What is USN

All You Need to Know About USN: A Stablecoin in the DeFi Ecosystem

Introduction

In the rapidly evolving landscape of cryptocurrencies and decentralized finance (DeFi), stablecoins play a crucial role in providing necessary stability and reliability. Among the myriad of stablecoin projects, USN has emerged as a significant player, designed specifically to support the DeFi ecosystem on the NEAR Protocol. This article will provide a comprehensive overview of USN, detailing its goals, functionalities, creators, and crucial milestones in its history.

What is USN?

USN is a stablecoin that operates natively on the NEAR Protocol. Developed and introduced on April 25, 2022, by Decentral Bank (DCB), USN initially launched as an algorithmic stablecoin intended to maintain a peg to the US dollar. Its design integrates on-chain arbitrage mechanisms along with a self-balancing reserve fund to ensure its value remains stable.

The primary objective of USN is to enhance the liquidity and overall development of the DeFi ecosystem built on the NEAR Protocol. By providing a reliable digital currency, USN aims to facilitate transactions, savings, and other financial activities, securing a more robust financial infrastructure within the growing realm of decentralized finance.

Creator of USN

The driving force behind USN is Decentral Bank (DCB), an independently operated and community-run project. DCB focuses on leveraging blockchain technology to create innovative financial solutions that can cater to the needs of users within the DeFi space. The approach adopted by DCB in creating USN reflects its commitment to fostering a decentralized financial system, enabling users to transact and engage without reliance on centralized entities.

Who are the Investors of USN?

While the NEAR Foundation has played an instrumental role in supporting USN—particularly in addressing concerns related to collateralization—the identities of other specific investors or organizations backing the project are not publicly disclosed. The NEAR Foundation's involvement has been pivotal in ensuring the stability and sustainability of USN, particularly following the growing scrutiny on algorithmic stablecoins within the sector.

How Does USN Work?

Central to the functionality of USN is its innovative structure designed to maintain a stable value. The project initially employed a smart arbitrage contract that facilitated the exchange of NEAR tokens for USN, striving to preserve its peg to the US dollar. Alongside this, USN was backed by a reserve fund that was double-collateralized using both USDT and NEAR tokens.

However, in response to the heightened risks associated with the inherent volatility of algorithmic stablecoins—and specifically after observing events throughout 2022 that affected the broader stablecoin market—USN transitioned to a non-algorithmic model (version 2) in June 2022. The new design ensures that USN is now fully backed 1:1 by USDT, significantly lowering the risk of volatility and offering a more secure option for users within the DeFi ecosystem.

In addition to its stablecoin features, USN has seen integration into various DeFi protocols across NEAR and Aurora, expanding its utility and enhancing its role within the growing decentralized financial space.

Timeline of USN

The development of USN has been marked by key events that have shaped its evolution. Below is a timeline of significant milestones:

• 25 April 2022: USN is officially launched by Decentral Bank (DCB) as an algorithmic stablecoin, aiming to establish stability in the DeFi sector.
• May 2022: The collapse of TerraUSD (UST) creates ripples of concern across the crypto community, raising questions about the viability of algorithmic stablecoins.
• June 2022: Recognizing the inherent risks, USN transitions to a non-algorithmic version (v2), switching to a model that is fully backed by USDT on a 1:1 basis.
• October 2022: The NEAR Foundation announces the creation of a USN Protection Programme, addressing undercollateralization issues and providing safeguards for USN holders amidst market uncertainties.

Key Points

The unique aspects of USN can be summarised as follows:

• Stability Mechanisms: USN employs on-chain arbitrage and a self-balancing reserve fund to maintain its stability and alleviate concerns over price fluctuations.
• Transition to Non-Algorithmic Model: In light of market volatility and scrutiny of algorithmic models, USN’s shift to a non-algorithmic framework offers increased security and reliability.
• Support from NEAR Foundation: The backing of the NEAR Foundation has been crucial in addressing collateral concerns and ensuring that USN can fulfil its purpose in the DeFi ecosystem.
• Integration within DeFi Protocols: USN has been incorporated into various DeFi projects on NEAR and Aurora, safeguarding its relevance and enhancing its usage within decentralized finance.

Conclusion

USN stands as a compelling case study in the world of cryptocurrencies and stablecoins. Originally conceived as an algorithmic digital currency, its evolution towards a non-algorithmic framework underscores the importance of adaptability in the rapidly shifting landscape of financial technology. Through its innovative approach, robust support from the NEAR Foundation, and integration within decentralised protocols, USN is well-positioned to contribute significantly to the stability and growth of the DeFi ecosystem on the NEAR Protocol. As the project continues to develop, it will undoubtedly offer users a dependable and secure means of engaging with decentralised finance.