Let me give you a short paragraph to relax

One day, Lao Chen and Lao Zhang said: "Why can USDT be used only at noon?"

Lao Zhang was puzzled and thought: No, I speculated on coins last night

Lao Chen said coldly: "Because USDT will die sooner or later"

Lao Zhang suddenly realized

Manipulated, opaque currencies are long to collapse

Stablecoins are like fiat currencies. If the issuer does not follow the rules and reality to increase circulation or change related processes, the entire currency system may collapse. In Venezuela and Argentina in South America, and many war-torn countries in Africa, currencies have collapsed due to excessive issuance .

Openness and transparency, fairness and justice, and the combination with mathematical codes are important reasons for the source of trust in a decentralized system. The previous article explained the characteristics and advantages of USDx in a simple way. This article will explain the formation process of the stable currency USDx in detail. Why USDx qualifies as the cornerstone of new finance.

USDx is a special type of stable currency, which is actually a mixture of fiat currency and over-collateralization

Before drawing the key points, let’s take a look at the introduction of USDx by the dForce team

USDx is an ERC-20 stablecoin based on Ethereum. It is automatically minted from a basket of high-quality US dollar stablecoins through smart contract decentralization. Users can convert the component stablecoins into USDx by weight through the minting agreement (1USDx = 0.35 USDC + 0.35 PAX+ 0.3 TUSD ), you can also burn USDx and get back a basket of stablecoins. The minting and burning processes are all implemented on the chain, ensuring highly transparent, non-tamperable, and reviewable operations. In the future, the category and weight of constituent coins will be changed through community voting governance.

To put it simply: The formation process of USDx is to bind multiple stablecoins into a basket of high-quality stablecoins (blue chips), put them into smart contracts for 100% mortgage, and finally print a new stablecoin "USDx"

Focus, the above sentence has three key points

1.100% collateral From a historical point of view, every US dollar was originally issued with an equivalent value of gold as collateral. It was not issued with credit as an endorsement until it broke away from the Bretton Woods system. In the stablecoin world, there is no centralized institution or government The strong endorsement emphasizes openness and transparency and endorsement through mathematical codes. The 100% collateralized stablecoin is inherently more trustworthy than other stablecoins, so it is also the most stable stablecoin on the market. Most of the trust crisis of USDT It comes from non-100% collateral, and USDx is backed by a basket of high-quality stablecoins as collateral, which can be reversed and cashed out at any time.

2. Most of the basket of high-quality stablecoins (blue chips) USDx comes from regularly audited legal currency stablecoins (USDC, TUSD, PAX), and these stablecoins have certain liquidity in the market. Also relatively rich.

3. USDx is generated on the chain. The generation of USDx is a completely decentralized process. It does not require any central organization to make an approval. Anyone who holds a stable currency can put it into a smart contract and mortgage it and then generate it. The whole process It is transparent, and all records can be queried on the chain.

Judging by the above three points, USDx is a stable currency that can be trusted and has actual assets as collateral.

Actually enter USDx coin synthesis and destruction interface

What is shown here is a portal of a decentralized protocol. In the decentralized mode, everyone can mint coins without any permission, and all the mortgaged high-quality stable coins during the minting process are stored in smart contracts. The dForce team has no Any power to make calls. (Friends who are not at ease after minting coins can immediately check the transaction data on the chain) Destroy interface

Destroying USDx is the opposite process of minting coins. One of the triggers is arbitrage. When an arbitrage opportunity arises, everyone can destroy and decompose the USDx they hold, and finally exchange the original stable currency in the market; Another interesting opportunity is that USDx cleverly connects other fiat currency stablecoins, and other fiat currency stablecoins become USDx’s deposit and withdrawal channels.

When we mention the blockchain, a new financial world is actually composed of USDx, a license-free protocol that anyone can quickly access and use as long as they want, and various new and efficient financial products will emerge as the times require.

Of course, risks cannot be ignored. What is the risk of USDx?

When a systemic risk occurs in a single stablecoin, such as the bankruptcy of a certain fiat currency stablecoin company, causing panic prices in the market, will USDx, which synthesizes multiple stablecoins, be implicated and collapse?

In response to such extreme events, the USDx protocol has designed three defense mechanisms

1. Every time USDx is destroyed as a constituent stable currency, the system will charge 1/1000 equivalent of DF tokens as a handling fee, and the handling fee will enter the insurance pool. When a systemic risk occurs, the DF tokens in the insurance pool will be charged DF will be compensated as a temporary reserve. PS: DF is the platform currency in the dForce ecosystem. In addition to the fee consumption, it also undertakes functions such as governance voting and fund accumulation in the dForce protocol.

2. When the systemic risk is very large, resulting in insufficient funds in the insurance pool to hedge against the price drop, the system will automatically issue DF as compensation for the USDx price drop, making the stablecoin stable again. PS: Although this risk is very small.

3. The voting governance mechanism replaces problematic stablecoins. When risks occur, the dForce system can respond quickly. DF holders can vote to reduce or even remove the weight of a certain stablecoin, so that the collateral behind USDx Stablecoins are the best stablecoins.

Through the three-layer protection mechanism, it can be said that USDx is the safest and most stable stablecoin in the market.

Summarize the formation process and risk protection mechanism of USDx
1. The USDx stablecoin is backed by 100% real assets as collateral
2. Decentralized currency protocol, anyone can operate without permission as long as they can connect to the Internet
3. Three-tier risk protection mechanism

The value of building a monetary system is huge. Facebook Libra is actively stirring up this market. The three major exchanges have established their own stable coins. The battle of the gods for stable coins will become more and more fierce, and the next article will detail Explain the interest-generating function of USDx, and bring out the double-layer interest function of special stablecoins after the withdrawal of the DIP improvement agreement.