$USN, the native stablecoin for $NEAR, had launched this week, garnering headlines across CryptoTwitter (CT)
But what really is it? Is it a threat to Terra's $UST and @anchor_protocol?
Let's find out! ๐
@NEARProtocol
Basics
$USN is a decentralized stablecoin, unlike Tether $USDT or $USDC, whose controlled by a central entity and risks being tightly regulated (like enforcing KYC)
$USN is more like Terra's stablecoin $UST, whose $1 value is algorithmically pegged/maintained
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Not familiar with @terra_money and its stablecoin $UST?
Here's a thread just for you!
twitter.com/sahicoin/status/1499053894286340096?s=20&t=wK9J1h-FyjXbV5WMcY3NRw
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$NEAR is a scalable Layer 1 blockchain competing with chains like $AVAX and $SOL
Here's a Mega Thread on $NEAR we wrote in case you want to know more!
twitter.com/sahicoin/status/1513900967749566464?s=20&t=y9PIPBo480AljA3YP1450w
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$USN is issued by Decentral Bank @DcntrlBank, a Decentralized Organization (DAO) on NEAR.
The $USN stablecoin can be created by posting #NEAR tokens as collateral.
Users will enjoy a minimum 10% annual yield for holding their $USN
But where is the yield coming from? ๐
4/
The yield comes from staked $NEAR tokens in @DcntrlBank's reserve fund.
The staking yield for $NEAR is currently 10.47%, acting as base for USN.
It could change based on $NEAR staking percentage and market value.
There'll be incentives to boost the yield in the beginning๐ค
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How does USN keep the $1 peg?
Arbitrage mechanisms and Reserve Fund
A smart contract enables the exchange of $NEAR>$USN on-chain. Arbitrageurs will take advantage of price discrepancy b/w on-chain price and Exchange price until $USN returns to its $1 peg.
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Reserve Fund
To mint $USN, a user needs to post $NEAR tokens as collateral.
E.g., To mint 10 USN, $10 worth of NEAR tokens are given as collateral to the Reserve Fund held by @DcntrlBank
The tokens are staked, and the staking yield generated is used to pay $USN depositors.
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The Reserve Fund will also include $USDT initially and retain a >100% backing of $USN at all times.
In a worst-case scenario, the @DcntrlBank could purchase back all of the $USN that has ever been issued.
Users can swap between $USN and $USDT on
app.ref.finance/stableswap
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$USN doesn't generate yield yet, its awaiting DAO approval
Once live, users can obtain >10% yield through lending protocols on NEAR and Aurora (NEARโs EVM layer) like @BastionProtocol, @aurigami_PLY, and @burrowcash
Meanwhile, you can pool into $USDT-$USN LP on @finance_ref
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How does $USN compare with Terra's $UST
-USN is FULLY BACKED by NEAR and USDT reserves while UST only started building reserves with $BTC and $AVAX
-USN's reserves contain USDT, making it less decentralized as of now. UST only has decentralized assets $BTC $AVAX
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How does $USN compare with Terra's $UST
-USN provides a min yield of ~10%, subject to grow based on NEAR staking rewards, while Anchor provides ~19.5% for UST deposits. However, it will start declining as Anchor shifts to a dynamic rate model for its yield
11/
How does $USN compare with Terra's $UST
-USN is brand new, thereby high risk. UST has been around for a while and has proven resilience during the precipitous 2021 May market drop and the $MIM @MIM_Spell Sifu drama
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However, both risk being algorithmic and could de-peg from their $1 value.
Such an instance has been seen recently with @wavesprotocol stablecoin Neutrino $USDN.
It went as low as $0.76, a 23% drop!
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Though DeFi demands a fully decentralized stablecoin, you must know the risks and allocate capital accordingly as a user.
If regulation and KYC don't scare you, @circlepay's $USDC is the best choice as it's fully backed by the US Dollar.
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Sources:
medium.com/nearprotocol/decentral-bank-launches-usn-a-near-native-stablecoin-cafe1ec0c5af
twitter.com/BastionProtocol/status/1519470419635494919?s=20&t=pC5pLTKSOSZDwjfjtDgtaQ
decentral-bank.finance/
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#NEAR #USN #stablecoin #UST #defi #blockchain #crypto