was the best, largest DEX allowing rebasing tokens.
Real estate is extremely volatile, are you concerned that the real estate market is going to nuke?
Like any other market, the price of real estate can rise and fall based on a number of factors. However, unlike crypto or equities, the real estate market is significantly less volatile. The drops occur over a much longer timeframe and are generally less substantial in terms of the loss of value.
Here are three indicators we can use to project a decline in the housing market based on the last housing market crash:
How will a declining housing market impact the value of the Real USD treasury?
With the housing market already in decline and the USDR treasury growing, it’s important to note that the treasury will not incur the full loss of market value as new properties added during a decline will be purchased closer to their bottom. The entire treasury will never fall by 20% as the whole treasury wasn’t added in only one purchase at the top. Take this hypothetical chart for example:
As shown, a growing treasury offsets the total decline in asset prices as the assets added get closer to the bottom.
How will a declining housing market impact Real USD’s yield and collateralization?
A drop in the value of the treasury’s underlying assets does not automatically mean a loss of yield for holders. USDR’s yield is primarily derived from rental income, not the valuation of the assets themselves. As such, we expect to continue collecting the projected rent from tenants in managed properties, despite any paper loss on the underlying asset itself.
Further, the collateralization rate of the USDR treasury isn’t completely dependent on the price of housing. An appreciation in the price of TNGBL can offset losses to property valuations. Yield earned from protocol owned liquidity can also be used to bolster losses.
That said, a decline in the estimated value of the treasury’s real estate assets will lower the collateral value of USDR. If the collateral value drops below 100%, 50% of the rental yield will be diverted into the treasury until the backing is at 100%. While the yield to holders may decline to recollateralize the treasury, the drop in yield will not be total or permanent. We’ll maintain a 50% return on the current yield to prevent a mass exodus from the system while we replenish the treasury.
Will a declining house market force Real USD liquidations?
No, the real estate in the USDR treasury is owned outright, it’s not financed, it’s completely unleveraged. The only mechanism that can force USDR asset liquidations are redemptions from holders. If the redemption amount of USDR exceeds the DAI in the treasury, assets will be liquidated in order to fulfill redemptions. In this case, pDAI will be issued to allow Tangible adequate time to appropriately liquidate assets, extracting maximum value from the assets.
However, as long as the market cap of USDR is fully collateralized and yield payments flow to holders, we don’t foresee a drop in housing being an automatic trigger to redemptions.
How does a declining housing market benefit Real USD?
With an expanding market cap, Tangible will have the opportunity to DCA into new property purchases, adding assets to the treasury at or close to the bottom of their recent valuation. The more assets that are added towards the bottom, the greater the increase in valuation will be when the market turns around.
This is no different to what institutions like Blackstone are doing, preparing $50 billion vehicles to buy up residential property during this downturn.
What is the selection process for the properties in the treasury? Do they all come from Tangible’s marketplace?
We have a team who identify high-yield properties which are added to the marketplace and subsequently the USDR treasury. These properties are already tenanted with an established high yield. This established yield also serves to insulate these properties from price volatility as the markets move.
The majority of properties currently in our pipeline are in the UK where we have a property management team and realtor relationships established with a large number of high-yield locations identified. We don’t have any geographic restrictions and plan to diversify locations as we grow with the US next on the list. In addition to internally sourced properties, Tangible will list properties from any owner looking to sell, provided they pass due diligence with our team. However, we’re not actively seeking out user properties at this time.
What happens when there are no tenants leasing the property, resulting in zero rental income? How does the ecosystem accommodate such a scenario?
2% of the property value is held in a vacancy reserve. This supplies yield in the event of a vacancy. Once the property is tenanted again, a percentage of the yield from that location will be used to resupply the reserve. Many of our current properties have tenants on government aid meaning the rental reliability is extremely high, over 99%.
What is the relationship between Tangible and Real USD? How do both products build on one another?
Real USD sits under Tangible as one of our primary products, alongside our marketplace of tokenized real world assets.
Real USD allowed us to build strength on strength. With the systems and organizational knowledge in place to purchase, tokenize and manage real estate, it was a simple leap forward to apply that infrastructure to the design of a fully collateralized stablecoin. USDR allows us to bring many of the benefits of owning real estate to a global user base (yield, wealth preservation) without the many barriers and hassles to owning an entire physical property.
We view Real USD as a key to our real world asset ecosystem going forward, serving as a borrowing currency for users looking for leverage on existing RWAs and operating as the primary currency in our marketplace.
There are many stablecoins available on the market. What features does Real USD possess that make it stand out from the rest?
- Real USD is fully-collateralized/over-collateralized and designed to become more collateralized over time as the real estate assets in the treasury appreciate.
- It’s the only stablecoin backed by real estate. It’s really the only money that’s backed by real estate.
- Real estate is a proven store of wealth unlike the fiat backing other stablecoins. Unlike stablecoins backed by crypto, real estate is a human primitive with timeless demand and substantially less volatility than digital assets.
- USDR has a native source of real yield, distributed vai daily rebase, built directly into the token itself. Rental income is extremely reliable/consistent and uncorrelated from the performance of crypto markets.
