UXD Launches Mainnet Beta, Bringing The First Fully-Decentralized, Capital-Efficient Stablecoin to Solana
Today UXD protocol is excited to announce its Mainnet Beta Launch on Solana! This post will cover what UXD’s Mainnet Beta will entail (including how to participate), and how UXD Protocol foresees the path from Mainnet Beta to fulfilling UXD’s goal to become the most widely used decentralized stablecoin in the world, starting by setting a new standard for trust and usability in the Solana ecosystem. This article will also announce our bug bounty program, give a quick look into the structure of UXD’s forthcoming governance program, as well as outline some upcoming improvements to UXD’s user interface.
The Vision of UXD Protocol
Taking a step back for a moment, it’s important to reflect on how and why the community got to where it is today, and clearly lay out UXD’s goals for the future and overall vision.
UXD was created to solve an incredibly difficult problem in the crypto world: creating a stablecoin pegged to the USD that was (i) stable (ii) decentralized (iii) capital efficient, all at the same time. Stablecoins have been one of the most difficult design challenges in crypto, with in-depth discussions around stablecoin mechanics happening over 7 years ago. Tens of stablecoins have come and failed in the years since, many spectacularly so. UXD is a trustless + decentralized algorithmic stablecoin that maintains its peg with the use of delta-neutral derivatives, the first of its kind on Solana.
Our vision for UXD is ambitious, yet simple:
Become the most widely used stablecoin in the world.
Put another way, UXD hopes to be the stablecoin that crypto users trust to transact with (buying NFTs, paying employees, etc), use as a store of value, and use productively in the economy (borrowing/lending, yield strategies, etc). Longer term, UXD’s goal is to be the asset of choice for decentralized banking, payment apps, and anything else DeFi users may want to do. UXD Protocol believes that the most used stablecoin with the largest market cap in crypto will need to be trustless, decentralized, and credibly-neutral. UXD Protocol believes it fulfills these requirements, and has the potential to be the bedrock of the decentralized finance ecosystem. In contrast, centralized stablecoins such as USDC and USDT are not trustless, not decentralized, and not credibly neutral. UXD Protocol therefore believes that UXD can serve a much wider audience than is possible for a centralized stablecoin, with the goal of ultimately replacing USDC and USDT in the crypto ecosystem.
Building and launching a stablecoin is quite different from creating a lending/borrowing platform, a yield aggregator, or a decentralized exchange. The purpose of a stablecoin is not to be an end in itself, but to be used for other things a user may wish to do in the crypto economy. UXD efficiently solves the “technological” goals of a stablecoin by providing stability, capital-efficiency, and decentralization. However, beyond the “hard” design specs there are “softer” elements that need to be handled with care in order to ultimately see broad UXD adoption:
- Trust & Transparency- Stablecoins by their nature are not assets that go up in value. Users hold and transact only in stablecoins they trust. The most direct way to build trust is through complete transparency. This includes everything from public communication to getting feedback on strategy plans from the community, to open sourcing code for review. Clear and consistent messaging is key.
- Network Effects- USD is the world’s reserve currency to date because of perceived network effects. Countries invoice trade in USD, international payments are often settled in USD, and many people “think” in terms of USD. UXD needs to strategically grow network effects through integrations with other protocols and incentives in the crypto ecosystem to ensure that UXD sees widespread adoption and reaches a similar level of comfort and familiarity in the minds of users. Growing the supply and liquidity of UXD is the best way to demonstrate demand and nurture network effects for UXD in the market, while integrating into major DeFi platforms.
Mainnet Beta Launch Details
With the above in mind, UXD Protocol is proud to announce the details of its Mainnet Beta launch. UXD Protocol appreciates the patience of the community in helping us get to this point. Remember, trust is key for a stablecoin and YOLO (you only launch once). Key Facts:
- Beginning on January 18th, 2022 at 14:00 UTC, UXD will be live as a stablecoin on the Solana mainnet network and can be minted on our website by persons in non-restricted regions (see Terms and Conditions). See minting/redeeming guide for instructions on how to use the app.
- In order to build trust in the protocol and ensure that UXD is functioning as expected, there will be an initial per address minting cap of 10,000 UXD and an initial total supply cap of 1,000,000 UXD.
- Initially collateral for minting UXD will be SOL.
- Early users will be rewarded for their continued support via a retroactive reward of UXP governance token.
The initial cap in order to confirm UXD’s security in a mainnet environment. Although UXD Protocol has completed its first security audit, UXD Protocol wants to continue to exercise an abundance of caution as UXD launches. As discussed below, UXD Protocol will be undergoing a second professional security audit to further confirm the security robustness of the underlying code. UXD Protocol believes that a gradual deployment through cap increases is the most secure way to establish confidence in the protocol.
With that in mind, here is the path for raising the capped amounts:
- UXD minted supply will remain capped at 1,000,000 UXD for a period of five days. If the protocol continues to run smoothly, the cap will be raised to 2,000,000 UXD on January 23rd at 14:00 UTC.
- After the first cap raise to 2,000,000 UXD, if the protocol continues to run smoothly, the cap may be further raised by 250,000 UXD every day until the cap hits 10,000,000 UXD. Any decisions to pause cap increases will be immediately announced in our discord channel, with rationale given.
- After the cap hits 10,000,000 UXD, if the protocol continues to run smoothly, the cap may be raised by 1,500,000 UXD per day until reaching a cap of 25,000,000 UXD.
- The cap of 25,000,000 UXD cap will remain in place until our second professional security audit concludes (expected completion: middle of March). Once the security audit concludes, the cap may be raised by 2,500,000 per day until it reaches 200,000,000 UXD. The UXD community may lift caps faster during this period if it is feasible to do so.
- Assuming everything goes smoothly, the UXD cap will reach 200,000,000 UXD in approximately 12–18 weeks from Mainnet Beta launch. This will be the final cap. Once the UXD community feels that UXD has implemented and finalized all features and security measures envisioned for V1, the 200,000,000 UXD cap will be lifted and UXD will achieve full takeoff, officially ending Mainnet Beta and entering UXD Mainnet.
In addition to the above minting cap schedule, the per user cap will increase at the same rate as the overall UXD cap. For example, once the minting cap is lifted from 1,000,000 UXD to 2,000,000 UXD, the per address cap will increase from 10,000 UXD to 20,000 UXD.
In the case that any issues arise during the above milestones, the minting cap at the time of the detected issue will be held constant until the issue is resolved. UXD Protocol will be transparent about any issues that may arise, and will be forthright about estimated resolution time. All announcements about such issues will be made in the discord channel.
Furthermore, there may be market conditions that lend themselves well to increasing the UXD cap at a faster rate than the above schedule. If such conditions become apparent, UXD may create a DAO proposal to raise the cap with rationale provided, which will be voted on by UXP holders.
For visual thinkers, the supply of UXD will increase as follows (assuming everything goes as intended, and not accounting for potential early supply cap increases):
On the third point regarding retroactive rewards, early adopters of UXD will receive retroactive rewards in the form of UXP governance token. The number of UXP tokens to be distributed and the exact distribution calculation/criteria for rewards will be revealed after launch.
In the spirit of full transparency, UXD Protocol wanted to note two things that may happen during the early phases of UXD, as the market adjusts to UXD’s entrance:
- UXD may trade above its peg of $1 due to the initial supply caps. If the demand for UXD far outstrips the capped supply, then UXD may trade at a premium. This would be natural, and shouldn’t be seen as a long term issue with UXD’s price stability. As the supply cap increases, this pressure should alleviate.
- UXD may push funding rates negative initially. As the Solana ecosystem continues to grow, open interest on Mango Markets and other derivative dexs will continue to grow as well. Initially, UXD may have significant positions on these dexs relative to their open interest, causing funding rates to be pushed temporarily negative. As open interest grows over time, this pressure should alleviate.
UXD Protocol views these pressures as short term quirks as the market adapts to UXD as a large new participant in the derivatives market.
UXD Protocol are proud to announce that UXD will be integrating with Saber and Mercurial Finance upon Mainnet Beta Launch, to ensure liquidity for stablecoin swapping. As the UXD minting caps increase, part of UXD’s insurance fund will be put into these pools to help bootstrap liquidity. Initially there will be UXD/USDC pools on both Saber and Mercurial. These pools (and future pools) will eventually be incentivized by UXD’s liquidity mining in the form of UXP rewards. Details on UXD’s liquidity mining program will be released by the time the UXD minting cap is raised to 25,000,000 UXD.
As the UXD minting caps continue to increase, UXD Protocol will aim to integrate with major Solana platforms for various DeFi functions, fostering adoption of UXD as the default USD-pegged collateral for the world of decentralized finance. As noted above, the goal is to have UXD be the most widely used stablecoin in the Solana ecosystem and later, the crypto economy at large. To do so, UXD needs to continuously strengthen network effects as supply grows, which will be best done through partnerships and direct incentives such as liquidity mining.
Bug Bounty Program
UXD Protocol is excited to announce its bug bounty program, which will initiate at launch. UXD Protocol believes a generous bug bounty program is key to protocol security, as it makes the decisions of white and grey hat hackers more aligned with the users of UXD. All bounties will be paid in vesting UXP token, at the 7 day TWAP. The full bug bounty specifications can be found in the docs, but the summary of the program is as follows:
- 2% of UXP (currently, ~$20mm) will be allocated to our bug bounty program. Eventually, these funds may be redirected towards protocol development as voted on by the forthcoming DAO.
- Critical bugs will be rewarded at 15% of the value at risk, up to $2,500,000.
- Major bugs will be rewarded between $50,000 and $100,000, on a case-by-case basis, eventually determined by the DAO.
- Minor bugs will be rewarded between $1,000 and $25,000, on a case-by-case basis, eventually determined by the DAO.
UXP Governance Token Preview
A frequent question from our community is around the exact details of the governance token. UXD Protocol will release a separate lengthy article on our governance token, UXP, and its functions, but for a teaser preview here are some key features of UXP that UXD Protocol can announce today:
- UXP holders and the UXD insurance fund will be the sole recipients of the interest created from the delta-neutral position. The interest rate split will be a function of the overall health of UXD protocol.
- UXP holders will be able to vote on important measures such as asset management strategies for the UXD insurance fund, integration of new derivative exchanges and collateral types, and other key protocol parameters. UXP holders will partake in the economics of the insurance fund as well.
- UXP will function similarly to Curve’s vote locked veCRV. Staked UXP will become an amount of veUXP, depending on time locked, and will accrue additional UXP rewards in return for staking. Staking will be required to receive the delta-neutral interest.
Therefore, UXP will accrue value both as a governance token and as a beneficiary of the yield generated by the delta-neutral position. Given that the supply of UXP is capped, whereas the supply of UXD eventually will not be capped, the yield generated by the overall protocol per UXP token may grow quite large.
UI/UX Improvements & Dashboard
Finally, UXD Protocol wanted to announce some upcoming improvements to our overall branding image, including our uxd.fi website. UXD Protocol hired a very talented graphic designer to improve the website to more clearly express the UXD brand, as well as make information about UXD more intuitive.
Beyond landing page aesthetics, UXD Protocol also hired talented designers and front-end developers to improve the mint/redeem UI as well as to create a dashboard detailing the important aspects of UXD protocol (collateral by asset type, funding rates, insurance fund performance, etc). Not only does UXD value transparency as a top priority, but UXD Protocol also believes that how this transparent information is conveyed is extremely important. That’s why UXD Protocol worked on conveying key information in a simple, easily interpretable manner. UXD Protocol looks forward to working with the community to refine the dashboard once it is operational.
UXD Protocol is ecstatic to bring UXD to Solana and make UXD the stablecoin of choice for crypto. That journey starts now with Mainnet Beta launch. As always, feel free to hop in discord if you have any questions.
The best way to get involved with UXD Protocol today is to actively participate in discord as well as provide commentary on future medium proposals that will have active commentary periods. For example, when UXD Protocol releases the UXP governance token structure, UXD Protocol will actively take feedback from the community on the proposed structure. In the future, all proposals will be handled in the community DAO.
All decentralized stablecoins carry risks related to their usage and price stability. Please review UXD Protocol’s Risks section in the docs for more information on potential risks.