🪙USDoge Collateralized Stablecoin
A Hyper-collateralized Algorithmic Stablecoin, designed for volatile & decentralized environments
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Note that this gitbook/documentation does not in any way constitute any direct deliverable or guarantee of the works contained within, nor does it serve any purpose towards a full audit or technical review of the systems outlined. This site highlights only the intended design of said service, and is provided without warranty or guarantee by either Studio Nova, Nova DAO, or its constituents.
Stablecoins and other decentralized or token-based offerings inherently carry risk, which may be increased or decreased as the level of decentralization grows or shrinks. External factors such as chain viability or underlying asset/platform security cannot be mitigated for risk. The functional Stablecoin methods proposed and implemented under USDO in no way guarantees its functional ability to maintain a USD Dollar pegging, and in no way is regulated, approved, insured or otherwise by any States, agencies, or otherwise.
Stablecoins are not recognized as forms of currency, or as any replacement or competitor to their real world counterparts. You accept that Nova DAO is a decentralized organization which makes said tooling available on an educational basis, providing no guarantees or warranties over its intended functionality, or over any losses incurred.
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What is USDO?
USDO is an overcollateralized stablecoin system which can use any token as backing collateral, including volatile crypto assets such as Dogecoin.
Following the unexpected shutdown of the cross-chain bridging service Multichain in 2023, several chains found themselves entirely without any access to a USD-pegged stablecoin. More significantly, stablecoins which were reliant on Multichain for arbitrage de-pegged - resulting in the collapse of various on-chain ecosystems throughout the space.
USDO was developed by Studio Nova to provide an alternative type of stablecoin which relies on dynamically scaling hyper-collateralization in order to remain pegged to the value of a dollar. As opposed to algorithmic stablecoins which saw the downfall of Terra’s UST, this hyper-collateralization model instead relies on increasing the required liquidity for a stablecoin as the underlying token increases in value.
This approach allows for any sufficiently liquid token to be used as the basis for a stablecoin - and with this in mind, Dogecoin was chosen as the first token to pilot the USDO protocol.
USDO is currently live on Dogechain, where it serves as the chain’s only stablecoin following the closure of Multichain’s bridging protocol. Self-service USDO minting, redemption, and staking systems incentivize users to maintain the dollar peg, enabling them to earn fees while actively supporting the stability and growth of the ecosystem.
A final incentive layer is placed on the heartbeat operator - where an external service is tasked with providing a price feed for the underlying token, in order to maintain the stability of the dollar peg. The heartbeat operator is then rewarded with up to 50% of all generated fees from the USDO protocol, ensuring that the protocol remains financially viable.
Along with serving as a source of revenue for Nova DAO, the ability for USDO to bring a secure source of stablecoin liquidity to any EVM-compatible chain gives it an unparalleled level of utility. Chains operating without a liquid stablecoin see significantly less volume and traction - giving USDO a remarkable selling point in being able to assist in the overall adoption of new chains.
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Summary
The USDO hyper-collateralization model allows for deploying algorithmic stablecoins on chains which may only have access to more volatile assets; while keeping its functionality as simple as possible, and not relying on any proprietary ERC-20 funding model or otherwise.
This model foregoes the typical staking incentives which have previously seen boom-and-bust stablecoins lose their peg; and instead focuses purely on incentive models which are fair to both stakers, and holders in their respective risk and reward models.
These allowances and concessions by both parties allows for a stablecoin which deliberately limits its own growth, in favor of increased security and stability at the protocol level; and in utilizing real yield reward incentives for stakers, rather than the token printing principles seen in other models attempted over the prior years.
Furthermore, the transparency of this system allows for increased risk management, along with incentivizing user-based arbitrage with direct on-chain minting/burning in order to maintain this pegged system.
We believe that stablecoins allow for a dramatic increase in on-chain volume, and overall total value on decentralized chains - and with the above hyper-collateralization model, it can be provided while mitigating the inherent risks that come from black-boxed solutions, or from bridge-pegged tokens.
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