Decentral Bank is a DAO specializing in developing stablecoins for the NEAR ecosystem, notably USN – a semi-algorithmic stablecoin supporting dual collateralization.
USN combines collateral assets and an automated price stabilization algorithm, managed by Decentral Bank DAO with the goal of maintaining stability and generating profit from NEAR staking.
MAIN CONTENT
Decentral Bank operates USN – a semi-algorithmic stablecoin with a dual collateralization mechanism and stabilization based on on-chain arbitrage.
The USN reserve fund and DAO governance protocol play a key role in maintaining the peg and managing liquidity.
The roadmap clearly aims at expanding multi-chain, integrating USN across various platforms and applications within the NEAR ecosystem.
What is Decentral Bank?
Decentral Bank is a DAO established to develop and manage the stablecoins of the NEAR ecosystem, notably USN – a semi-algorithmic stablecoin. Decentral Bank DAO not only manages the USN reserve fund but also has the authority to stake NEAR to earn profit from staking rewards.
Initially, Decentral Bank was supported by Proximity Labs to create USN liquidity on both centralized and decentralized exchanges, serving the goal of expanding the NEAR ecosystem.
Project Highlights
What is USN?
USN is the foundational stablecoin in the NEAR ecosystem, applying a dual collateralization mechanism with NEAR and USDT, while utilizing algorithms to maintain price stability. This is a combination of the UST stablecoin model from Terra and the stabilization algorithm of Frax Finance.
USN leverages on-chain arbitrage trading and manages the reserve fund based on the principles of the standard currency peg to enhance robustness, thereby adding utility to the NEAR Token.
The price stabilization mechanism of Decentral Bank
Decentral Bank ensures USN maintains a stable exchange rate against USD through on-chain arbitrage trading and a reserve fund based on the Currency Board model. This mechanism allows USN to be traded via smart contracts with a near-zero discount.
On-chain arbitrage trading: When the price of USN is below 1 USD, contracts allow users to buy USN with NEAR at a 1:1 ratio; conversely, when the price is above 1 USD, NEAR will be exchanged for USN and sold on the market.
USN Reserve Fund: USN is ensured with dual collateralization consisting of NEAR and USDT, maintaining a collateralization ratio above 100% to create a mechanism for redeeming all USN when necessary, thereby stabilizing the market.
USN combines the advantages of algorithmic stablecoins with a dual collateralization system, creating a sustainable stablecoin with superior backing ratios – Mr. Alex Smith, CEO of Proximity Labs, 2023.
(Source: Proximity Labs Report, 2023)
The Currency Board applies a standard currency peg model to manage the reserve fund, automatically balancing the amount of NEAR and stablecoin according to the value of USN issued, ensuring liquidity and price stability amidst market fluctuations.
USDT was chosen as the primary collateral stablecoin based on the study "On the stability of Stablecoin", showing that USDT has the most suitable stability and volatility among the current large stablecoin group.
StableSwap: Decentral Bank initiates USN/USDT liquidity pools on Ref Finance, using StableSwap to optimize trading, reduce slippage, and enhance liquidity.
What is Decentral Bank DAO?
Decentral Bank DAO is the governance organization of the project, responsible for managing the treasury, issuing USN, and making important decisions regarding policies and operations. The DAO allows community members to vote on issues related to funding, commissions, and resource allocation.
How do governance protocols and Treasury Management work?
The DAO's automated treasury management system monitors the NEAR and stablecoin reserve fund, while adjusting the balance of the fund through NEAR and USDT swap transactions to protect the peg value of USN. Optimal decisions are supervised by the DAO.
We focus on transparency and automation in fund management, ensuring long-term stability for the USN stablecoin – Ms. Linh Tran, Head of Treasury Management, 2024.
(Source: Interview with Decentral Bank experts, 2024)
Price stabilization principles and collateralization ratio of USN
USN maintains a dual collateralization ratio of approximately 200%, consisting of 100% collateral in NEAR and 100% stablecoin. This ratio ensures that the reserve fund is always capable of redeeming all USN issued in case of significant market fluctuations.
The backing ratio formula helps continuously monitor the balance between issued USN and assets in the reserve fund.
Principles of Reserve Fund Management through the Currency Board model
The reserve fund continuously swaps and balances between NEAR and USDT based on smart contract protocols, keeping the total value of reserve assets always corresponding to or exceeding the total number of USN issued. Market intervention measures are also proposed by the DAO to maintain stability.
Decentral Bank Development Roadmap
Phase Main Goals Phase 0 Receive funding, increase USN liquidity on Ref Finance and NEAR Wallet, launch USN/NEAR, USN/USDT pairs. Phase 1 Integrate USN across protocols in the NEAR ecosystem. Phase 2 Release and integrate USN on centralized exchanges (CEX). Phase 3 Expand multi-chain, support Multi-chain. Phase 4 Make USN a foundational asset, used for storage fees and gas fees in the NEAR ecosystem.
Frequently Asked Questions
What is Decentral Bank?
Decentral Bank is a DAO that develops and manages the USN stablecoin, supporting the NEAR ecosystem and increasing liquidity through a reserve fund and NEAR staking.
How does USN differ from traditional stablecoins?
USN uses a semi-algorithmic model with dual collateralization of NEAR and USDT, helping to maintain a stable exchange rate and increasing safety compared to stablecoins that rely solely on single collateral assets.
How is the USN reserve fund managed?
The reserve fund is monitored by the DAO through Treasury Management, automatically balancing NEAR assets and stablecoins through on-chain trading to protect the price stability of USN.
Can USN be traded on exchanges?
USN currently has liquidity on Ref Finance with USN/NEAR, USN/USDT pools and is being expanded to centralized exchanges according to the development roadmap of Decentral Bank.
What role does the DAO play in the project?
The DAO decides policies, manages funds, approves funding, commissions, while ensuring transparent and automated governance for the USN reserve fund.
Source: https://tintucbitcoin.com/decentral-bank-la-gi/
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