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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.
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.
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.
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.
We will integrate with various perpetual swap protocols in the future but in the first release we will integrate with mango markets.
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.
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.