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Up-and-Coming DeFi Platform Wault Finance Introduces Commerce-Backed Stablecoin

  • Wault Finance is launching its own stablecoin, WUSD, which is commerce-backed.
  • A leading DEX on both Polygon and BSC, is offering users a unique stablecoin asset.
  • It will announce its launch date soon.

Following the successful run of its decentralized exchange WSwap on both Polygon and Binance Smart Chain, Wault Finance has just announced its upcoming launch of WUSD, the platform’s new stablecoin. Dubbed a “Commerce-Backed” stablecoin, WUSD will be the first of its kind, enforcing its peg through a completely new framework.

So, what’s so exciting about one more stablecoin coming to the market? The answer is—everything. WUSD is not a fiat-backed, algorithmic, or even a crypto-backed stablecoin. It is supported primarily by commercial activity. Now let’s look at what that means:

What is a commerce-backed stablecoin?

It’s a USD-pegged token for which the peg is supported by the commercial activity or trade that takes place on the platform it originates from. In this case, WUSD’s peg will be supported by all the activity that takes place on Wault’s top-ranked decentralized exchange on Binance Smart Chain, WSwap.

In its attempt to improve on current stablecoin models by reducing the element of uncertainty, WUSD brings unique, never-before-done stability mechanisms. Initially, 90% of the value of WUSD will be collateralized by USDT deposits. This way, even in a worst-case scenario, users are only at risk of losing a max of 10% of their invested capital. In exchange for bearing this risk, Wault Finance will offer very high APYs for staking WUSD in order to promote adoption.

Regarding the other 10% of WUSD’s collateral, it will be backed by WSwap’s governance token–WEX, and unlike the governance tokens created for other partially-backed algorithmic projects, WEX already has a market cap worth tens of millions of USD and regular ongoing commerce. Furthermore, the peg for WUSD to $1 will be reinforced through multiple stability mechanisms using this commerce.

Here is how it will work:

  1. Users will deposit 1 USDT as collateral.
  2. Wault will then mint 1 WUSD and give it to the users.
  3. Wault will deposit .9 USDT into the treasury.
  4. Wault will use the remaining .1 USDT to buy WEX and hold that in the treasury as well.
  5. When users want to redeem their collateral, they return 1 WUSD and receive .9 USDT and .1 USDT-worth of WEX according to the price of WEX at that time.

In this way, Wault ensures that its stablecoin is completely crypto-backed as well since 100% of its value in collateral is redeemable at any time. However, it is not overcollateralized like other crypto-backed tokens such as DAI, improving WUSD’s capital efficiency.

Also differing from algorithmic stablecoins, no minting or burning of WEX takes place within the stablecoin itself. This will remove potential minting vulnerabilities that stand at risk of exploits. Added to this, WEX is much more resilient than other governance tokens as it already has use-cases.

This isn’t entirely why WUSD is a commerce-backed stablecoin though. The stability mechanisms listed on Wault Finance’s WUSD announcement are a major reason why it’s called what it’s called. Read more about them here.

What’s in store for the crypto market once WUSD launches?

Wault Finance is aiming to implement governance for users first of all. This will mean that WEX holders will be able to vote to adjust WUSD’s parameters. To begin with, WUSD will launch on BSC. Then, the stablecoin will launch on Polygon, with WEXpoly acting as collateral(the Polygon-native version of WEX). Once the peg of WUSD proves stable, Wault will implement a cross-chain bridge. This way the two blockchains will exchange their versions of WUSD directly, which will provide another stability mechanism through the liquidity connection.

Further, Wault’s WSwap exchange will seek to lower the USDT collateralization ratio over time to strengthen its commerce element and empower both WEX and WEXpoly.

Wault Finance is known for having hundreds of millions of dollars in TVL within its platform. This is a great advantage to users on the platform as use-cases for WUSD can be instantly created. Launched just recently, in Q1 2021, the DEX WSwap has already reached the 3rd highest trading volume on BSC and 2nd highest on Polygon—even higher than SushiSwap.

Notably, the project has one of the largest and most engaged communities in DeFi, ranking 6th highest in the number of token holders on BSC. As per its official blog, Wault Finance will announce the launch date of its new stablecoin soon, so stay tuned!

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