deUSD is a decentralized synthetic dollar developed by the Elixir Network. It functions as a fully collateralized stablecoin designed to provide stability and liquidity across both decentralized and centralized exchanges. Collateralized using stETH and sDAI, deUSD offers an approach aimed at mitigating funding rate volatility. Integrated within the Elixir ecosystem, it plays a role in liquidity provision and yield opportunities, contributing to the infrastructure of decentralized finance (DeFi). ^{[1] [2][3]}

Overview

deUSD ("decentralized US Dollar") is a synthetic dollar created by the Elixir Network, fully collateralized through assets such as stETH and sDAI. The protocol utilizes these assets to maintain a delta-neutral position by shorting ETH, while funding rate arbitrage within Ethereum is employed to mint deUSD. Even in environments of negative funding, deUSD is structured to maintain stability.

Within the Elixir ecosystem, deUSD functions as a preferred collateral for exchanges powered by the network, enhancing liquidity across orderbook exchanges and offering users opportunities to earn yield. Its future objective includes becoming a cross-chain currency, integrated natively into DeFi systems.

During the initial bootstrapping phase, the protocol's revenue will contribute to the Over Collateralization Fund (OCF), primarily composed of sDAI and Tether. Notably, deUSD is not collateralized by US dollars, nor is any issuer maintaining dollar reserves for it. ^[1][2][3][4]

Key Features

Decentralization

The Elixir Network provides decentralized execution for deUSD through verifiable proofs, open-source code, and on-chain liquidity. Over time, the system aims to enable permissionless minting and redeeming of deUSD, with users interacting fully on-chain.

Resilience in Negative Funding Conditions

To minimize exposure in negative funding environments, deUSD adjusts its collateralization through the Elixir Network, ensuring stability during adverse conditions.

Collateral Use within the Elixir Ecosystem

deUSD is accepted as collateral by multiple orderbook DEXs within the Elixir ecosystem, enhancing liquidity and contributing to orderbook depth.

Over Collateralization Fund (OCF)

The Over Collateralization Fund (OCF) supports deUSD’s resilience, particularly in challenging market conditions. Its primary role is to manage costs related to executing transitions to sDAI in negative funding environments, minimizing exposure to negative basis trades by converting collateral into sDAI, which generates yield through MakerDAO’s T-Bill protocol.

The OCF operates based on predefined health factors within the protocol. Should the fund's health decline, the system shifts to a defensive mode, reducing exposure and converting collateral to sDAI. During periods of positive funding, the OCF allows deUSD to capture additional yield, balancing risk and return. ^[1][2][4][5]

Tokenomics

deUSD operates as a synthetic asset backed primarily by stETH and sDAI. These assets are used to manage positions and provide stable yield through the OCF. Collateralization adjusts dynamically based on the protocol’s health to maintain stability in both positive and negative funding rate environments.

deUSD is integrated with both centralized and decentralized exchanges, where authorized participants, such as market makers, can mint and redeem deUSD in exchange for collateral. Decentralized protocols facilitate trade execution and liquidity provision. ^[1][2][3]

Future Outlook

Elixir plans to expand deUSD's ecosystem onto decentralized platforms, aiming for permissionless minting, decentralized custody, and on-chain trade execution. Integrations with decentralized exchanges like Vertex, dYdX, and BlueFin are expected to broaden deUSD’s role within DeFi. The shift to a fully decentralized model is planned for the near future.

At launch, users can stake deUSD to earn protocol revenue, with additional yield opportunities available through Elixir-powered exchanges. ^[1][4]

Governance and the ELX Token

The ELX token serves as the governance and utility token for the Elixir Network. Following the mainnet launch, ELX holders will be able to vote on governance decisions, including fee distribution across the network. Validators are required to stake ELX tokens, incentivizing them to secure the network. ^[1][2]