Behold, the USN Wars
$USN is the native stablecoin of NEAR, offering uncapped yield with a minimum 11% APY. $USN is backstopped by an overcollateralized reserve, and the growth of $NEAR fuels a built-in flywheel.
$USN is not a copy of $UST, nor should it be viewed as a competitor. The paradigm-shift towards decentralized money is a win for decentralized finance.
Types of Stablecoins
1. Backed by the actual US dollar: USDT, USDC = centralized
2. Backed and collateralized by crypto: DAI = capital inefficient
3. Semi-algorithmic: FRAX = complex, low adoption
4. Fully algorithmic: UST = undercollateralized
USN combines the growth potential of $UST and the risk management, strong peg defense of $FRAX; all while adding utility and reducing volatility of $NEAR.
Why would $NEAR release $USN?
- Direct staking yields across the ecosystem
- Attract liquidity to the ecosystem
- Create another use case to $NEAR
$USN is symbiotic with $UST
Bastion has been in deep discussions with Terraform Labs for weeks about integrating $UST heavily into the NEAR/Aurora ecosystem, and even a potential Anchor integration.
Other algostables will help strengthen the UST peg and narrative. Crypto is not zero-sum. Do not lose sight of the grander purpose: to replace centralized currencies with the new paradigm of decentralized money. We are all on the same team. Do Kwon said it himself:
USN offers a different type of decentralized stablecoin that fills a clear, differentiated use case.
The multichain expansion of SoLunAvax expanded the horizons of crypto. Similarly, the invention of new algostable mechanisms and decentralized money adoption should be encouraged. Maximalism, in any form, is destructive.
As seen with 4Pool, decentralized algostables complement and strengthen each other. Decentral Bank’s Reserve plans to adopt other stablecoins like UST or FRAX later. The bubble of CT often makes us forget that the true goal is not to PVP each other endlessly in a closed loop but to enable the mass adoption of DeFi.
Advantages of USN
Two major differences between UST and USN include:
- USN is overcollateralized because it holds and stakes NEAR rather than burn it
- Yields come from and are distributed to more than one source (multiple money markets, not just Anchor)
Instead of burning NEAR to mint USN, NEAR is simply held in a reserve meaning USN is always overcollateralized. Staking yields from the NEAR reserve are distributed to users of protocols which integrate USN. As seen with the Curve Wars, establishing an ecosystem of protocols competing for yields is extremely effective in stimulating demand for the native token (CRV → NEAR).
As the largest Stableswap/Lending protocol on NEAR and with veBSTN coming soon, Bastion will a key player in the USN Wars.
Technically, both UST and USN have a base APY of 11% since LUNA and NEAR staking reward APRs are similar. The rest of UST’s APY is mostly made up by ANC incentives. In the case of USN, it sources/distributes yield across multiple protocols (instead of just Anchor).
Ultimately, the difference between USN and UST is a matter of ethos. Anchor is a powerful black hole for UST farmers which dominates the Terra ecosystem. Decentral Bank is the great facilitator for USN adoption, sharing yield among multiple protocols in the NEAR ecosystem. One drives growth through undercollateralized bulldozing, and the other drives growth through broad distribution and yield generation. One is not necessarily “better” than the other. Just different.
This is important because the success of a stablecoin depends on demand and utility of it as currency. A large problem of UST adoption is that 90%+ is just being farmed on Anchor. Engaging with multiple protocols and spreading yield far-and-wide increases organic demand for the stablecoin. It is possible for USN to offer a higher APR than UST.
Furthermore, USN will open up economic creativity around yield capture for staking/delegators. Decentral Bank’s massive reserve and staking rewards can be directed to any protocol. Bastion will soon be launching interest-rate swaps, and yield optimizers aiming to harness USN yield.
USN financializes NEAR’s blockspace — a huge, untapped market — enabling dApps with similar ambitions to Alkimiya to be formed on top.
In the aspect of ‘moneyness’, the overcollateralized nature of USN makes users feel safe holding it. The launch of NEARPay later will introduce more utility for real-world use. https://twitter.com/0xngmi/status/1458980000900734976?s=20&t=PLoGgIEHuPKaEGynNP3FqA
Many sovereign funds and institutions are not comfortable parking billions into an undercollateralized stablecoin. $USN fills a clear niche.
Does this mean USN will have lower yields or grow slower? Not necessarily, due to the powerful built-in flywheel where USN APY increases when demand for USN or price of NEAR increases.
Does this mean UST sucks?
Not at all. Just a different mechanism, different stablecoin, and different target market with different risk appetites.
Bastion genuinely wants both to thrive. The adoption of decentralized money is a win for decentralized finance.
Why is USN partially backed by USDT?
NEAR conducted thousands of market simulations, and USDT was the most robust asset to back USN and maintain peg in the early stages. Decentral Bank will progressively diversify the assets in backing, potentially including other stablecoins such as $UST and $FRAX down the line.
The North Star is to move away from centralized stablecoins such as USDT. This is the path to decentralized money.
How does $USN maintain peg?
To maintain peg, USN can be minted and burned when it falls above and below peg respectively, offering arbitrage opportunities with zero slippage.
How do I get $USN?
Users can acquire $USN from the open market or mint $USN via a 1:1 collateral in the NEAR wallet.
Let the $USN Wars begin.
Bastions, man your battle stations. 🗿
Time to become the Liquidity Foundation of NEAR.
Bastion is a Lending and Stableswap protocol built on Aurora, NEAR’s EVM-compatible layer. The project innovates with novel features such as: isolated markets, interest rate swaps, increased receipt token utility, veTokens, gauges, and boosters. Building on Aurora enables Bastion to create an autonomous interest-rate engine with superior capital efficiency, low slippage swaps, fast transactions, ultra-low fees, precise liquidations, and harness the underlying UX benefits of NEAR.
DISCLAIMER: This article does not constitute investment advice. Bastion Protocol Token (BSTN) is a means by which users may utilize and govern the protocol. Bastion does not recommend purchasing BSTN for speculative investment purposes. BSTN tokens may lose value or have no value and may have no market. Please read the full disclaimers here.