Ardana’s on-chain asset-backed stablecoin integrates with yield aggregation protocol
The Cardano ecosystem is growing as it sees an increase in DeFi protocols creating decentralized applications. Ardana, an issuer of dUSD, a verifiable on-chain asset-backed stablecoin on Cardano, will integrate with the suite of products provided by Optim Finance, including Single Asset Vaults, DEX LP Vaults, staking and lending operations to provide optimized yield generation to users on Cardano.
Users receive USD by placing collateral assets in vaults within the platform via back-to-back debt positions, which are unique smart contracts (CDPs). This is how dUSD is brought into circulation and users get liquidity. Others receive dUSD by buying it from brokers or marketplaces or by accepting it as payment.
To ensure efficient and capital-optimized revenue streams for its consumers, Optim Finance, as the leader of the Cardano yield aggregation/asset management subset of DeFi, will leverage Ardana’s services. Optim clients will have easy access to high-yielding, in-demand stablecoin assets by collateralizing stablecoin loans with native assets, allowing them to further expand their yield-creating capabilities.
Stableswap DEXs play a vital role in Optim Vault multi-stage schemes by supporting some of the most crucial yield chances. Ardana will act as an intermediary, allowing users to manufacture and transfer a range of stablecoin assets. Stableswap ecosystems also provide consumers with lower risk investment alternatives by significantly reducing temporary losses. To optimize its internal revenue streams, Optim will capitalize on this potential by offering native auto-composition and mining functionality for Ardana vaults.
Additionally, by staking their LP tokens in the Ardana Reward Enhancement Module, Optim’s liquidity provider strategies within the Ardana protocol will be able to participate in their Liquidity Mining Method (AREM). This will result in DANA awards for Optim’s Strategic Vaults, bringing our two communities closer together in governance and voting power.
Discover stablecoins – DeFi’s Foundation
A stablecoin is a virtual currency backed by a stable asset such as fiat currency or a precious metal. Stablecoins were meant to combat the extreme volatility in the cryptocurrency industry. Fiat-backed, crypto and algorithmic stablecoins are the three types of stablecoins. BUSD and other fiat-backed stablecoins are connected to conventional fiat currencies. They keep the stablecoin pegged by holding fiat reserves that can be exchanged for it. Crypto stablecoins (such as DAI) over-collateralize their tokens to accommodate crypto price volatility, while algorithmic stablecoins regulate supply without any reserve requirements.
Due to their heavy usage and high market value, stablecoins are attracting the attention of regulators. To keep control over the money, some governments even put their own in place. With cryptocurrencies, volatility is not the only aspect to consider. Stablecoins, for example, are designed to maintain a constant price. In a world where the value of coins and tokens can plummet overnight, there is a strong need for currencies that combine the benefits of blockchain with the ability to track a more stable commodity. If you haven’t started trading or investing in stablecoins yet, it’s worth learning more about them and the pros and cons they offer.
Stablecoins are virtual currencies whose value is tied to fiat currencies or other assets. For example, you can buy tokens pegged to the dollar, euro, yen, gold, and oil. A stablecoin allows the owner to lock in profits and losses and transfer value at a uniform price across peer-to-peer blockchain networks.
Cryptocurrencies are difficult to use for daily transactions due to their high volatility. For example, a store might take $5 in BTC for a coffee one day and then find out the next that their BTC is worth 50% less. This makes it difficult to plan and manage a business.
Previously, there was no way for crypto traders and investors to lock in a profit or avoid volatility without transferring bitcoin to cash. Stablecoins were created as a simple solution to both of these problems. Today, stablecoins like dUSD, bUSD, Dai, and USDC make it easy to enter and exit the crypto market.
A fiat-backed stablecoin is backed by fiat currencies like the US dollar or British pound. For example, each BUSD is backed by an actual US dollar held as collateral. Users can then use a fixed rate to convert money into stablecoins and vice versa. If the price of the token deviates from the underlying fiat, arbitrageurs will quickly bring it back to the established rate.
Crypto stablecoins are similar to cash-backed stablecoins. On the other hand, cryptocurrencies are used as collateral in exchange for dollars or other currencies as reserves. Cryptocurrency-backed stablecoins over-hedge their deposits as a hedge against price movements due to significant volatility in the cryptocurrency market.
Minting and burning of crypto stablecoins is controlled by smart contracts. Users can review contracts independently, which adds credibility to the process. On the other hand, some crypto stablecoins are governed by Decentralized Autonomous Organizations (DAOs), which allow the community to vote on project changes. You will either need to get active or trust the DAO to make the right decisions in this situation.
Consider the situation below. You will need $150 in foreign currency with 1.5x leverage to build a US dollar pegged DAI. You can use your DAI any way you choose when you get it. You have the choice to transfer, invest or simply keep the money. If you wish to recover your guarantee, you must repay the 100 DAI. On the other hand, it will be liquidated if your collateral falls below a certain collateral ratio or loan value.
Holders are incentivized to give up their stablecoins in exchange for collateral when the stablecoin drops below $1. As a result, the supply of the coin is reduced, bringing the price back to $1. To encourage price stability, users are encouraged to mint the token for more than $1, increasing the supply and lowering the price. Game theory and on-chain algorithms are used in all crypto stablecoins.
Stablecoins have caught the eye of governments around the world due to their uncommon mix of fiat and crypto. Because they maintain a stable price, they are useful for uses other than speculation. They can also be moved simply and inexpensively around the world. Therefore, some argue that stablecoins could compete with fiat, even if a country’s central bank does not regulate them directly. As a result, many countries are experimenting with the production of stablecoins.
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Image credits: 金运, Paul Stollery and Christian Wiediger.