Standard Protocol Launches USM — First Decentralized, Self-sovereign, Web 3.0 Stablecoin
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Standard Protocol Launches USM — First Decentralized, Self-sovereign, Web 3.0 Stablecoin

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Standard Protocol Launches USM — First Decentralized, Self-sovereign, Web 3.0 Stablecoin

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TL;DR

Standard Protocol testnet is now LIVE on Rinkeby for MeterUSD, USM, the first decentralized, self-sovereign, collateralized stablecoin for the Web 3.0. USM is the MVP product for the Standard Protocol money economy and will be essential to empower the whole Standard ecosystem along with STND and LTR tokens, and CDP NFTs that allow full self-sovereignty over the collaterals, debt positions, and loans.

Shortly after the testnet phase, Standard will initially deploy USM to Metis Mainnet, Andromeda, and other partners networks. Now, we welcome our community to participate in the launch and share any feedback with us on ☎Telegram or 🤖 Discord.

Useful links

📍 DEX: Borrow and Vault (Rinkeby Network)

📚 New Doc — a wiki of Standard: https://standard-protocol-wiki.super.site/

USM Testnet Guide

Part 1: Select Collateral to Mint USM

👇 Visit our guide for How to Mint USM

To mint testnet USM on Rinkeby Network, users can deposit collateral on the Borrow page📍apps.standard.tech/borrow

Borrowed quantity of USM = Market value of the collateral (using oracle price feed) / collateral ratio
  • The borrowed amount is the quantity of USM, not based on the market value of USM. Meaning, USM is always minted at $1. USM is always paid back at $1 as well.
  • Example — If the collateral value is $200 and the collateral ratio is 200%, 100 USM are minted. (Note that the market price of USM may not exactly be $1.)

Part 2: Vault Management

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👇 Visit our guide for How to Manage Vault

After minting USM, users can interact with the vault in the following ways on the Vault page📍apps.standard.tech/vaults

  • 💰 Payback borrowed USM + accrued fees (in USM)
  • 💵 Mint more USM
  • 🏛 Deposit Collateral
  • 💸 Withdraw Collateral

Now, let’s deep dive more on what Standard’s visions, brief explanation of our core product USM, and what is the design mechanism. You can also find these info in our new released doc 📍 https://standard-protocol-wiki.super.site/

Our vision for Stablecoin Protocol

Standard Protocol’s vision is to be the CeDeFi multichain protocol that utilizes technology to create borderless financial opportunities for everyone through full transparency and stability. By working across blockchain as a form of smart contract in each network, the Standard Protocol ecosystem strives for interoperability and represents a CeDeFi blockchain hub.

Standard Protocol wants to solve the following issues of the existing stablecoin mechanisms.

  1. Lack of Self-sovereignty
  2. Lack of interoperability with excessive focus on price stability.
  3. Absence of dedicated incentivized oracle system.
  4. Hard-To-Enter, Hard-To-Track Liquidation Auction Systems creating plutocracy in the ecosystem

A true Web 3.0 stablecoin needs to give the borrower full ownership including the borrower’s assets exchanged for the stablecoin. The typical design is a custodial model in which a protocol-controlled contract forms a reserve of the borrower’s traded-in assets. The reserve is usually controlled by a DAO, but individuals do not have control over what they provide unless they are in the majority. This is conditional ownership and freedom.

In order to let the borrower have self-sovereignty, it’s a necessity to be non-reserve and here, we define reserve as a “set of funds under control by the protocol”. Having a reserve introduces multi-step intermediary processes like voting and can introduce problems like voter apathy and community division. Being non-reserve eliminates these complexities in the protocol design.

Most stablecoins in the market are bull market materials. Most existing solutions to the bear market are not practical or have high barriers to entry, leaving out the general population from the game. These solutions include auctions, seigniorage, reserve buybacks + backstops.

Auctions bring complicated terms, intermediaries, and processes. In addition, users need to interact with raw smart contracts or run programmatic modules. This is definitely not for everybody. Indeed, only for the few. Seigniorage and reserve buybacks + backstop possess reflexivity and these can always create death spirals when heavy redemptions come, crushes the confidence, and destroys backstop or share token reinvestments.

Introducing USM — Self-sovereign, Non-reserve, Web 3.0 Stablecoin, Protocol Design and Components

Earlier, we have release an an article and statement about the general design of our stablecoin USM, and what problems we are solving.

In a nutshell, the the core values of USM — self-sovereign, decentralized, collateralized stablecoin for Web3 ecosystem tackles existing issues in three main directions:

  1. Rebasable elastic supply of stablecoin (USM) for price stability.
  2. Dedicated, incentivized and decentralized oracle ecosystem for punctual and accurate price feeds to support all activities within the protocol.
  3. Market efficient liquidation system achieved by depositing liquidated collateral to the USM-AMM pair instead of an auction system, opening arbitrage opportunities to any USM holder.
  4. Our DEX, Standard Protocol engine of Stablecoin, covers Vault to mint USM through collateralized assets, AMM, and LP farming. Our design on collateral liquidation will provide a more fair, transparent, and market-efficient way to sustain the stability of our stablecoin MeterUSD ($USM)

1. Meter (USM) Mechanism

Intrinsically, each unit of Meter will have at least USD 1 equivalent of collateralized assets such that its economic value will be higher than USD 1, and hence could be similarly used as a settlement currency that valued at USD 1 for each token.

The challenge is to stay close to the peg, which two sides of forces will need to be considered,

Either when USM is positively or negatively off-peg, rebase mechanics will kick in to govern how much new MeterUSD could be minted in the upcoming cycle. The algorithm will be based on issuance ratio and the market situation to adjust, and even suspend new minting of stablecoin until the entire market is stabilized (e.g. during a free-falling bearish situation). All these will be handled by our stablecoin contract automatically, which you may also refer to our whitepaper for more details.

2. Price Restoring Factors

USM is a stablecoin with a rebasable desired supply which is a mathematically determined optimal total supply to best keep USM at $1. This rebasable desired supply factor is on/off-able.

Vault Manager mints USM and vaults and Vault Manager are in control of the rebasable desired supply factor as well. Vault Manager constantly gets updated with USM’s market price.

Based on the market price, it sets the desired supply of USM for every rebases by the following equation:

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Essentially equivalent to

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There are other factors that work with the desired supply to restore USM’s peg

3. Collateralized Debt Position (CDP) in NFT

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Every time users borrow MeterUSD, they need to over-collateralize their assets. In Standard Protocol, we do not own any collateral as a reserve, but rather, our vault contract will create a Collateralized Debt Position NFT in your wallet and lock your assets as collateral before minting the MeterUSD to you.

When a borrower opens a CDP (Collateral Debt Position), NFT (ERC-721) is minted along with the debt (borrowed USM). This NFT represents the ownership of the CDP and is fully transferable. This means that the borrower has full ownership and has the freedom to spend not only the borrowed USM but also the collateralized debt position at his own will. The custodial design on the other hand only allows the bidirectional transfer of trade-in assets between the user and the protocol. On top of the full ownership and the freedom, the self-sovereign design opens another market for the CDPs.

This approach introduces two interesting mechanics that are unique to Standard Protocol.

  1. Your assets are still with you rather than locking up into our treasury as a reserve like some other stablecoin protocol. This means that if anything bad happened to the protocol, you remain to own your assets. It’s a truly decentralized way of handling collaterals.
  2. Your CDP is an NFT, you keep it, you own it. Compare to other protocols, Standard CDP is recorded under protocol with assets stored in the contract, but Standard Protocol not only let you keep the ownership in a decentralized format, but subsequently unlocking the potential of some other usage, including trading, and staking, enabling richer Defi options which we will explore more later.

To redeem your assets, all you need to do is to visit our vault contract, explained below, burn the sufficient amount of MeterUSD plus a few percent of stability fee (paid in MeterUSD as well), then your CDP will unlock your assets and now you can spend them again.

To maintain the stability of the entire protocol, there’s one more feature, liquidation, will be required to ensure that all CDP have sufficient collaterals to back the intrinsic value of all the circulating MeterUSD.

What are the benefits of using USM?

1. Arbitrage from Liquidation

The challenge of every stablecoin is when the collaterals can no longer support the token to stay close to its $1 peg during a bearish market. Standard Protocol takes a different approach on liquidation: instead of auctioning the undervalued collateral to specific, privileged users, the CDP will be liquidated (partially or completely) directly to our DEX and available to the market to trade. This is not only a much more capital-efficient way to handle liquidation but also allows users to explore arbitrage, i.e. slightly discounted, tokens on our DEX even during an unpleasant market sentiment.

2. Collateral Liquidation on AMM

When a liquidation happens, liquidated collaterals are sent to the AMM pair of Collateral-Meter. This creates an arbitrage opportunity where anyone can gain from trading Meter to the collateral through the AMM.

  • *In the bear run, collaterals are liquidated to the free market, and the market self-adjusts. One can simply trade Meter and gain instead of having to participate in an auction or governance token backstop.

Summary

These days, people keep asking the team why build yet another stablecoin? Don’t we already have enough stablecoin options in the market? That’s actually not wrong. Yet, in Standard Protocol point of view, the current landscape is still far from our Web 3.0 vision — with every individual being the sovereignty of the web, or in another way round, the free web that is truly owned by individuals.

We are open to all developers teams, projects, and organizations willing to integrate USM Stablecoin into their ecosystems. Our goal is to make USM available as a multichain and be a first choice, self-sovereign Stablecoin for Web3, DEFI, and Kusama & Polkadot ecosystem after our parachain launch in Q2 2022. Read more about Standard’s 2022 plan below.

Are You ready to join the self-sovereign, financial revolution?