USDs: New player in town
What is a Stablecoin and what is USDs Sperax?
The stablecoin ecosystem is a high-paced environment where constant development has become the standard. Protocols are becoming much more sophisticated as competition inevitably raises the bar amongst them. In this article, we are going to take a deep dive into the Sperax ecosystem and its USDs stablecoin and see what is unique about this network.
Strong Foundation
The crypto industry is growing really fast and new developments are being deployed across many networks. But to succeed in such a crowded space, a project needs to show not only an interesting proposal but a serious and solid organizational and executional plan.
In this regard, Sperax follows this route by transparently disclosing all the team behind its project, as we can see here. They also hold weekly AMA’s. These are “ask me anything” sessions where anyone can ask questions about the current state of development of the protocol.
In addition, its protocol has been audited by Slowmist, PeckShield, and Certik, one of the most prominent blockchain security firms out there. Being a novel company founded in 2020, Sperax is demonstrating a promising way to build trust among its users.
The Sperax protocol is built on Arbitrum, a layer-2 Ethereum scaling solution that utilizes Optimistic Rollup technology. This network provides cheap and fast transactions, but without compromising on security, since it still relies on Ethereum’s mainnet as the settlement layer.
By existing on Arbitrum, Sperax can rely on infrastructure capable of what many other projects built on Ethereum struggle with: scalability. Sperax’s objective of mass adoption of cryptocurrency needed an efficient network solution, and a layer-2 solution like Arbitrum is a sensible choice.
In this regard, Sperax follows this route by transparently disclosing all the team behind its project, as we can see here. They also hold weekly AMA’s. These are “ask me anything” sessions where anyone can ask questions about the current state of development of the protocol.
In addition, its protocol has been audited by Slowmist, PeckShield, and Certik, one of the most prominent blockchain security firms out there. Being a novel company founded in 2020, Sperax is demonstrating a promising way to build trust among its users.
The Sperax protocol is built on Arbitrum, a layer-2 Ethereum scaling solution that utilizes Optimistic Rollup technology. This network provides cheap and fast transactions, but without compromising on security, since it still relies on Ethereum’s mainnet as the settlement layer.
By existing on Arbitrum, Sperax can rely on infrastructure capable of what many other projects built on Ethereum struggle with: scalability. Sperax’s objective of mass adoption of cryptocurrency needed an efficient network solution, and a layer-2 solution like Arbitrum is a sensible choice.
Stablecoin ecosystem
Following the Sperax whitepaper, we see that when it comes to stablecoins, there are currently different types of solutions deployed in the crypto space, and each one of them has its own set of advantages and disadvantages.
The more widely adopted stablecoins today are fiat-backed stablecoins. They maintain their peg by using fiat currency in a 1:1 ratio relationship as collateral. Even though they currently dominate the market, they are largely controlled by a single centralized entity, which makes them not as censorship-resistant as other cryptos. Additionally, they have to hold a 1:1 ratio of reserves backing their asset; this makes them relatively capital inefficient since their capital has to remain idle as collateral with very limited options when it comes to investing it. Examples of this type of stablecoins are USDT, USDC and BUSD.
On the other hand, there are also on-chain crypto-backed stablecoins. This type of stablecoins maintain their peg by backing its emission with collateral of higher value. While this alternative is decentralized, it mostly relies on over-collateralization to mitigate the volatility of the crypto market. This inevitably makes them even more capital inefficient and thus impacts their scalability. The most widely adopted stablecoin that follows this approach is DAI.
Last but not least, there are algorithmic stablecoins, maintain their peg by using market incentives through specialized algorithms. These types of currencies have the advantage of being scalable and decentralized. However, they might be subject to high-volatility periods and might also be difficult to bootstrap. UST is the most prominent example of this type of stablecoin.
The more widely adopted stablecoins today are fiat-backed stablecoins. They maintain their peg by using fiat currency in a 1:1 ratio relationship as collateral. Even though they currently dominate the market, they are largely controlled by a single centralized entity, which makes them not as censorship-resistant as other cryptos. Additionally, they have to hold a 1:1 ratio of reserves backing their asset; this makes them relatively capital inefficient since their capital has to remain idle as collateral with very limited options when it comes to investing it. Examples of this type of stablecoins are USDT, USDC and BUSD.
On the other hand, there are also on-chain crypto-backed stablecoins. This type of stablecoins maintain their peg by backing its emission with collateral of higher value. While this alternative is decentralized, it mostly relies on over-collateralization to mitigate the volatility of the crypto market. This inevitably makes them even more capital inefficient and thus impacts their scalability. The most widely adopted stablecoin that follows this approach is DAI.
Last but not least, there are algorithmic stablecoins, maintain their peg by using market incentives through specialized algorithms. These types of currencies have the advantage of being scalable and decentralized. However, they might be subject to high-volatility periods and might also be difficult to bootstrap. UST is the most prominent example of this type of stablecoin.
Novel approach
Having analyzed the state of the industry, the team behind Sperax came up with a novel alternative that aims to combine the best characteristics of each alternative.
The Sperax team believes that the problem of how to keep a stablecoin stable is a dynamic one; this is, it actually depends on multiple factors, such as market forces and network maturity, among other factors.
This is why USDs was designed to be a hybrid stablecoin: both algorithmic and crypto-backed, while being scalable and decentralized at the same time. This dynamic reliance on crypto collaterals and algorithmic stability is what brings capital efficiency and rapid scalability to the protocol.
As the network matures, the protocol will rely less on crypto collateral and shift towards an algorithmic stability mechanism, providing the necessary assurance it needs to bootstrap and thrive.
Just like other algorithmic stablecoins, the Sperax protocol consists of a dual token system: USDs, the stablecoin; and SPA, the governance token. Nevertheless, USDs functions in tandem not only with SPA but also with a pool of other existing cryptocurrencies (at the time of this writing, USDT and USDC stablecoins).
In this way, the crypto pool acts as collateral and the SPA tokens account for the uncollateralized algorithmic component. Anyone that wants to mint USDs has to provide both collateral and SPA tokens. The former, redeemable when burning USDs, the latter, burned.
The ratio needed between the collateral and the SPA tokens will be determined by the protocol, following market conditions. It is also designed to incentivize arbitrageurs to mint and burn USDs whenever it is trading in the market below or over its peg.
The Sperax team believes that the problem of how to keep a stablecoin stable is a dynamic one; this is, it actually depends on multiple factors, such as market forces and network maturity, among other factors.
This is why USDs was designed to be a hybrid stablecoin: both algorithmic and crypto-backed, while being scalable and decentralized at the same time. This dynamic reliance on crypto collaterals and algorithmic stability is what brings capital efficiency and rapid scalability to the protocol.
As the network matures, the protocol will rely less on crypto collateral and shift towards an algorithmic stability mechanism, providing the necessary assurance it needs to bootstrap and thrive.
Just like other algorithmic stablecoins, the Sperax protocol consists of a dual token system: USDs, the stablecoin; and SPA, the governance token. Nevertheless, USDs functions in tandem not only with SPA but also with a pool of other existing cryptocurrencies (at the time of this writing, USDT and USDC stablecoins).
In this way, the crypto pool acts as collateral and the SPA tokens account for the uncollateralized algorithmic component. Anyone that wants to mint USDs has to provide both collateral and SPA tokens. The former, redeemable when burning USDs, the latter, burned.
The ratio needed between the collateral and the SPA tokens will be determined by the protocol, following market conditions. It is also designed to incentivize arbitrageurs to mint and burn USDs whenever it is trading in the market below or over its peg.
The beauty of passive income
One of the key aspects of any DeFi protocol relies on its ability to reward its users. And the easier it is done, the better. The Sperax team is well aware of this and its protocol does in fact accomplish this pretty well. After all, its USDs is the first Auto-Yield stablecoin.
The way USDs earn yields is straightforward: the use of yield aggregators. Through these DeFi tools that maximize efficient strategies, profit is generated making the most out of the collateral used to mint USDs.
Holders of USDs receive interest automatically every 10 days at a random point in time. They simply need to hold USDs in their wallets; they don’t have to do anything else.
On the other hand, holders of SPA can also earn yield by staking their tokens. They will get a portion of the fees collected by the protocol and a share of the interests generated by the yield aggregators, as well as pre-established incentives depending on the locking period they choose to stake for.
In summary, the Sperax ecosystem has a unique product and a very focused team behind it that works towards the mass adoption of their stablecoin. The future looks bright for this novel stablecoin protocol.
The way USDs earn yields is straightforward: the use of yield aggregators. Through these DeFi tools that maximize efficient strategies, profit is generated making the most out of the collateral used to mint USDs.
Holders of USDs receive interest automatically every 10 days at a random point in time. They simply need to hold USDs in their wallets; they don’t have to do anything else.
On the other hand, holders of SPA can also earn yield by staking their tokens. They will get a portion of the fees collected by the protocol and a share of the interests generated by the yield aggregators, as well as pre-established incentives depending on the locking period they choose to stake for.
In summary, the Sperax ecosystem has a unique product and a very focused team behind it that works towards the mass adoption of their stablecoin. The future looks bright for this novel stablecoin protocol.