What is UXD Protocol? As users increasingly lose trust in fiat-backed Stablecoins because of lack of transparency. Algorithmic stablecoins are susceptible to collapse due to their operating mechanism. In this article, let’s explore a Stablecoin project with this extremely interesting operating mechanism.
What is UXD Protocol?
UXD Protocol is a Stablecoin project backed by underlying assets built on the Solana ecosystem.
The project’s stablecoin is specially designed, integrating with leading derivatives exchanges on Solana to create a “Delta Neutral” position that ensures the underlying assets are not liquidated when the market fluctuates strongly.
UXD Protocol Products
Mint: The platform helps users mint the project’s UXD Stablecoin and redeem assets instantly. Currently the only base asset supported is USDC.
Stake: Users stake UXP governance tokens to receive Yield from the project’s operating mechanism. UXD Protocol uses mechanism veRev to distribute Yield resources to stakeholders.
Dashboard: Where users can see the project’s insurance fund and reserve fund assets. Ensure project transparency.
OTC: Similar to an AMM (Automated Market Makers), this is where users easily convert one asset to another. Currently only supports converting Solana (SOL) to USDC and vice versa.
Mechanism of action of the veRev model
Step 1: Protocol Distributes veTokens |
||
---|---|---|
Cell
|
Cashflow |
Token Flow |
Alice |
No Changes |
+ $1 in veToken |
Bob |
No Changes |
+ $1 in veToken |
Wassie |
No Changes |
+ $1 in veToken |
Net Change from Step 1 |
No Changes |
+ $3 in veToken |
Step 2: Protocol Includes Auction |
||
Cell
|
Cashflow |
Token Flow |
Alice |
+ $1.5 in stablecoins |
+ $1.5 in veToken |
Bob |
+ $1 in stablecoins |
– $1 in veToken |
Wassie |
No Changes |
No Changes |
Net Change from Step 2 |
+ $2.5 in stablecoins |
– $2.5 in stablecoins |
Step 3: Protocol Buys on Market |
||
Cell
|
Cashflow |
Token Flow |
Open Market |
+ $0.5 in stablecoins |
– $0.5 in tokens |
Next Change from Step 3 |
+ $0.5 in stablecoins |
– $0.5 in tokens |
Cell
|
||
Overall “Value Out” |
+ $3 in stablecoins |
$0 in veToken/Token |
Suppose at time t = 0 there are 3 stakers: Alice, Bob and Wassie. Each person stakes $10 of veToken value into the UXD Protocol vault. At time t = 1 protocol has $3 profit and wants to distribute it to the other 3 stakers.
- Step 1: The protocol will increase the number of veTokens of 3 people. Each person receives an additional $1 in veToken value.
- Step 2: The protocol will conduct a Reverse Dutch Auction model. All three people will make the decision to sell or keep their veTokens. Alice wants to sell $1.5 worth of veTokens, Bob wants to sell $1 worth of veTokens, Wassie wants to keep all of his veTokens.
- Step 3: At this time, UXD Protocol will spend $2.5 to pay Alice and Bob, the remaining $0.5 will buyback tokens on the market.
What Are The Highlights Of UXD Protocol?
In contrast to other Stablecoin backed projects, user assets are easily liquidated when the market fluctuates strongly. UXD Protocol uses a “Delta Neutral” strategy that ensures assets are not liquidated when users pledge to mint the project’s Stablecoin.
How it works
Let’s say you want to mint $100 UXD in BTC
- Step 1: Deposit BTC worth $100 into the vault of UXD Protocol (UXD Protocol uses oracle to calculate BTC price).
- Step 2: UXD Protocol’s vault will mint 100 UXD for users.
- Step 3: UXD Protocol will send the user’s BTC to Derivatives Dex to create a Short order for this BTC amount.
- Step 4: When a user deposits 100 UXD into the UXD Protocol vault, the protocol will close the Short order on Derivatives Dex.
- Step 5: The Vault will return the corresponding $100 worth of BTC to the user and burn 100 UXD.
Why is it necessary to place a Short order on Derivatives Dex?
Suppose BTC at that time was $20,000, after 2 days the price increased to $40,000, the Short order would also be negative $20,000. At this time, the user’s BTC value is still $20,000 unchanged from when UXD minted.
Development Roadmap
Currently, the Team has not announced a development roadmap for 2023, but the plan for 2022 is:
- Integrate Maple Finance and Credix Finance into ALM.
- Open Source project source code.
- Extending the project to the Layer 2 network is Optimism.
Core Team
Kento Inami – Founder: Before founding UXD Protocol Kento spent more than 3 years working as a Trader and Sales at Sumitomo Mitsui Banking Corporation, a large bank with more than 5,000 employees. After that, Kento also spent nearly 3 years working at BitFlyer Group, a large Bitcoin exchange in Japan.
Investor
September 2, 2021: UXD Protocol raised $3M seed round led by Multicoin Capital with the participation of a series of other large investment funds such as: Alameda Research, Defiance Capital, CMS Holdings, Solana Foundation, Mercurial Finance.
There is also the participation of Anatoly Yakovenko, Raj Gokal (Solana founders) and Dylan Macalinao (Saber founder).
Tokenomics
UXD Protocol uses 2 tokens:
- UXD: The project’s stablecoin has a value of $1.
- UXP: Project governance token.
Overview information about UXP token
- Name: UXD Protocol
- Ticker: UXP, UXD
- Blockchain: Solana
- Contract: UXPhBoR3qG4UCiGNJfV7MqhHyFqKN68g45GoYvAeL2M
- Total supply: 7,000,000,000
Token Allocation
- Team: 28.6% 1/4 is paid on November 14, 2022, the rest will be paid in monthly installments within 3 years.
- Investors: 21.4% Pre-Seed Investors receive 7.1% 1/4 paid on November 14, 2022, the rest will be paid in monthly installments within 3 years. Seed Investors receive 14.3% 1/2 paid on November 14, 2022, the rest will be paid in monthly installments for 1 year.
- Community: 38.6% governance by DAO will be distributed to liquidity miners and future Incentives programs.
- Treasury: Reserve fund used to develop UXD Protocol in the future.
- Insurance Fund: 100% of Public Sale tokens will be distributed to UXD holders.
Token Use Case
UXP is the project’s governance token used to:
- Voting project management.
- Staking receives yield from the veRev mechanism.
- Provide liquidity on the Dex exchange.
Exchanges
Currently UXP is being traded on Raydium, a Dex exchange built on Solana.
Project Information Channel
- Website: https://uxd.fi/
- Twitter: https://twitter.com/UXDProtocol
- Discord:
Summary
With the explosion of Defi (Decentralized Finance) along with the strict censorship of Fiat-Backed Stablecoin. Algorithmic stablecoins become an extremely important piece of the puzzle for Crypto to mass adopt in the future.
UXD Protocol’s Stablecoin is designed extremely intelligently to solve many problems that Stablecoins are facing today.
However, UXD Protocol chose Solana as the project development platform, which faced many difficulties after the collapse of FTX. Currently the team is also trying to develop to many other platforms. Let’s wait for updates from the UXD Protocol team.