Optim Finance is Bringing Single Asset Vaults and Staking to Ardana's dUSD Stablecoin on Cardano

Ardana’s on-chain asset-backed stablecoin is integrating with yield aggregation protocol

The Cardano ecosystem is growing as it sees a rise in DeFi protocols building decentralized applications. Ardana, an issuer of dUSD, a verifiable on-chain asset-backed stablecoin on Cardano, shall integrate with product suite provided by Optim Finance including Single Asset Vaults, DEX LP Vaults, Staking and lending ops to provide optimized yield generation to users on Cardano.

Users receive dUSD by placing collateral assets into vaults within the platform through Collateralized Debt Positions, which are unique smart contracts (CDPs). This is how the dUSD is put into circulation and how users get liquidity. Others receive dUSD by purchasing it from brokers or marketplaces or accepting it as payment.

To ensure capital efficient and optimized income streams for its consumers, Optim Finance, as the leader in the Cardano yield aggregation/asset management subset of DeFi, will leverage Ardana’s services. Optim’s customers will have easy access to high yield and in-demand stable assets by collateralizing stablecoin loans with native assets, allowing them to further expand their yield creation capabilities.

Stableswap DEXs play a vital part in Optim vault multi-step schemes by supporting some of the most crucial yield chances. Ardana will act as a middleman, allowing users to manufacture and transfer a range of stable assets. Stableswap ecosystems also provide consumers with lower-risk investment alternatives by dramatically reducing temporary loss. To optimize its internal income streams, Optim will take advantage of this potential by offering native auto-compounding and leveraging features for Ardana vaults.

Additionally, by staking their LP tokens in the Ardana Rewards Enhancement Module, Optim’s liquidity provider strategies inside the Ardana protocol will be able to participate in their liquidity mining method (AREM). This will result in DANA awards for Optim’s strategic vaults, bringing both of our communities closer together in governance and voting power.

Discovering Stablecoins - DeFi’s Foundation

A stablecoin is a virtual currency backed by a stable asset such as fiat cash or precious metal. Stablecoins were intended to combat the cryptocurrency industry’s extreme volatility. Fiat-backed, crypto-backed, and algorithmic stablecoins are the three types of stablecoins. BUSD and other fiat-backed stablecoins are connected to conventional fiat currencies. They maintain the stablecoin peg by keeping fiat reserves that may be exchanged for it. Crypto-backed stablecoins (such as DAI) over-collateralize their tokens to accommodate for crypto price volatility, while algorithmic stablecoins regulate supply without any requirement for reserves.

Due to their extensive use and high market value, stablecoins are garnering the attention of regulators. To maintain control over the money, some governments are even establishing their own. With cryptocurrencies, volatility isn’t the only aspect to consider. Stablecoins, for example, are designed to maintain a consistent price. In a world where coins and tokens may collapse in value overnight, there is a strong need for currencies that combine blockchain benefits with the ability to track a more stable commodity. If you haven’t yet started trading or investing in stablecoins, it’s useful to learn more about them and the benefits and drawbacks they provide.

Stablecoins are virtual currencies with a value tied to fiat currencies or other assets. For example, you may purchase tokens pegged to the dollar, euro, yen, gold, and oil. A stablecoin allows the owner to lock in profits and losses and transfer value at a uniform price on peer-to-peer blockchain networks.

Cryptocurrencies are difficult to use for day-to-day transactions because of their significant volatility. For example, a store may take $5 in BTC for a coffee one day then find out the next day that their BTC is worth 50% less. This makes it difficult to plan and manage a business around.

Previously, there was no way for crypto traders and investors to lock in a profit or avoid volatility without transferring bitcoin to cash. Stablecoins were established as a simple solution to these two issues. Today, stablecoins like dUSD, bUSD, Dai and USDC make it straightforward to enter and exit the crypto market.

A fiat-backed stablecoin is backed by a fiat currency like the US dollar or the British pound. For example, each BUSD is backed by an actual US dollar held as collateral. Users may then use a set rate to convert money for stablecoins and vice versa. If the token price deviates from the underlying fiat, arbitrageurs will quickly return it to the established rate.

Crypto-backed stablecoins are similar to stablecoins backed by money. On the other hand, cryptocurrencies are used as collateral in exchange for dollars or other currencies as reserves. Crypto-backed stablecoins over-cover-collateralize their deposits as a hedge against price movements due to the substantial volatility of the cryptocurrency market.

The minting and burning of crypto-backed stablecoins are controlled by smart contracts. Users may independently examine contracts, adding credibility to the process. On the other hand, some crypto-backed stablecoins are governed through Decentralized Autonomous Organizations (DAOs), which let the community vote on project changes. You’ll have to either get active or trust the DAO to make the correct decisions in this situation.

Consider the situation below. You’ll need $150 in currency with a 1.5x leverage to construct a DAI pegged to the US dollar. You may use your DAI in any way you choose when you get it. You have the choice of transferring, investing, or just retaining the money. If you want your collateral back, you must reimburse the 100 DAI. On the other hand, it will be liquidated if your collateral falls below a particular collateral ratio or the loan’s value.

Holders are provided incentives to relinquish their stablecoins in return for the collateral when the stablecoin falls below $1. As a result, the coin’s supply is reduced, causing the price to return to $1. To encourage price stability, users are encouraged to manufacture the token for more than $1, increasing the supply and reducing the price. Game theory and on-chain algorithms are used in all crypto-backed stablecoins.

Stablecoins have grabbed the interest of governments all over the world because of their uncommon blend of fiat and crypto. Because they maintain a stable price, they are useful for uses other than speculation. They may also be simply and cheaply moved throughout the globe. Consequently, some argue that stablecoins might compete with fiat, even though a country’s central bank does not directly regulate them. As a consequence, numerous countries are experimenting with stablecoin production.

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Image credits: 金 运,Paul Stollery and Christian Wiediger.

Disclaimer: The purpose of this article is to remove informational asymmetry existing today in our digital markets by performing due diligence, asking the right questions, and equipping readers with better opinions to make informed decisions. The writer holds Bitcoin, Ethereum, Cardano, Solana and Cosmos. The writer has been commissioned to write this story and thus has a vested interest in the companies/products mentioned above.