Stablecoins are popular among crypto users and they represent the backbone of Decentralised Finance. Without stablecoins, there would be no DeFi. They provide safety against the inherent volatility of crypto currencies and enable payments within the ecosystem. You can also lend it and make some “safe” return.
Today we present a project which has created a stablecoin where the main idea and goal is to maintain the 1:1 peg with the USD thanks to stability mechanisms and to generate a yield at the same time: DeFi Dollar.
What is DeFi Dollar?
The project is a combinaison of a stablecoin, the DUSD and a governance token, the DeFiDollar DAO (DFD). Both are ERC20 tokens running on Ethereum blockchain.
DeFi Dollar USD
DeFi Dollar USD is a stable asset collateralised by an index of stablecoins. It is a meta stablecoin which encompasses other stablecoins, with built in stability mechanisms to make sure it maintains its 1:1 peg to the USD. DUSD can be used to generate yield via liquidity pools or via staking on the protocol itself.
It provides hedging against the stablecoins’ volatility and portfolio risk diversification.
One DUSD shall be worth 1 USD at all time. It is a stablecoin.
DeFi Dollar DAO
It is the governance token of DeFi Dollar. DFD token holders run the protocol and vote on the important decisions to be taken. It might also receive protocol fees in the future (like Curve and veCRV for example).
How does DeFi Dollar work?
Buy or Mint
First of all, you need to get DUSD to take part in the project. Either you buy it on the market (via Curve) or you mint it in DeFi Dollar dApp, here.
To get DUSD, you deposit other stablecoins and use the mint function. You can use USDC, USDT, TUSD, DAI, yCRV and yUSD to mint DUSD.
Once you have done that, you can use the Savings tab in the dApp and start to generate yield. It will automatically accrue interests based on your deposit.
You can withdraw at any time with a withdrawal fee of 0.5% (similar with market practices).
Current APY is 45%, really good for depositing a stablecoin. And that 45% is not achieved through unsustainable yield farming which is a big plus.
Tip: if DUSD is trading higher than $1, you will want to mint it via the dApp. If DUSD is trading lower than $1, buy it on the market makes more sense. You will get arbitrage profit on top of your deposit and participate in the stability of DUSD.
How does DUSD stay stable over time?
Decentralised stablecoins such as DUSD fluctuate daily depending on supply and demand. So the DUSD can trade above or below $1 USD. Once that happen arbitrageurs come and close the profit opportunity thanks to the design of DeFi Dollar.
Indeed you can either buy or mint DUSD. As a result it automatically provides a stability mechanism.
If DUSD trades below $1 USD: arbitrageurs buy DUSD on the market (in Curve for example) and redeem the DUSD for another stablecoin via the DeFi Dollar dApp (Redeem tab), generating an instant arbitrage profit.
If DUSD trades above $1 USD: arbitrageurs mint DUSD via the dApp and sell in the open markets the DUSD received for another stablecoin and make an instant profit from arbitrage.
DeFi Dollar by the numbers
Discord: 1181 members
Twitter: 4387 followers
Team: 4 experienced team members, not anon.
Backed by VCs: raised $1.2M USD
Price: $1 USD
Market cap $10.6M USD
Circulating supply: 10,600,000
Max supply: not applicable
Curve DUSD pool: DUSD+3POOL: 10,369,932.88
Price: $0.53 USD
Market cap: $4M USD
Circulating supply: 7,635,540
Max supply: 100,000,000
Fully Diluted MC: $53M USD
Uniswap top liquidity pool (DFD/ETH): $895,000 USD
Why we do like the protocol
Stablecoins are the backbone of the DeFi ecosystem. If you are not willing to risk your money on speculative assets, investments in stablecoins make sense. You can still get a nice return and DUSD is no exception.
We do like the protocol for multiple reasons:
Ease of use: Using DeFiDollar is a seamless experience. Earning money is only a couple clicks away. You mint DUSD with stablecoins, you deposit into savings and you earn. That’s it. There is nothing else to do.
It is super easy, even more for somebody not familiar with liquidity pools, etc.
High APY: Current APY is super attractive and much higher than stablecoin lending activities. Why? deposited DUSD only represents a fraction of total DUSD in existence at the moment. But yield is generated on the entire stack of DUSD so the return is currently high.
Security: the protocol has been audited multiple times.
Integrated with Curve liquidity pools.
DeFi Dollar has the ambition to grow more in the future. Currently DUSD is a $10M USD stablecoin which is small compared to the other big stablecoins such as DAI, USDT or USDC. But innovation and development takes time and the DeFi Dollar team has a plan to keep growing: working on more integration for the protocol.
With more integration comes more volume and users.
They plan to integrate the DUSD with more protocols going forward. Doing that will sustain the APY offered by the savings product and shall onboard new users to DeFi Dollar.
We do like DeFi Dollar as a product thanks to its ease of use and higher APY compared to stablecoin lending activities.
Farming DFD via DUSD Curve liquidity pools can also make sense if you have a decent amount of stablecoins.
We look forward to the new integrations.
Thanks for reading,
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