Stellar Community Fund

By FxDAO

FxDAO

SCF #13

$74.8K

Legacy v4.0 Award

Awarded

A proof of concept of a decentralized borrowing protocol for the issuance of stablecoins backed by Lumens

Products & Services

Decentralized stablecoins backed by Lumens. Stablecoins are key for blockchain adoption and are one of the reasons why the DeFi space has evolved so quickly. Unfortunately, current stablecoin providers across the blockchain ecosystem haven't been transparent enough, and we see more and more red flags from stablecoin issuers. But decentralized solutions like DAI and others have proven there is value in decentralized stablecoins because transparency is built into them by default. For that reason and many more, it seems reasonable to be inspired by their success and create a similar solution.

Enter FxDAO, a decentralized borrowing protocol that enables the issuance of stablecoins by backing them up with Lumens. Who will use such a type of protocol? We might ask "why" and "who will use it?" There are multiple reasons for such a type of protocol or its decentralized stablecoins. Let's list some of them:

- People who want liquidity against their Lumens but don't want to sell them - People who prefer to diversify their funds between multiple stablecoins; currently, on Stellar, the only highly liquid and trusted stablecoin is USDC - People who would like to participate in the protocol to earn its asset - People who want to benefit from rewards given by the protocol - And many more!

How will it work? We get into more details in our first draft available at https://docs.fxdao.io, but here is a quick view: A core contract takes care of the issuance and burn of the stablecoins. If a user deposits Lumens into the protocol, they will receive 85%* of the value in the stablecoin selected (the target is to have multiple stablecoin denominations, i.e., USD, EUR, etc.). Later, that user can liquidate the position by depositing the stablecoin and getting their Lumens back. *Percentage is from our first draft but it can change during development.