Original - Odaily
Author - 0xAyA
Stablecoins have always been regarded as the cornerstone of the crypto market, paving the way for the entry of over-the-counter funds; the development and changes of stablecoins have a major impact on the entire crypto market, and are also a battleground for the major giants. ”.
In the past two years, due to various black swans and other security incidents, the stablecoin market has undergone certain changes: UST completely collapsed, BUSD retreated and gradually disappeared, USDC lost ground and its share declined... The market gap left behind is attracting emerging players to enter field.
This year, two major projects in the stablecoin market have become the focus of attention. One is the stablecoin PYUSD issued by the payment giant PayPal and Paxos. However, it is limited to specific regions and applications, and the current adoption rate is low; the other is the recently launched stablecoin USDV issued by the Verified USD Foundation has attracted much attention since its birth.
USDV (Verified USD) is a community-driven stablecoin pegged 1:1 to the U.S. dollar and fully supported by STBT. By integrating with LayerZeros full-chain homogeneous token standard (OFT), USDV has unique advantages in cross-chain capabilities and ecological interoperability. In addition, the algorithmic features of USDV enable community participants to receive rewards for their contributions to the stablecoin ecosystem, thus motivating more participants to actively invest in its ecosystem.
For stablecoins, the most critical thing is to build a healthy ecosystem that can sustain internal circulation and have practical application value that can be recognized by the community. As a newcomer to the stablecoin battlefield, how should USDV use its own advantages to create a new world among the princes?
1. The internal circulation path of stable coins
To ensure that stablecoins can be used continuously and for a long time, the key point is that they must have practical application value.
For example, LUSD has a stability pool function, and users can pledge LUSD in the pool to obtain liquidation incentives and additional $LQTY rewards; crvUSD’s LLAMMA mechanism allows users to gradually sell the assets used for mortgage in different price ranges. , and will not be liquidated immediately; DAI provides incentives to holders through enhanced savings interest rates.
Stablecoin solutions have their own merits, but they reach the same goal in different ways. The core purpose is to ensure that users are willing to hold their own stablecoins for a long time instead of replacing them with other stablecoins.
In terms of application, USDV has adopted a smarter solution: using algorithmic mechanisms to incentivize ecological project contributors who use USDV more, and then using contributors to incentivize users to use USDV, thereby achieving the effect of a positive cycle flywheel. In the practice of incentive mechanism, USDV uses an algorithm called ColorTrace, which is similar to Bitcoins UTXO structure. Community contributors can mark USDV and enjoy the right to receive rewards from their contributions to the USDV ecosystem.
Below, we use an example to help you understand the operation of the incentive mechanism:
Lets say there is a project named V, and they decide to adopt USDV as the primary payment method in their ecosystem. As a contributor, Project V dyes USDV and uses it to provide trading liquidity in its ecosystem. Thanks to their contributions, the ABC project is an active participant in the ecosystem. Due to USDVs ColorTrace algorithm, the V projects contribution can be recorded and eventually receive a certain proportion of rewards. These rewards can be continued to be put into the ecosystem by the V project and enable the project to have a higher APY, and ultimately promote more External liquidity enters the ecosystem, so that projects, users, or stablecoins can all benefit from it, and ultimately form a positive cycle.
In the past, stablecoin incentives were more from the users perspective, attracting users by simply increasing incentive distribution. For example, the Enhanced DAI Deposit Rate (ESDR) mentioned earlier incentivizes users to purchase U.S. bonds by anchoring stablecoins in the Stability Module (PSM); Frax Finance has also launched sFRAX, a pledge vault linked to U.S. Treasury bonds. Partnering with Lead Bank in Kansas City to open a brokerage account to purchase U.S. Treasuries, incentivizing sFRAX pledgers.
However, in these two examples, the flow incentives of stablecoins are considered more from the perspective of users rather than the perspective of the entire ecosystem. There is always an upper limit to a single incentive threshold. Through the algorithm mechanism, USDV encourages projects and partners in the ecosystem to think about how to turn the flywheel and make good use of the ColorTrace algorithm to gain more incentives, thereby truly promoting ecological projects to actively promote USDV.
In addition, because USDV has obtained OFT standard support provided by Layerzero, it has strong cross-chain capabilities, which makes it particularly suitable for multi-chain deployment and encryption projects with good development momentum. These projects are able to earn more rewards through the ColorTrace algorithm and therefore will naturally be more active in promoting the use of USDV within their ecosystems. This incentive mechanism not only encourages project parties to adopt USDV, but also builds a broader and healthier internal cycle within the ecosystem for USDV itself. It also promotes cross-chain interoperability and development of the entire DeFi ecosystem.
From the perspective of implementation practice, through the fair and transparent Colortrace mechanism to incentivize contributors, the USDV ecosystem has grown stronger.
Among them, the Verified USD Foundation is the main promoter and supporter of the ecosystem, and its biggest mission is to cultivate a progressive community composed of contributors. In addition, key contributors such as Matrixport and LayerZero also play an indispensable role in ecological construction. Together with important DeFi facilities such as Curve, Sushi, TraderJoe, and Stargate, they work together to expand the ecological scale of stablecoins.
In addition, according to the latest official news, USDV has also been supported by multiple wallets and payment platforms, using USDV as a payment channel, including COIN 98, Beam, Everywhere Finance and basedappHQ. In addition, BIT.com exchange also announced the launch of the USDV/USDT trading pair to expand the application of crypto exchange scenarios.
The cake of stable currency needs the cooperation of multiple parties to build it and continue to grow in order to better promote it to the market. The joint efforts of partners will help USDV occupy an important position in the market, not only accelerate the market popularity of stablecoins, but also provide users with more diversified choices and establish a more healthy, transparent, and sustainable stablecoin. ecosystem.
2. How can USDV ensure true stability?
The key to stablecoins is not only their practical value, but also how to achieve the stable properties they promise, and achieving this is not easy. In addition, stablecoins also need to face challenges such as inflation, insufficient market liquidity, and black swan events, which all pose severe tests to their underlying mechanisms.
In the past two years, news about some stablecoins such as UST and USDC being unanchored or even collapsing have been common, and they have also given us some inspiration:
First of all, the asset stability of stablecoins needs to be fully guaranteed, which means that stablecoin issuers must ensure that there are sufficient and stable asset reserves to support their value. These assets are preferably cash, bonds or other highly liquid assets. assets, rather than non-stable tokens like Terra.
Secondly, issuers of stablecoins need to comply with relevant financial transparency and compliance requirements and disclose financial information to the public to build trust and ensure the sustainability of stablecoins - currently USDC and others are issued on a regular basis (3 months/half a year) ) publicity.
More importantly, in the issuance and management process of stablecoins, it is also necessary to establish an effective risk management mechanism and take necessary technical security measures to protect the stablecoin system from the threats of hacker attacks and data leaks.
In response to the above issues, USDV submitted its own answer sheet after exploring it.
(1) STBT improves the stability of USDV
First of all, USDV is based on tokenized real-world assets (tokenized RWA), and only whitelisted tokenized assets are allowed to serve as the basic assets of USDV. This strict screening mechanism helps To ensure the quality and stability of USDVs underlying assets.
Secondly, USDV has made innovations in the anchoring mechanism: USDV is linked 1:1 to its reserve asset Short-term U.S. Treasury Token (STBT); at the same time, the Short-term U.S. Treasury Token (STBT) is always maintained at 1 U.S. dollar through the Daily Rebase mechanism. to ensure the stability of USDV value.
STBT (Short-term Treasury Bill Token) is the first reserve asset underlying USDV. It is a token designed for qualified investors and follows the ERC-1400 standard, allowing holders to earn risk-free U.S. Treasury bond returns on the chain. Rate.
An asset reserve model like USDV is a positive sign for investors and holders, as they can use and hold USDV with more confidence without having to worry about the risk of large fluctuations or value decline. This also helps to improve USDV’s recognition and acceptability in the market, laying a more solid foundation for its future development.
(2) Transparency and security
USDV starts from many aspects such as real-time on-chain transaction tracking, reserve certificates, and daily real-world asset monitoring. The full-process tracking ensures the transparency of stablecoins.
Through technology, USDV is able to achieve real-time on-chain transaction tracking, which means that all USDV transactions can be tracked and verified on any public blockchain to ensure the verifiability of transactions. In terms of reserves, USDV displays its asset reserves in a public manner to ensure that each USDV has corresponding asset support, and the most important of these is STBT.
STBT is fully backed by Chainlink Proof of Reserves and comes with complete transparency. At the same time, it can also be verified on-chain through timely minting and redemption pathways, and undergo strict inspection and auditing by security companies. STBT is fully reserved by U.S. Treasury bonds and reverse repurchase agreements maturing within 6 months, effectively improving its stability and transparency and reducing the risks associated with USDV.
In addition, the Foundation provides technical and security support for the USDV ecosystem to ensure that it remains stable and secure in the face of various potential threats and challenges. The foundation will also work with security experts and technical teams to conduct security audits and vulnerability testing to ensure the overall security of the USDV ecosystem - so far, USDV has passed security audits by Paladin, Zellic and OtterSec.
In order to ensure that USDVs technical infrastructure can meet the needs of future development and maintain a high level of security, the above measures are essential. These efforts have also laid a solid foundation for the long-term success and sustainable development of USDV.
Although the leading players in the stablecoin market occupy a large market share, the industry structure is not static. Emerging stablecoins such as USDV are catching up with their unique advantages.
As the encryption market matures, competition between projects will transition to competition between ecology and ecology. For individuals, the earlier they participate in an ecology with development potential, the more incentives they will receive as the ecology gradually grows. USDV, a small tree that is rising quietly from the ground, will become a big tree that can protect against wind and rain in the future, bringing more stability and prosperity to the entire stablecoin ecosystem.