NEAR Foundation will help to safely stop the operation of a stable USN coin. The project ceases its operations due to insufficient provision of stablecoin and high risks.
NEAR Foundation will help to safely stop the operation of a stable USN coin. The project ceases its operations due to insufficient provision of stablecoin and high risks.
The history of the USN is quite interesting. The stablecoin was launched by Decentral Bank (DCB) in April this year as an algorithmic stable coin (this version of stablecoin is designated V1). However, in June of this year, the code of the stable coin was changed, since then the stablecoin has become fully secured 1 to 1 with USDT and has ceased to be algorithmic (version V2). It can be assumed that such a decision was due to the fall of the algorithmic stablecoin Terra, which called into question the reliability of algorithmic coins.
Predominantly the stablecoin has been in close connection with the NEAR ecosystem. In this regard, DCB informed the NEAR fund about problems with providing a stable coin. According to DCB, the gap in collateral is 40 million US dollars.
“DCB recently contacted the NEAR Foundation to advise it that USN had become undercollateralised due to it originally being an algorithmic stablecoin (v1) susceptible to undercollateralisation during extreme market conditions. DCB has also confirmed that there was some double-minting of USN, associated with the v1 algorithm, which contributed to the undercollateralisation.”
The NEAR Foundation and DCB eventually decided to terminate USN, having developed a protection program to protect users during the closure of the project.
A Message to the Community: $USN Wind-down
— Decentral Bank (@DcntrlBank) October 24, 2022
TLDR; $USN is gradually winding down. The contract will be accessible indefinitely, with only minting disabled. $USN is safely redeemable 1:1 for $USDT through a $40M Protection Program.
Full statement: https://t.co/bnCCFqdzZm
To implement the USN Protection Program, $40 million in fiat currency was allocated, which will close the gap in collateral and ensure the safe exchange of USN for USDT and other assets during the year. The NEAR Foundation has already provided this grant to a subsidiary of Aurora Labs, which is a member of the NEAR ecosystem.
“As conditions of the grant, Aurora Labs have agreed that the USN Protection Programme will operate with the sole purpose of making users whole and will be subject to various conditions including KYC/AML, sanctions checks and certain geographic restrictions. In order to prevent abuse of the Programme, only legitimately minted USN in existence immediately prior to the time of this announcement will be eligible (a snapshot). The USN Protection Programme is live and redemptions will begin once the USN smart contract has stopped minting and the double-minted USN has been burnt. The DCB team and their affiliates will not be eligible to participate in the Programme.” - it is stated on the official website of the NEAR ecosystem.
Interestingly, if you look at the chart showing the price for the entire existence of the USN stablecoin, you can see that it was quite stable. Strong deviations in value are visible in May and June, which is most likely due to the transition of a stable coin from algorithmic to fully secured, as well as in November after the announcement of the completion of the project.
The Near Foundation Chief Executive Officer, Marieke Flament, noted that transparency and informing users, play an important role for the company.
“We are in a regulatory landscape where the crypto space has a bad reputation and so does anything stablecoin-related. It’s about working through this and putting our values of transparency and making sure users are protected.” - told Marieke Flame to CoinDesk .
Let's hope that the protection program will help to minimize the work of USN painlessly for users and companies. And we will continue our observations of stablecoins and inform you about the news.