“Spells…of the ancients…mine…Mine…”
dUSD.sol is modular and can contain as many algorithms as we want to keep dUSD at 1 dollar peg.
dUSD will have five phases on Polygon’s layer 2.
Users can convert their convert their Rebase dUSD, Basis dUSD, ESD dUSD or FRAX dUSD into dUSD with 1:1 ratio. This is a one way portal.
DB/dUSD pool (which rewards DB) will always have the highest APY out of all DB pools.
Rebase dUSD (rdUSD) Phase
Users will be able to convert DB to Rebase dUSD (rdUSD) with zero slippage via D.B Offers program. (More details coming soon)
rdUSD/USDC pool will reward dUSD instead of rdUSD, the only way to get rewarded dUSD is to become a liuqidity provider for rdUSD/USDC liquidity pool.
Basis dUSD Phase
Basis dUSD does what Basis Cash does but gaslessly on layer 2.
ESD dUSD Phase
ESD dUSD does what ESD does but gaslessly on layer 2.
FRAX dUSD Phase
FRAX dUSD can always be minted and redeemed from the system for $1 of value. This allows arbitragers to balance the demand and supply of FRAX dUSD in the open market. If the market price of FRAX dUSD is above the price target of $1, then there is an arbitrage opportunity to mint FRAX dUSD tokens by placing $1 of value into the system per FRAX dUSD and sell the minted FRAX dUSD for over $1 in the open market. At all times in order to mint new FRAX dUSD a user must place $1 worth of value into the system. The difference is simply what proportion of collateral and DB makes up that $1 of value. When FRAX dUSD is in the 100% collateral phase, 100% of the value that is put into the system to mint FRAX dUSD is collateral. As the protocol moves into the fractional phase, part of the value that enters into the system during minting becomes DB (which is then burned from circulation). For example, in a 98% collateral ratio, every FRAX dUSD minted requires $.98 of collateral and burning $.02 of DB. In a 97% collateral ratio, every FRAX dUSD minted requires $.97 of collateral and burning $.03 of DB, and so on.
If the market price of FRAX dUSD is below the price range of $1, then there is an arbitrage opportunity to redeem FRAX dUSD tokens by purchasing cheaply on the open market and redeeming FRAX dUSD for $1 of value from the system. At all times, a user is able to redeem FRAX dUSD for $1 worth of value from the system. The difference is simply what proportion of the collateral and DB is returned to the redeemer. When FRAX dUSD is in the 100% collateral phase, 100% of the value returned from redeeming FRAX dUSD is collateral. As the protocol moves into the fractional phase, part of the value that leaves the system during redemption becomes DB (which is minted to give to the redeeming user). For example, in a 98% collateral ratio, every FRAX dUSD can be redeemed for $.98 of collateral and $.02 of minted DB. In a 97% collateral ratio, every FRAX dUSD can be redeemed for $.97 of collateral and $.03 of minted DB.
The FRAX dUSD redemption process is seamless, easy to understand, and economically sound. During the 100% phase, it is trivially simple. During the fractional-algorithmic phase, as FRAX dUSD is minted, DB is burned. As FRAX dUSD is redeemed, DB is minted. As long as there is demand for FRAX dUSD, redeeming it for collateral plus DB simply initiates minting of a similar amount of FRAX dUSD into circulation on the other end (which burns a similar amount of DB). Thus, the DB token’s value is determined by the demand for FRAX dUSD. The value that accrues to the DB market cap is the summation of the non-collateralized value of FRAX dUSD’s market cap.
Stable Credit as basis, dUSD will be the core part to enable single side liquidity exposure for Dark.Build Exchange. Half of the exchange’s liquidity will be dUSD.
Finally, now imagine an algo stable coin with all of AMPL, BASIS, ESD and FRAX’s features and unlimited arbitrage opportunities, on layer 2.