Solana Stablecoin UXD Raises $ 3 Million, Aims To Expand DeFi Outside Of Ethereum

Stablecoin provider UXD Protocol, formerly Soteria, raised $ 3 million in a funding round led by Multicoin Capital. round also included Alameda Research, CMS Holdings, Defiance Capital and others. UXD protocol is based on Solana, a blockchain network optimized for high performance.

” funds from the collection will be used to hire developers and scale the team,” said Kento, founder of UXD Protocol. decipher.

Unlike traditional stablecoins, which are supported 1: 1 with cash or equivalent, UXD’s offering is algorithmic. This means that the stablecoin maintains its parity by holding and balancing various cryptocurrencies as collateral. For now, UXD will only accept Bitcoin, Solana, and Ethereum as collateral.

MakerDAO’s GO stablecoin is another example of an algorithmic stablecoin.

When users want to create DAIs, they must provide a 150% guarantee in Ethereum (or USDC AND WBTC, a native Ethereum token that tracks the price of Bitcoin).

refore, $ 150 of Ethereum will earn you $ 100 in DAI. However, if the Price of Ethereum falls drastically, users must add more collateral to maintain their position. y risk selling their position on the open market if it is not resolved.

MakerDAO mechanism is a relatively simple means of keeping DAI pegged at $ 1. But there have been many other attempts to achieve the same results, many have. ended in disaster.

EIF fell to $ 0.136. In the process, he was supposed to teach everyone some lessons on stablecoin design and, perhaps, investing in cryptocurrencies.

A wire.

– Emin Gün Sirer (@ el33th4xor) April 7, 2021

However, Kento and the latest round of investors believe they have found a solution.

Algorithmic stablecoins have a difficult history. Most of the somewhat stable cryptocurrencies failed because they did not have 100% support, which made them extremely volatile and prone to losing their rungs, “Kento said.” UXD, on the other hand, is 100% supported by a neutral delta position.

A delta-neutral position is a common derivatives strategy in the world of finance to hedge volatility. se derivatives can be anything from call and put options to perpetual swaps, the latter of which uses UXD. Delta measures the rate of change between these derivatives and the price of the underlying asset. delta value can range from -1 to 1, and zero indicates a neutral delta position.

“Delta neutral strategies are not a new idea,” Kento said. “Assuming positions are managed correctly, they are one of the safest ways to execute a profit-generating strategy. In traditional finance, traders create neutral delta positions to hedge their exposure to the market and generate returns. “

Kento came up with the idea when he used the strategy for traditional trading activity, rather than using it to hook a stable coin.

More importantly though, Kento believes that UXD will finally be the first truly decentralized stablecoin.

Read also Facebook Diem Network collaborates with K2 Integrity to combat illicit financial activities

UXD points Circle, Tether

With a combined market capitalization of nearly $ 100 billion, both To Tie and USD Coin are big forces in the cryptocurrency industry. However, despite their popularity, the community is often reminded of the biggest drawback of these two currencies: centralization.

Since both stablecoins are managed and maintained by centralized entities, these entities are potential targets for regulators. “It’s a black swan risk that everyone in the ecosystem is after them, but when that happens it will be devastating for the crypto ecosystem,” Kento said.

Ya Center, the consortium that oversees USD Coin, blacklisted the $ 100,000 from USDC after claiming it was complying with law enforcement. Even more recently, Tether froze $ 33 million involved in the Poly Network hack last month.

VAMOS is also at risk, as nearly 60% of all collateral on MakerDAO is USDC, according to Dai Stats.

png »alt =» Pie chart showing percentage of collateral used to mint DAI. » style = »max-width: 100%; overflow: hidden; width: 100%» /> Source: Dai Statistics.

This raises additional problems for broader decentralized finance (DeFi), which is proposed as a set of financial services, such as loans and loans, but without a centralized intermediary, such as a bank or a broker.

Both USDC and USDT play outsized roles in various DeFi applications. This could be in the form of collateral like on MakerDAO or simply as return-generating assets on platforms like Aave.

” only reason USDC and UST have gained so much market share is because all other carals have fallen into the scalability trilemma in some way,” Kento said. ” first decentralized stablecoin to solve that problem and win the confidence of the market will see a wave of adoption.”

Also read Bitcoin consolidates as Ethereum and Altcoin rise an inch

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