Maintaining the stability of DUSD, our decentralized stablecoin, is a top priority at Davos Protocol.

Here’s how we ensure that DUSD stays pegged to the US Dollar:

1️⃣ Collateralization
• Mechanism: DUSD is minted through collateralized debt positions (CDPs). Users deposit reward-bearing assets as collateral.
• Over-Collateralization: The value of the collateral always exceeds the value of the minted DUSD, providing a buffer against market volatility.

2️⃣ Dynamic Borrowing Rates
• Mechanism: Borrowing rates are dynamically adjusted based on the highest of three rates: the PCE Index, Federal Reserve interest rates, or DeFi stablecoin lending rates.
• Purpose: Ensures that borrowing costs reflect the true cost of capital and the risk profile of the collateral, promoting stability.

3️⃣ Stability Fee
• Mechanism: A stability fee acts as an interest rate on the borrowed DUSD.
• Governance: This fee can be adjusted by the governance module to manage the supply and demand of DUSD, helping maintain its peg.

4️⃣ Liquidation Mechanism
• Mechanism: If collateral value falls below a certain threshold, the protocol automatically liquidates the collateral to repay the DUSD.
• Purpose: Ensures system solvency and maintains the DUSD peg.

5️⃣ sDUSD Savings Rate
• Mechanism: sDUSD, the omnichain savings rate token, provides DUSD holders with a consistent and predictable interest rate.
• Incentive: Encourages holding DUSD, helping to maintain its demand and stability.

6️⃣ Governance and Community Involvement
• Mechanism: The protocol's governance module allows community participation in decision-making processes.

7️⃣ Purpose
Adjustments to the stability fee, borrowing rates, and other parameters ensure the system can adapt to changing market conditions.

The Result? A resilient, reliable stablecoin designed to weather any storm. DUSD empowers you to explore the exciting world of DeFi with confidence, knowing your assets are safe and sound.

Learn more about DUSD's stability mechanisms in our docs: https://t.co/BVQQN7qxu2