Overview
USG is an over-collateralized USD-denominated stablecoin that can be minted against a variety of productive collateral, such as Curve Finance LP tokens or Pendle PTs.
Under certain circumstances, USG can be borrowed interest-free on dedicated markets. When an interest rate is charged, the system uses a dynamic model that adjusts the interest rate depending on USG’s price.
As with other CDP protocols, a position on Tangent can be liquidated if its health ratio falls below a defined threshold, wherein the protocol considers that the position isn’t sufficiently collateralized. Users are required to monitor their position to avoid liquidation.
USG can serve various needs and is particularly adapted to the following use cases:
- Leverage farming;
- Leverage trading;
- Low-risk yield farming on liquidity pools or the savings account.
Markets
Tangent uses three different kinds of markets to mintUSG, known as High Emissions Collateral (HEC), Low Emissions Collateral (LEC), and Fixed Interest Rate (FIR) markets.
On HEC markets, it is possible to borrow interest-free while USG’s price is above a predefined price threshold. Since the collateral used in these markets generates liquid rewards (such as CRV), the system deducts a portion of these rewards from borrowers as a form of payment. As USG goes down, the rewards cut goes up. If USG falls below the price threshold, 100% of rewards are cut, and a dynamic interest rate is charged while USG stays below this price.
On LEC markets, a dynamic and price-dependent interest rate is charged immediately. If the collateral generates liquid rewards, 97.5% of these rewards are streamed back to borrowers, as the protocol applies a 2.5% fee.
On both HEC and LEC markets, the interest rate goes up as USG’s price goes down.
On FIR markets, a fixed interest rate is charged immediately, independently of the price of USG. If the collateral generates liquid rewards, 90% of these rewards are streamed back to borrowers, as the protocol applies a 10% fee.
For more details, refer to the following sections:
HEC markets
LEC markets
FIR markets
Savings account
sUSG is the savings version of USG, and stands for staked Tangent USD. It is a decentralized and unstoppable savings account that can be used in DeFi. To earn yield, it simply needs to be held in a wallet.
sUSG yield is fully endogenous, and comes from the system itself. It does not rely on governance token emissions.
For more details, refer to the following section:
sUSG - Savings account
Stability
USG doesn’t use redemptions and thus, can’t be redeemed for its collateral. Instead, it protects its peg through a combinaison of Peg Keepers contracts, and a dynamic interest rate and rewards deduction model. This design has been proven efficient, and is inpired by crvUSD.
As USG’s price deviates below $1, the interest rate and the rewards deduction rate go up automatically. As a result, the more USG depegs downward, the more the system earns, and the stronger the incitation is for borrowers to repay their loans. Since most of the system’s revenue are directed back towards liquidity pools and the savings account, USG’s attractiveness increases as its peg decreases.
For more details, refer to the following sections:
Peg Keepers
Peg stability
Self-sustainability
The system is designed soUSG can grow and maintain its liquidity in a self-sustainable way, without relying on external incentives.
Many stablecoins depends on exogenous incentives, mostly to sustain their liquidity on DEXs. To do so, it is common to use governance tokens as a subsidy to incentivize users to provide liquidity. This is done either by directly rewarding liquidy providers with the governance token, or by issuing vote incentives on dedicated markets.
In contrast, USG uses most of its revenue to maintain its liquidity, and to provide a yield to its savings account, sUSG. Thus, the system doesn’t rely on external incentives to be sustainable and grow, and can live indefinitely, without ever running out of incentives.
Benefits of using USG
AsUSG can be minted against a vast variety of productive collaterals, it is a versatile tool that can serve many purposes at once.
First and foremost, the stablecoin collaterals used by USG are generally more productive than those used in other CDP stablecoins. A high-yield collateral allows borrowers to sustain leverage farming strategies longer, and more efficiently.
On the other hand, when volatile collaterals are used in HEC market, USG can provide free leverage, whereas elsewhere, borrowers need to pay interest. In fact, when USG is above the market’s price threshold, borrowers are paid to take leverage. On LEC markets, the rewards earned from collaterals can offset totally or partially the cost of borrowing. USG can then be, in many situations, the most capital-efficient way to open leveraged positions against volatile assets.
Finally, USG can be used for its yield opportunities on liquidity pools, or savings account.
Overall, given its design, USG is able to serve the needs of many market participants, from leveraged traders and farmers, to simple yield farmers, in a capital-efficient and secured way.