dForce USD (USX)

USX is a fully-collateralized within the ecosystem, offering financial access that focuses on openness, interoperability, composability, and decentralization. USX's over-collateralization design enables users to USX by supported assets within approved Loan-to-Value (LTV) ratios, akin to the mechanics of . [1]


dForce emerged in the space in late 2019, with a focus on price stability and expanding use cases beyond self-incentivization. It offers flexible minting options, including vault-based single minting, direct borrowing from supported lending protocols with varying collateral options and market-driven interest rates, and the 1:1 swap with supported stablecoins. The protocol's controlled liquidity facilitates credit granting and diverse use cases, particularly fostering interactions between protocols and liquidity seeding in USX bridges and stablecoin swap pools. Also, a hybrid interest rate policy is used which enables minting with fixed interest rates through Vaults and adjustable interest rates for different collaterals via governance voting. [2]

Moreover, the Protocol-Direct-Liquidity-Provision (PDLP) module governs market interest rates by managing USX's supply in the secondary market. The Liquid Stability Reserve (LSR) module allows for 1:1 swaps between USX and various supported stablecoins, serving as a tool in maintaining USX's to the US dollar. In a multi-chain environment, USX facilitates native minting capabilities across deployed chains through cross-chain liquidity bridging. In conjunction with Swap and Lending capabilities, users can transfer crypto assets across diverse chains without encountering liquidity constraints. [2]

Main Functions

Price Stability

USX is designed to uphold a 1:1 soft peg with the U.S. dollar. The primary driver behind this peg is the hybrid interest rate policy, which autonomously adapts to maintain equilibrium between market supply and demand. Two approaches are instrumental in achieving this equilibrium: First, DF holders collectively vote to set interest rates for Vaults, offering fixed interest rates adjusted via governance. Second, the PDLP module dynamically influences USX's interest rate in the secondary market by managing its supply. When market forces push the USX price above $1, interest rates for Vaults can be lowered or USX supply increased in lending protocols, driving the price back to $1. Conversely, when demand shrinks, interest rates can be raised, or USX liquidity withdrawn from lending protocols to decrease supply and restore the $1 peg. A critical addition to the peg maintenance strategy is the Liquid Stability Reserve (LSR) module, introduced in July 2022, enabling 1:1 tradeability between USX and other supported stablecoins, offering an efficient peg-maintenance mechanism. [3]


LSR, or Liquid Stability Reserve, enables users to utilize supported , such as , , and , as collateral to mint USX tokens or redeem USX for these stablecoins at a 1:1 rate. The introduction of LSR was endorsed through a governance approval process. It was introduced in an improvement of Maker's Peg Stability Module (PSM). LSR channels all the stablecoins obtained from LSR into dForce Lending, where they are put to work, generating yields. [4]

Designed as an extension to the existing mechanism, the LSR was made to ensure USX maintains its dollar peg with efficiently. Users have the ability to mint USX against or redeem USX for supported stablecoins at a 1:1 exchange rate. However, it is worth noting that since most of the stablecoin reserves are deployed in lending protocols to earn yields, the will automatically manage fund withdrawal from these protocols to facilitate the swap when requested by the user. It the LSR pool lacks the necessary balance to support the swap or when liquidity for the desired stablecoin is depleted from the supported lending protocols, users may experience a slight delay. In such cases, users have the option to trade USX on supported . [4]

Key Features

  • No Additional Fees: Using LSR comes with zero additional fees, although users are still required to cover the fees associated with executing the 'swap.'
  • Collateral-Specific Minting Cap: Each collateral stablecoin is associated with a specific 'Minting Cap.' This cap determines the total quantity of USX that can be minted against a particular collateral stablecoin.
  • Unlocking New Revenue Streams: Importantly, all the stablecoin reserves amassed through the LSR module are automatically channeled into lending protocols, including dForce Lending and . This aims to unlock additional revenue streams for the dForce Treasury, enhancing the sustainability of the ecosystem.


Minting and Redeeming

Pool-based Minting

The PDLP (Protocol-Direct-Liquidity-Provision) module empowers pool-based minting by allowing supported lending protocols to use USX's yield tokens (i.e., iUSX) as collateral to mint USX. This mechanism ensures USX remains over-collateralized, maintaining stability. USX's borrowing interest rate is regulated, anchored within a capped range and determined by its utilization rate. For example, when demand surges and the interest rate exceeds the target, PDLP provides additional USX liquidity to lending protocols, adjusting the rate to remain within the desired range. This approach enhances capital efficiency by directly supplying USX liquidity to lending protocols, expanding collateral options, and providing adaptive, market-driven interest rates. [5]

Vault-based Minting

The Vault model offers tailored support for different collateral types and use cases, each with unique risk profiles. It accommodates interest-bearing tokens, tokens, assets, tokens, and other assets. Vaults enforce distinct risk parameters based on the specific collateral type supported, including borrowing , debt cap, supply cap, loan-to-collateral ratio, fee, and borrowing fee. Compared to the Pool-based model, Vault-based minting caters particularly to long-tail assets, bolstering isolated risk models and offering a fixed interest rate structure. [6]

Liquidity Modules

PDLP (Protocol-Direct-Liquidity-Provision)

PDLP facilitates aiming to optimize capital efficiency and combat USX and EUX liquidity shortages. It employs a hybrid model, enabling users to mint and supply liquidity simultaneously. For instance, it leverages yield tokens as collateral, allowing users to mint USX and provide liquidity in a single step, removing the need for primary market issuers to provide liquidity in secondary markets. PDLP also supports a range of protocols, extending USX liquidity across lending markets, , bridges, and chains. In lending, it offers principal-safe strategies, while in bridges, it facilitates low network transitions. Additionally, PDLP enables stablecoin swaps, which are less exposed to , and supports third-party lending protocols. [7]

POO (Protocol-Owned-Operator)

POO, an iteration of PCV (Protocol-Controlled-Value), utilizes treasury assets to mint and control USX and EUX, providing yield generation and liquidity. It collaborates with PDLP to maximize organic use and protocol revenues through yield-carrying trades. This module augments capital efficiency, revenue generation, and liquidity, including support for pools and cross-chain expansion. In particular, it offers Protocol-Controlled-Staking-Assets, allowing sustainable borrowing for underlying staking tokens, and Protocol-Controlled-Treasury for lending, borrowing, and trading assets. POO features a pilot program allowing USX to fund and own real-world assets with non-crypto correlated yields, furthering the integration of DeFi with tangible assets and global liquidity. To manage risk, a cap of 50 million USX is initially set for POO, subject to governance adjustments. [8]

Positive Feedback Loop

PDLP and POO are integrated with the goal of: lowering liquidity retention costs, enhancing capital efficiency, diversifying revenue, reducing inflation pressure, and distributing fee income to DF holders. These liquidity and yield-generating mechanisms create a positive feedback loop by reducing DF supply, increasing staking yields, and fostering protocol-owned liquidity, all contributing to the overall growth and sustainability of and DF holders' benefits. [9]


dForce Lending is a decentralized, pool-based multisided lending protocol designed to offer users the opportunity to earn interest on their or borrow supported assets against their supplied . Unlike traditional financial intermediaries, dForce Lending operates without intermediaries through automated , striving to enhance accessibility and reduce associated costs. [10]

Asset Classification

Assets available on dForce Lending are grouped into five categories, each defined by distinct interest parameters based on the asset's risk profile and liquidity test results. [11]


Adequacy Ratio serves as the liquidation point on dForce Lending. If a borrower's debt falls below the minimum Adequacy Ratio, part of their collateral is liquidated at a discount to protect lenders from financial loss. [12]

Dealing with Loan Default

To secure a crypto loan, borrowers must lock up supported assets as collateral. In the event of loan default, a portion of the collateralized assets is auctioned, with a liquidation penalty applied to ensure timely repayment. The ability to participate in the liquidation process is open to everyone, offering a bonus for facilitating solvent operations. [13]

Risk Methodology

To maintain robust security and adaptability, dForce employs a multifaceted, quantitative model that evaluates risk, financial risk, and counterparty risk. This model is used for assessing new assets and their suitability as collateral. [14]

Non-Ethereum Blockchain Deployment and Asset Onboarding

dForce's expansion to non- involves a policy that supports assets automatically accepted from Ethereum Lending to other protocols. Additionally, the top 50 market capitalization tokens, as per rankings, are eligible for listing, subject to on-chain voting. [15]

Risk Factors

Risk assessment factors include smart contract risk (e.g., code maturity and audit history), financial risk (e.g., market and liquidity risks), and counterparty risk, with an emphasis on centralization and intermediary risks. [16]


dForce Trade functions as a aggregator integrated with 's Inter-Chain Messaging framework (Celer IM) to enable cross-chain swaps. Using algorithms, it identifies the best rates and pools liquidity from various platforms and to facilitate optimal trades. dForce Trade also focuses on enhancing user experience by sourcing the best rates across different blockchains, splitting trades into efficient routes to minimize fees and . [17]

Cross-Chain Swap Mechanism

dForce Trade enables users to convert tokens across different blockchains in a single transaction. For instance, users can swap for across Ethereum and the . dForce Trade simultaneously sources liquidity and ensures the best price on both chains. It handles the swapping process efficiently, bridging assets if needed. [18]

Fee Structure

For cross-chain swaps, there is an estimated fee to cover the cost of using Celer's cBridge and the gas fees on the destination blockchain. dForce Trade does not charge any additional fees. For non-cross-chain swaps, dForce Trade imposes a 0% fee for trades executed within the same blockchain. [19]

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dForce USD (USX)


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