Neutrino: algorithmic price-stable cryptocurrency protocol collateralized by Waves
Popular digital assets such as Bitcoin (BTC), Ether (ETH) or WAVES are too volatile to be used as everyday currency or instrument of saving funds. This is also a big barrier for dApp (decentralized applications) developers and retail merchants which is preventing cryptocurrencies from mass adoption.
There are a bunch of fiat-based stable coins such as USDT, TUSD, Gemini or WUSD*. The main problem is that users should trust to centralized entities who are responsible for keeping enough reserves for issued stable-coins on the market.
Neutrino stable coin set-up combines an algorithmic approach with a cryptocurrency backing. Since the exchange rate is provided through external oracles and the actual exchange stable-coin — crypto is executed to this rate, the issue that we need to solve is not the stable coin price stability per se, but the price stability of the underlying asset.
A smart contract dispenses stable coins in exchange for the underlying crypto and enables the redemption of stable coins back into crypto. However, it might happen that the redemption of the stable coin becomes impossible, due to the crypto volatility and the diminishing value of the underlying asset.
To counter this, we propose adding a new instrument called Neutrino system base token (NSBT), which ensures that in case of diminishing reserves in underlying assets at the smart contract there is an incentive to replenish them through the purchase of NSBT.
The issue and redemption of NSBT is administered through the smart contract. Depending on which asset we are using as a reference we might have different variations of stable coins collateralized by WAVES native token: USD Neutrino, EUR-Neutrino, BTC-Neutrino or even S&P 500-Neutrino. Neutrino is designed to become one of the three deflationary mechanisms in Waves 2.0 together with side-chains and miners bounty.
This is an excerpt of the overview from the Neutrino white paper. For the full most updated version, see: http://neutrino.at/whitepaper