Neutrino protocol works differently from other stable coin protocols, so a SHORT PRIMER could help. Neutrino ties in deeply with the economy of the underlying Waves blockchain. It turns Waves staking into $USDN staking, eliminating the volatility.
Waves staking earns around 6% annually. USDN is backed by Waves tokens, and the locked tokens are staked. Not all users choose to stake their USDN, so the staking profits go only to USDN stakers, which increases their profits to 10% +.
Therefore USDN is effectively an interest bearing stable coin, unique of its kind, which creates an intrinsic demand for it. It also affects positively the stability of the US dollar peg, since it boosts the value of the underlying waves token.
To provide for more stability an additional token is used. It also doubles as a governance token of the protocol. When the value of Waves tokens in USDN backing it goes down it works as a bond, allowing users to speculate on so-called Backing Ratio (BR) .
When BR goes below 1, that is USDN tokens total value exceeds the value of locked Waves tokens Neutrino token works like a bond, it is sold under 1 dollar and can be swapped into 1 USDN when the backing is restored. There are no marginal mechanisms and liquidations in Neutrino.
If USND backing goes down, intrinsic demand and speculative interest bring it back to stability. It is not necessary for Waves price to go up to restore the balance, it can also be restored through additional backing locked in the contract.
Once BR is above 1 Neutrino token becomes more of a governance token. There is an emission curve connecting the backing ratio to Neutrino price. Overcollateral of 1.5 is targeted, the curve is built in such a way that after BR=1.5 there is a steep increase in Neutrino token price
What neutrino governance actually governs? To provide for even more stability we add an additional layer that allows creation of stable assets on top of USDN. They can be tied to national currencies, precious metals, stock market indexes etc.
Custom stable assets are backed by USDN, and an additional user liquidity pool is created to account for the volatility of stable assets against the dollar. Liquidity providers earn swap fees, and vote with Neutrino token for the concrete stable assets to be launched.
KEY POINTS: Neutrino backed by Waves but its stability is provided via different mechanisms, including the demand for the governance token. There are no liquidations and margins in Neutrino.
Neutrino token curve targets x1.5 over-collateral for Neutrino and makes Neutrino token price fluctuate around the stable point of around $3.
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