The algorithmic stablecoin wars are heating up.
USN is a NEAR-native stablecoin soft-pegged to the US dollar.
Similar to LUNA and UST, in order to maintain the peg, NEAR is used to absorb the volatility of USN, and 1USN can be exchanged for NEAR worth 1 USD. So there is an arbitrage space: when USN=$0.99, people can buy 1 USN and exchange it for $1 worth of NEAR, making a profit of $0.01; when USN=$1.01, people can exchange 1 US$ NEAR for 1 USN , then sell at $1.01 for a profit of $0.01.
The difference here is that when 1 USD of LUNA is minted into 1UST, LUNA will be burned and destroyed, while NEAR will not. NEAR participating in the minting of USN will be deposited into the protocol’s reserve fund instead of being destroyed, becoming a part of supporting USN.
USN is initially double-collateralized by NEAR and the stable currency (USDT) through the reserve fund to ensure that in extreme cases, Decentral Bank can repurchase all the USN once issued, and in the future, the reserve fund will also be automatically balanced under the action of the agreement Maintain support for USN at a rate consistently above 100%.
Regarding USN staking, USN will automatically generate yield based on NEAR staking rewards, in other words, USN minimum yield = APY for staking NEAR (~11%), if due to NEAR appreciation or increased demand for USN, the amount held in the reserve As the value of NEAR rises, the APY will be higher . According to Decentral Bank’s description, the initial rate of return will be around 20% (guessing to attract some people who pledge UST), and third-party DeFi projects will also be integrated in the future, so that USN has Multiple revenue opportunities.
This is not the same as UST, as USN does not have a fixed yield, which may disappoint many, but Anchor supports that ~20% annualized by its dollar reserves, USN seems less risky by comparison much more.
USN’s ability to resist risks is also relatively strong, thanks to its reserve mechanism. If the price of NEAR falls, the protocol will use the stablecoin in the reserve to buy more NEAR; and if there are too many USN sellers, USN will get it at any time. Dual support for NEAR and stablecoins.
As of now, the only way to get USN is to use USDT to buy USN through Ref Finance’s StableSwap. I don’t want to take a big position into USN right now, but I’ll keep an eye on it, I’m more curious about the outcome of the calculation, there will be another competitor USDD (TORN) soon, and it promises 30% APY. This is the most exciting time for stablecoins, and the algorithmic stablecoin war is intensifying.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/a-quick-overview-of-the-near-algorithm-what-is-the-difference-between-usn-and-ust/
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