Stablecoins are the “crown jewels” of the crypto industry. How will the new stablecoin USDV, issued by the Verified USD Foundation, impact the industry? Can it stand out among the many contenders vying for the crown?
Data shows that the current market capitalization of stablecoins has reached $125.1 billion, accounting for 8.7% of the total cryptocurrency market cap. However, the industry has not had smooth sailing, experiencing events such as the collapse of UST since 2022, a brief depegging of USDC, and strict regulation of BUSD and PYUSD. While the market’s demand for stablecoins continues to grow, so do the requirements for their stability and transparency.
At the same time, the industry lacks an on-chain algorithm capable of tracking token demand generated by CeFi or DeFi applications, leaving stablecoin projects unable to fairly reward those who generate demand and contribute to the ecosystem. To address this issue, USDV, launched by the Verified USD Foundation, opts for a solution that tracks token demand and rewards ecosystem contributors.
Introduction to USDV
USDV is a community-driven stablecoin backed by U.S. short-term Treasury bill tokens as reserve assets, introduced by the non-profit Verified USD Foundation. It is also a native all-chain stablecoin using the ERC-20 standard, integrated with the LayerZero universal fungible token (OFT) standard.
Its reserve asset is the STBT, a tokenized RWA issued by Matrixport Group under the Matrixdock brand, and is the second-largest short-term U.S. Treasury bill token on the Ethereum blockchain. According to official sources, STBT was chosen as the reserve asset for USDV for several reasons, including its “risk-free” nature, flexibility in redemption, stability, and high transparency. STBT is an ERC-1400 standard token, issued and redeemed by Matrixdock, and its transfer and trading are restricted to authorized account holders through a contract whitelist mechanism.
In terms of minting and redemption, eligible USDV minters can deposit K STBT into the Vault contract and receive K USDV_X from a designated recipient account. For redemption, the minter deposits K USDV_X into the official USDV website, and the corresponding amount of STBT is unlocked.
Features and Advantages
As mentioned earlier, to address the issue of unfairly rewarding contributors who generate demand and contribute to the ecosystem, USDV uses the ColorTrace algorithm, an innovative value attribution mechanism created by LayerZero Labs. This mechanism allows verified community contributors to securely and transparently earn rewards from on-chain reserve assets through blockchain technology. It aims to reward those who make efforts in promoting the widespread adoption of USDV while allowing USDV to circulate freely as a fungible token within the ecosystem. The entire process is conducted transparently on the blockchain through USDV’s smart contracts.
This system revitalizes the traditional stablecoin domain by rewarding contributors in the ecosystem, expanding and innovating use cases, and addressing the issue of insufficient incentives for participants. Besides its unique value attribution mechanism, USDV’s characteristics are also reflected in the following aspects:
1. Asset Security
USDV ensures a high level of security by using STBT (short-term U.S. Treasury bill tokens) as its reserve asset. STBT also achieves bankruptcy isolation through the structure of a special purpose orphan entity reducing counterparty risk; STBT holders have the first priority in the liquidation of the physical asset pool. Even in the most extreme cases, such as Matrixport’s bankruptcy, the value of STBT is still guaranteed by the asset pool, and the corresponding assets can be redeemed after liquidating these securities.
USDV is issued on-chain by the non-profit Verified USD Foundation, which holds legal ownership of all reserve assets. The value of the reserve assets will always be equal to or greater than the USDV in circulation.
2. Price Stability
USDV’s price stability is achieved in two ways: first, users can always exchange USDV and STBT at a 1:1 ratio. Since STBT is pegged 1:1 with the US dollar, USDV is not subject to market pricing risks.
As the initial reserve asset, STBT, entirely composed of highly liquid short-term U.S. Treasury bills and reverse repurchase agreements, ensures quick liquidation in times of liquidity demand. Considering the potential value decline of these bonds in extreme situations, the value of STBT could be affected. USDV will add more short-term safe reserve assets to maintain or increase the liquidity of the underlying reserve assets, thereby avoiding depegging.
3. Real-Time On-Chain Transparency
Compared to centralized stablecoins, which publish their reserve assets monthly or quarterly, USDV’s reserve assets can be verified at any time. The minting nodes corresponding to STBT can be found on the official STBT website, ensuring asset transparency and the sovereignty of corresponding minters. In contrast, centralized stablecoins are limited in transparency, as their reserve verification often relies on third-party audits, leading to information delays and a lack of transparency.
4. Attracting Traditional Monetary Investors
USDV is more attractive to traditional financial investors seeking low-risk investment opportunities due to its asset stability, transparency, and regulatory compliance. Particularly, the STBT mechanism behind USDV creates a direct link with traditional financial markets. This design not only lowers the entry barrier but also boosts the confidence of traditional investors in the cryptocurrency market.
5. Accessibility and Compatibility
USDV’s ERC-20 standard ensures compatibility with a wide range of blockchain ecosystems, including various decentralized applications (DApps) and exchanges. Upon release, it will be usable on Ethereum, BSC, Avalanche, Arbitrum, and Optimism, with the technical capability to interoperate across over 40 L1 and L2 chains, and will continue to expand.
Additionally, USDV complies with LayerZero’s OFT standard. Compared to traditional wrapped assets for cross-chain or using centralized exchanges for cross-chain, this standard ensures that USDV can bridge between different chains without liquidity concerns, making it safer, more efficient, and more user-friendly. This wide accessibility and compatibility make USDV highly accessible on multiple platforms and applications, providing convenience to users.
Can transfer USDV between different chains on the USDV transfer page.
6. Community-Driven Ecosystem
USDV emphasizes community participation and the joint construction of the ecosystem. Through reward mechanisms and open development strategies, USDV encourages community members to participate in building and maintaining the ecosystem. Community contributors have more freedom to maintain and develop the ecosystem, achieving a win-win for both contributors and USDV users. USDV’s fair and open reward distribution mechanism will also attract more community contributors and applications, forming a positive flywheel for the USDV ecosystem.
This community-driven approach, compared to some other centralized stablecoins, may more easily stimulate the vitality and creativity of the community. The naturally growing ecosystem model is also an innovation in the current stablecoin industry development.
In terms of security, USDV has set up three safeguards to ensure the stability and safety of its assets. Firstly, it uses tokenized “risk-free” U.S. short-term Treasury bills and repurchase agreements as its underlying asset reserves, ensuring the stability of its assets. Secondly, by maintaining a 1:1 exchange ratio between USDV and STBT and dynamically adjusting the total supply of STBT and total net asset value daily, additional safe reserve assets can be added apart from STBT, ensuring the price stability of USDV even in the rare extreme cases of sharp fluctuations in U.S. Treasury bill prices. Lastly, the design of STBT and USDV through a special purpose orphan entity minimizes counterparty risk, ensuring the legal ownership and priority liquidation rights of USDV holders over USDV reserve assets.
In terms of transparency, real-timeasset proofs and on-chain records provided by Chainlink ensure high transparency of assets, avoiding information delays. In terms of usability, USDV complies with ERC-20 and OFT standards, being immediately usable on major public chains upon launch, with the technical capability to interoperate across over 40 L1 and L2 chains, and is expected to have high usage scenarios in various DeFi projects, mainstream exchanges, wallets, OTC traders, etc. Additionally, USDV’s community incentive and value attribution mechanisms will promote and encourage more participants to engage in ecosystem construction and maintenance. This community-driven ecosystem will further enhance its attractiveness.
Although there are many stablecoin issuers currently, considering USDV’s advantages in asset security, price stability, high transparency, and community-driven mechanisms, USDV’s ecosystem layout and application may gain a certain advantage. Whether it can grow and develop further will depend on more breakthroughs in application scenarios.