Stablecoin Components

The USB Stablecoin feature allows borrowers to deposit collateral and to mint Fringe’s USB stablecoin ($USB) against their deposited collateral. USB is a USD-pegged stablecoin backed by crypto assets.

USB stablecoins are burned when the borrower repays any part of their loans. Since the Fringe platform uses lending primitives to allow users to mint stablecoins, the terms “minters” and “borrowers” are used interchangeably to refer to users minting stablecoins.

The USB Stablecoin facility allows borrowers to deposit crypto collateral into a USB Collateral Safe of their own which is then reflected as their borrowing capacity arising from their deposited assets.

Collateral assets accepted by USB Collateral Safes are a set of whitelisted assets. Borrowers may mint USB stablecoins based on the borrowing capacity afforded them by their deposited collateral i.e. USB stablecoins are collateralized. Upon repayment of $USB, the $USB is burned and the borrower’s borrowing capacity is increased according to the amount repaid.

Borrowers are charged a Stability Fee as part of the mechanism to keep the USB stablecoin stable. This Stability Fee is the cost to mint and hold $USB – and therefore effectively acts as an interest rate on borrowing.

Stability fees are pooled and paid out to USB stablecoin savers who deposit their USB to receive interest. This dynamic between borrowers’ stability fees and USB savers’ interest is part of the economic mechanism that elegantly stabilizes the price of the USB stablecoin to parity with 1 USD.

Liquidations work as follows in the USB Stablecoin Platform:

  • A borrower’s position must always be sufficiently capitalized above a Liquidation Threshold.

  • Positions that fall below the Liquidation Threshold may be subject to liquidation by liquidators who repay the minted USB and in return receive a greater portion of the position’s collateral.

USB Stablecoin liquidations are more fully described here.

In the next pages of this section, we will explore the user roles and mechanisms of the USB Stablecoin facility.