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What is UXD Protocol?
UXD Protocol issues a collateralized decentralized stablecoin backed by various assets deemed by the Protocol to be relatively low risk. These assets may include overcollateralized lending positions, real-world assets, and delta-neutral positions, among others.
UXD is issued on Solana, an incredibly fast, cheap, and permissionless blockchain. UXD is a next-generation decentralized stablecoin that integrates with top crypto projects to collateralize the stablecoin and ensure full backing.
Through UXD's construct, we are able to significantly mitigate the "stablecoin trilemma", allowing UXD to be stable, relatively capital efficient, and decentralized. Moreover, the stablecoin has native yield component from the yields of the various underlying assets and positions.
When thinking about what features an ideal stablecoin would have, three come to mind as incredibly important:
- 1.Stable: The goal of a stablecoin is to keep a direct peg to a non-crypto asset like US Dollars. If a stablecoin wildly fluctuates above or below this peg, it is fundamentally not very useful.
- 2.Decentralized: The issuance, trading, and flow of the stablecoin should not rely on any centralized entity. Minting and redeeming the stablecoin should be permissionless and decentralized, and the community of stablecoin users should own the platform that creates the stablecoin.
- 3.Capital Efficient: Anyone should be able to mint the stablecoin with $1 of assets. Requiring more than $1 to mint a stablecoin, such as the case with DAI, is extremely inefficient for users.
The stablecoin trilemma that we referenced above states it is impossible to be Stable, Decentralized, and Capital Efficient at the same time. Stablecoins can have at most 2 of these 3 features. UXD believes that all stablecoins currently in the crypto ecosystem fail in one of these three key features, whereas UXD has the ability to find a flexible balance between all three due to its multi-strategy approach.
Think of your favorite stablecoin designs - they will fail in one of these three features to some extent. Of course, UXD comes with its own Risks, which should be fully understood before minting or using UXD. Moreover, UXD is not available to be minted or redeemed in certain jurisdictions, please see our Terms and Conditions.
UXD is pegged to the US dollar through our Liquidity Management strategy, which allows for redemption of 1 UXD for 1 USD of assets subject to the constraints of the strategy. This ability to redeem (or the expectation of the ability to redeem in the near future) are what helps UXD remain near its USD peg. This is because if UXD deviates above or below the USD peg for any reason, traders will be able to arbitrage and bring the price of UXD back to the peg.
UXD Protocol is non-custodial, and does not hold user's deposited crypto assets. Assets are routed to various decentralized protocols according to Protocol defined strategy. Users in available jurisdictions can mint/redeem UXD on a permissionless basis. Although the UXD team will control initial design choices for the protocol, eventually UXP holders (UXD's governance token) will have DAO authority over future design proposals. This will ensure that UXD is decentralized over the longer term, and never relies on any individual entity.
Unlike many popular stablecoins that require more than $1 of crypto assets (sometimes $1.50+ of assets) to mint $1 of a stablecoin, UXD users can mint 1 UXD for $1 worth of crypto assets. This is because positions such as delta-neutral positions, and real-world asset positions do not require more than $1 of purchase to create 1 UXD.
When UXD token is minted, UXD protocol establishes an asset position according to its various strategies, which are able to generate yield through a combination of interest rates paid, funding rates for perp positions, and other yield generating streams.