Market swings and unpredictable conditions call for stablecoins that deliver reliable value. Introducing iUSD: Mode Network’s native and most advanced decentralized stablecoin from Ironclad is launching today. Designed to be interest-generating and facilitate stable strategies even in the most turbulent times.
Become an iUSD user and enjoy interest-free stablecoin loans on your favorite holdings while generating a sustainable and scalable source of yield. At launch, iUSD is designed to deliver unparalleled support to ETH, ezETH, USDC, USDT, and MODE as collateral types.
Through unique minting and redemption features, robust Stability Pool, and rehypothecation, iUSD gives holders access to real, scalable yield and exposure to market volatility without the price exposure. Whether you’re looking to hedge, loop, LP, or simply earn single-sided stablecoin yield, iUSD gives you the tools to do it all.
The Ins and Outs of iUSD
The Stability Pool
The Stability Pool is crucial for iUSD liquidity, handling liquidations and providing consistent yield. When positions are liquidated, iUSD is burned from the Stability Pool, and the collateral is transferred to the pool. This mechanism allows users to earn collateral tokens while their iUSD balance decreases, creating a dynamic yield environment.
The system ensures collateral safety through liquidations. While high lending utilization might delay collateral withdrawal, Ironclad’s reserve management and lending market interest rate model mitigate these challenges.
Collateral Yield
When a user creates a Collateralized Debt Position (CDP) and mints iUSD, their collateral is rehypothecated (deposited) to the lending market’s supply side, generating a constant source of yield that is routed back to them as stablecoin holders via the stability pool. This yield is in addition to any yield that may be generated by interest-bearing collateral used to mint iUSD.
The rehypothecation mechanism drives down borrowing rates in the lending markets, increasing demand from borrowers and thus scaling the yield for lenders and stablecoin minters over time.
Redemptions
A Redemption is the act of swapping iUSD tokens with the system in return for an equivalent value of collateral, and protects iUSD from falling considerably below $1. Redeemers pay off debt on behalf of users, in exchange for collateral, resulting in no net loss for collateral depositors.
Redemptions occur separately for each collateral type.
Management Fees for Interest-Bearing Collateral
Interest-bearing collateral has historically caused peg issues for CDP protocols, as users leverage their collateral exposure and short the stablecoin.
Our team has spent over a year studying this problem and developing a solution.
To avoid redemption scenarios hindering capital efficiency, especially with interest-bearing (IB) collateral (for example: ezETH), we have created a variable collateral management fee, allowing the current system to grow safely and efficiently.
When you create a new iUSD position with interest-bearing collateral, the management fee is clearly displayed in the position creation interface. These fees are directed to iUSD yield in the Stability Pool.
For more information about these details, please visit our documentation.
If you’re interested in diving even deeper, you can read more about our stablecoin and money market research, including:
iUSD Use Cases
Stability Pool Yield
Stake your iUSD in the Stability Pool to earn rewards. From the dashboard, click “Stake” in the iUSD stability pool, deposit your desired amount, and voila! Rewards can be claimed anytime and Ironchads will be contributing to the stability of the protocol at the same time.
Benefits of the Stability Pool
- Single-sided pool
- Real yield for iUSD depositors
- Earn oICL rewards
- Ensures efficient liquidations
Liquidity Provision
Providing liquidity (LPing) is one of the most popular use cases for iUSD. By supplying liquidity to various pools on Mode, users can earn trading fees and incentives. This is another way Ironchads can make their assets work for them even in volatile market conditions.
Shortly after launch, users can provide liquidity on Kim Exchange. Stay tuned for announcements upon the launch of iUSD pools later today.
Arbitrage Opportunities
iUSD’s soft peg to the US dollar creates arbitrage opportunities that users can use to their advantage and generate profits.
How It Works:
- Redemption Below $1: When iUSD drops below $1, you can redeem it for $1 worth of collateral from Ironclad’s smart contracts, minus a 0.5% fee. This creates a profit margin for arbitrage traders. Automated bots handle redemptions almost instantly, ensuring swift arbitrage opportunities and maintaining the peg.
- Minting Above $1: When iUSD trades above $1, minting it becomes cheaper. For example, minting $100 of iUSD when it’s valued at $1.05 on external exchanges nets you an extra $5, offering another profitable arbitrage opportunity. The Stability Pool ensures the system remains fully collateralized by closing unhealthy debt positions for profit.
Zero-Interest Loans
iUSD offers an endless supply of USD-denominated credit for the most popular assets on Mode. Users can enjoy interest-free stablecoin loans on their favorite holdings while generating a sustainable and scalable source of yield.
How It Works
- Borrow iUSD: Deposit collateral and borrow iUSD at a 0.5% issuance fee. This fee is significantly lower than typical interest rates, making it an attractive option for users needing liquidity.
- Flexible Repayment: There are no fees for repaying loans, allowing you to manage your debt efficiently and flexibly without worrying about interest accrual.
Getting Started with iUSD
Minting iUSD To mint iUSD, go to the iUSD tab to open the position creation interface. Select Open next to the collateral you would like to use. At launch, iUSD is designed to deliver unparalleled support to ETH, ezETH, USDC, USDT, and MODE.
In the New Position interface, enter the amount of collateral to deposit and the amount of iUSD to borrow. The minimum borrowing amount is 50 iUSD.
When satisfied with deposit and borrow amounts, click Approve & Open to perform the necessary transactions. Wallet confirmation is required for each transaction. If a transaction fails, try again. Ironclad will pick up where you left off.
Note that some interest-bearing collaterals may incur a management fee (refer to the Management Fee page)
After a position has been opened, it will be visible in the Ironclad Dashboard.
Managing Positions and Liquidations
Maintaining a healthy collateral ratio is vital to avoid liquidation. To maintain a healthy position and avoid liquidation, ensure you have enough collateral to cover potential losses or asset value fluctuations. If your position is at risk, manage it by either borrowing more iUSD or withdrawing collateral to adjust your collateral ratio (CR).
To manage your position:
- Click the ‘Edit’ button on the desired position.
- Use the edit icons on the collateral or iUSD sides to withdraw/add collateral or repay/borrow iUSD.
Conclusion
Ironclad’s iUSD offers a versatile solution to your stablecoin needs, providing users with multiple ways to generate yield while paying minimal fees. Whether through staking in the Stability Pool, providing liquidity, or leveraging arbitrage opportunities, iUSD ensures users can maximize their assets’ potential even in volatile market conditions. With zero-interest loans and flexible repayment options, iUSD stands out as a reliable stablecoin for both seasoned investors and newcomers entering the Mode ecosystem.
Embrace the potential of Ironclad and elevate your DeFi strategies with Mode’s native stablecoin, iUSD.
Fire up the Ironclad app today.