DCNTRL Network Docs
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  • πŸ‘‹Welcome to DCNTRL - The future of Stablecoins
    • Introduction to DCNTRL Protocol
  • DCNTRL Features
    • πŸ’²USDEFI Stablecoin
      • πŸ’°Minting / Redeeming USDEFI
      • πŸ“ˆMaintaining the $USD Peg
      • πŸ’ΈEarning in USDEFI Stability Pool
    • πŸ’ŽDCNX Tokens
      • 🎁Earning DCNX
      • πŸ“ŠDCNX Tokenomics
      • 🏦Earn Protocol Revenue
      • πŸ’³How to Buy DCNX
    • πŸ›‘οΈEcosystem Stability
      • 🌊Liquidations
      • 🌑️Recovery Mode
  • User Guides
    • ⚑Getting Started with DCNTRL Protocol
      • 1️⃣Connecting Your Wallet
      • 2️⃣Getting BNB
    • 3️⃣Your Dashboard
    • 4️⃣Borrowing (Minting) USDEFI
      • βš™οΈManaging your USDEFI Position
    • 5️⃣Start Earning with USDEFI
      • How to Stake USDEFI
      • How to Unstake From Stability Pool
    • 6️⃣Redeem USDEFI - Get BNB
    • 7️⃣Liquidating Bad Debt
      • β†ͺ️How to Manually Liquidate Bad Debt
    • πŸ†How to stake DCNX to earn Protocol Revenue
  • Useful Docs
    • πŸ“ƒSmart Contract Audits
    • πŸ“ˆDCNTRL Protocol Fees
    • Terms of Service
      • πŸ”’Privacy Policy
      • πŸͺCookie Policy
    • 🎨Brand Assets
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On this page
  • Introduction
  • The Importance of the USDEFI Peg
  • How the USDEFI Peg is Maintained
  • Conclusion
  1. DCNTRL Features
  2. USDEFI Stablecoin

Maintaining the $USD Peg

PreviousMinting / Redeeming USDEFINextEarning in USDEFI Stability Pool

Last updated 1 year ago

Introduction

USDEFI, the stablecoin at the heart of the DCNTRL Protocol, is designed to maintain a stable value pegged to the US dollar. This page provides an in-depth look at how the protocol ensures the stability of USDEFI, despite the inherent volatility of its BNB collateral and the broader cryptocurrency market.

The Importance of the USDEFI Peg

A stablecoin's value is its stability. For USDEFI, maintaining a 1:1 peg with the US dollar is crucial. This peg allows users to treat USDEFI as a digital equivalent of the dollar, providing a stable store of value, medium of exchange, and unit of account within the DCNTRL Protocol and beyond.


How the USDEFI Peg is Maintained

The DCNTRL Protocol employs a combination of mechanisms to maintain the USDEFI peg:

1 - 110% Minimum BNB Collateralization Ratio

Every USDEFI token is backed by BNB collateral. When a user mints USDEFI, they deposit BNB into the protocol, which serves as a guarantee for the value of the minted USDEFI. The protocol requires a minimum collateralization ratio of 110%, ensuring that the value of the collateral always exceeds the value of the minted USDEFI.

While this does mean that for every $1.00 worth of BNB deposited, a maximum of $0.90 in USDEFI can be minted. We reccomend keeping collateral ratio >200% to avoid your funds being liquidated.

2 - Redemption Mechanism

The protocol allows any holder of USDEFI to redeem their tokens for the underlying BNB collateral at face value at any time. This direct redemption mechanism removes USDEFI from circulation & ensures that USDEFI can always be exchanged for $1 worth of BNB, reinforcing the peg.

3 - Stability Pool

The Stability Pool plays a crucial role in maintaining the peg. In the event of a borrower's collateral falling below the required collateralization ratio, the Stability Pool automatically liquidates the position, using USDEFI from the pool to cover the debt and adding the liquidated BNB collateral to the pool. This mechanism ensures that every USDEFI token in circulation is fully backed by BNB, even in volatile market conditions. To continue learning more about the stability pool read this deep dive:

4 - Liquidation of Bad Debt

In addition to the Stability Pool, the protocol also allows users to liquidate bad debt manually. If a borrower's collateralization ratio falls below the minimum requirement, any user can liquidate the position, pay off the debt with their USDEFI, and claim the BNB collateral. This mechanism provides an additional layer of security for the USDEFI peg, ensuring that all outstanding debt is fully collateralized at all times.


Conclusion

The beauty of the DCNTRL Network lies in its on-chain architecture and immutability, which is a result of all collateral and smart contracts being housed on-chain without the need of any audits or attestations that Fiat backed stablecoins have to go through to prove reserves. This ensures USDEFI maintains its 1 USD peg, bolstered by caps and liquidations applied not just to downward movements, but upward fluctuations as well. This dual-sided mechanism fosters a more balanced environment for USDEFI to thrive. Given its overcollateralized design, our system is well-equipped to sustain market stability, even amidst periods of intense market volatility. By understanding these mechanisms, users can confidently use USDEFI, secure in the knowledge that its value is robustly pegged to the US dollar.

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πŸ’ΈEarning in USDEFI Stability Pool