15th June 2023 – Davos Protocol, a Polygon-backed homegrown DeFi ecosystem, has unveiled DUSD, an inflation-proof stablecoin with sustainable yield opportunities. This decentralized stablecoin differentiates itself through transparency and decentralization, backed by various crypto assets managed on-chain. In just two months since its soft launch, the protocol has achieved a significant milestone with Total Value Locked (TVL) exceeding INR 10,00,00,000.
Davos Protocol addresses the limitations of existing stablecoin models by leveraging recent crypto industry advancements. The DUSD stablecoin is collateralized by Liquid Staking Tokens (LSTs), ensuring stability by preventing the collateral’s value from falling below the stable asset value, in contrast to algorithmic stablecoins that face inherent risks.
Decentralized governance, driven by DGT tokens, manages yield-generation activities such as interest rates, fees, and liquidity. DGT tokens, along with the DUSD stablecoin, form Davos Protocol’s dual token model. The advanced vote-escrow model (veModel) optimizes governance parameters, giving veDGT holders voting power based on the number of DGT tokens locked on Balanced liquidity pools.
Varun Satyam, CEO and Co-founder of Davos Protocol highlights the distinguishing feature of DUSD: “With Davos Protocol, we aim to build a stablecoin mechanism which is immune to any market conditions. By offering the DUSD stablecoin to mitigate crypto volatility while providing sustainable yields, Davos Protocol aims to minimize risks associated with DeFi and make it more accessible to retail.”
Davos Protocol utilises Liquid Staking Tokens (LSTs) as collateral for DUSD. Users stake MATIC LST, ETH LST, and ETH LST LPs to borrow DUSD at attractive interest rates. This collateral not only secures the stablecoin but also generates yields from native tokens staked on liquidity-staking PoS protocols, promoting capital efficiency and protecting against inflation.
The Peg Stability Module (PSM) allows users to exchange DUSD with other stablecoins at a 1:1 ratio, maintaining a stable peg. Yield distribution among stakeholders is determined by the Davos Governance Council, comprising veDGT holders with voting rights.
Davos Protocol aims to reshape the future of DeFi by combining elements of traditional finance (TradFi) and DeFi. The DUSD stablecoin provides an inflation-proof alternative, offering returns that surpass inflation through reasonable borrowing rates, yield farming, and LST collateral rewards.