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Detailed explanation of NEAR's native Stablecoin USN stability mechanism: the minimum APY is 11%

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USN’s APY will vary based on circulating supply and vault size, but will be as low as NEAR’s staking APY (currently ~11%)

Original title: "Decentral Bank Launches $USN: a NEAR-native Stablecoin"

Original source: Decentral Bank

Original compilation: 0x9F, Rhythm BlockBeats

USN is NEAR's native stablecoin, soft-pegged to the US dollar, backed by a reserve fund initially consisting of NEAR and USDT. Its core stability mechanism consists of on-chain arbitrage and a self-balancing reserve fund based on the principles of the Currency Board.

Combining the growth potential of UST and the strong anchor of FRAX, USN will be an important part of the NEAR ecosystem One of the most effective ways to channel liquidity. At the same time, it also raised the utility of NEAR, a Token, to a new level.

Decentral Bank DAO manages all aspects of the reserve fund and the main smart contract operation. The DAO can also vote to stake NEAR in the reserve fund and distribute the staking rewards to DeFi protocol users who support USN. At launch, Decentral Bank will receive funding from Proximity Labs to bootstrap initial USN liquidity on CEXs and DEXs.

The peg between USN and USD is supported by on-chain arbitrage and a self-balancing reserve fund ensure. The core of the on-chain arbitrage mechanism is a smart contract that supports two-way exchange between NEAR and USN without slippage and minimum commission. Once USN is unanchored, arbitrageurs will use the price difference between this contract and the trading platform to arbitrage until USN is re-anchored.

NEAR used to mint USNs will go into the Reserve Fund. The reserve fund adopts the Currency Board principle, and the automatic balance ensures that the asset reserve ratio of USN is greater than 100% at any time. Initially, USN was dual-collateralized with NEAR and USDT. USDT will exist in NEAR's main DEX, Ref Finance and other CEXs, ensuring that USN is pegged to the US dollar in the open market. The stability design of USN allows Decentral Bank to repurchase all USNs ever issued in the worst case.

From April 25th, users can use NEAR to mint through the core smart contract of the NEAR web wallet USN, or perform two-way exchange between USN and USDT on Ref Finance's StableSwap. During the initial launch, Decentral Bank will receive a grant to bootstrap liquidity for the USN/USDT pool on Ref Finance.

Decentral Bank DAO can vote to pledge the NEAR of the reserve fund, and the reward for staking is Earnings generated automatically by USN. This $10+ million in staking rewards is distributed monthly to USN holders through NEAR and Aurora (NEAR’s EVM layer) lending protocols such as Burrow, Aurigami, and Bastion. USN’s APY will vary based on circulating supply and vault size, but will be as low as NEAR’s staking APY (currently about 11%). The first batch of depositors (lenders) have the opportunity to earn more than 20% APY through additional incentives.

In the near future, USN is expected to be integrated into CEX and other chains. After maturity, USN can also be integrated into the protocol layer as NEAR's native assets to pay for Gas and storage fees.