UXD Protocol is the first trustless algorithmic stablecoin that maintains its peg with the use of perpetual swaps. UXD Protocol is integrated with derivative exchanges to create a delta-neutral position to ensure the stablecoin is fully collateralized.
What happens when the funding rate is negative?
The insurance fund will pay the negative funding rate to ensure that holders of UXD will never pay a negative interest rate as long as the insurance fund remains capitalized.
How will the insurance fund be funded?
When the funding rate is positive, part of the interest generated from the delta-neutral position will flow to the insurance fund. UXD's insurance fund was initially capitalized at $57,086,131 as of 11/14/2021.
Which cryptocurrency assets will be used to create the delta-neutral position?
We will accept various types of cryptocurrency assets such as BTC, SOL, ETH, etc as collateral to back the stablecoin. Initially, we will accept only SOL as a deposited collateral.
What happens if the insurance fund balance is depleted?
We will have an auction of the governance tokens and use the proceeds to refund the insurance fund. See Risks for further details.
Which perpetual swap protocol will you integrate with?
We will integrate with various perpetual swap protocols in the future but in the first release we will integrate with mango markets.
How do you know that UXD will be stable at all times?
Since UXD is 100% backed by a delta neutral position, users can always mint/redeem the UXD with an equivalent amount of cryptocurrency. If 1 UXD trades at a price that is different from 1 USD, arbitrageurs can make risk free profits and will push the price of 1 UXD to 1 USD. For more information on the stability mechanism see here. For risks related to de-pegging, see here.
Why doesn't UXD Protocol require over collateralization?
Since perpetual swaps are very liquid, UXD Protocol will be able to unwind the delta neutral position without much slippage. As a result, users can mint 1 UXD with 1 USD worth of cryptocurrency assets. The stability mechanism of a delta-neutral position ensures that the underlying position will be worth 1 USD. See Risks for more details.