New Opportunity for Yield Farmers as DefiDollar launches

DUSD model provides a swift arbitrage opportunity aiding in stabilizing its peg.

By · Aug 28, 2020 . 7min read

DefiDollar Defi

The innovation steam observable among players in the DeFi industry is at boiling point with new solutions being added daily. Yet another opportunity surfaces for yield farmers as DefiDollar, a stable asset-backed by an index stablecoins launches.

With the DUSD ticker, DefiDollar is an index of stablecoins that uses Defi primitives to stay near the dollar mark, thereby subsidizing the collateralization ratio for yield farmers. Moving away from Dai and sUSD model in both Maker and Curve respectively where both stablecoins are debt positions, DUSD attempts to change the game. Therefore, in its case, it employs DeFi primitives to maintain its one Dollar peg. While this may be a little trickier than the other stablecoins model mentioned, however, the DUSD model provides a swift arbitrage opportunity aiding in stabilizing its peg.

How do DUSD stablecoin work for those seeking to explore the yield farming opportunity therein?

To begin with, the DefiDollar supports peaks. These are yield generating protocols where users deposit the underlying stablecoin. Users can mint DUSD with DAI, USDT, USDC, and sUSD as supported by Curve. Although DefiDollar is rolling out with just Curve, it plans on expanding the number of peaks it will support in future. Examples such as Aave, Uniswap, etc., are in consideration. The user can then choose to stake minted DUSD in DefiDollar’s native stake pool it calls Valley. Basically, this offsets any under-collateralization risk that may happen when the underlying stablecoin asset falls below its peg. Hence, liquidity providers who stake their DUSD in Valley are sort of lenders of last resort. And for the risks, they earn interests generated from Curve’s trading fees as well as CRV and SNX.

DefiDollar is hot and new on the horizon, but this is not YAM.

As one might have expected, the mania is already off the roof. DefiDollar barely launched just a few hours back and already has reached its Total Value Locked – TVL cap at $3 million. DefiDollar tweeted with excitement as well as locking deposits as displayed on its app.

DUSD stablecoin yield farming app by DefiDollar
Source: DefiDollar web app

This kind of optimism yield farmers and other DeFi shows as DefiDollar launches may be likened to the YAM experiment mania. But this is different. DefiDollar before launch subjected its contracts through a series of professional audits. This wasn’t the case with YAM which opened up its unaudited contract for deposits.

And to demonstrate its commitment to full decentralization ethos, DefiDollar protocol is already pooling data from Chainlink’s oracles.

Although the core development team presently manages the protocol, it plans to cede this responsibility to users. Its user community will manage the DefiDollar governance including but not limited to decisions such as the addition of peaks, the relative weights assigned to them, mediatizing oracles and distribution of protocol rewards. However, only when the core team think it has achieved protocol market fit.

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