Discount Stablecoins

Stablecoins that appreciate in value

Discount stablecoins track the value of real-world assets and indexes, e.g. USD, BTC, gold, etc. Unlike other stablecoins, they are expected to trade with a discount relative to their benchmark asset/index. As it gets closer to the expiry, the discount decreases, therefore stablecoins appreciate.
Discount Stablecoins are different things to different investors
To earn interest on your BTC
  • Buy BTC_20200701 stablecoin. It trades below 1 BTC now but is supposed to appreciate towards 1 BTC closer to the expiry date - July 1, 2020.
  • Hold it.
  • Sell it before the expiry date.
BTC_20200701 is traded vs BTC on Cryptox exchange.
To earn interest on your BTC
To take a leveraged long position in GBYTE
To take a leveraged long position in GBYTE
  • Borrow BTC_20200701 stablecoin on this website by locking GBYTE as collateral.
  • Sell BTC_20200701 for GBYTE. Now you have exposure both to GBYTE in the collateral and GBYTE you received from the sale of stablecoins.
  • Wait for GBYTE to appreciate.
  • Close the position by buying BTC_20200701 back from the market.
  • Repay the loan to release the collateral.
BTC_20200701 is traded vs GBYTE on ODEX decentralized exchange and Oswap automated market maker.
To trade one asset/index against another asset/index
e.g. gold vs USD, gold vs silver, S&P500 vs USD, etc
  • Borrow a stablecoin tracking the asset/index you want to short.
  • Sell it for another stablecoin tracking the asset/index you want to take a long position in.
  • Wait for the desired price movement.
  • Close the position by buying stablecoin 1 back for stablecoin 2.
  • Repay the loan to release the collateral.
Various stablecoins are traded on ODEX decentralized exchange and Oswap automated market maker.
To trade one asset/index against another asset/index
F.A.Q.

When stablecoins appreciate, where is the money coming from?

From traders. Traders borrow stablecoins when they are worth less and repay their loans later when stablecoins are worth slightly more. They have to pay the difference for using the borrowed money while holders of stablecoins earn the same difference.

How do I get stablecoins?

Depending on your investment strategy, buy them on an exchange or issue new stablecoins on this website.

How are stablecoins issued?

Stablecoins are issued as debt against GBYTE collateral when a trader borrows them on this website. The collateral is larger than the value of the stablecoins issued (usually 150%) to ensure that the debt is properly secured.

Do I need to issue stablecoins in order to benefit from their appreciation?

No. Issuing is for traders who try to make money from price movements of GBYTE against USD, GBYTE against BTC, gold against USD, etc. To benefit from stablecoin appreciation, buy stablecoins on an exchange.

How do I sell/redeem stablecoins?

Sell them on an exchange or, if you hold a loan, repay it on this website.

Where are stablecoins traded?

Stablecoins are traded on:

What makes stablecoins pegged to their benchmark?

They have limited lifetime and after the expiry date they can be exchanged for GBYTE exactly at the exchange rate registered on that date. Their price on any earlier date is “pulled” to traders’ expectations about the asset’s price on the expiry date. This is exactly the same mechanism that determines the prices of futures contracts.

What are these numbers like 20200701 in stablecoin names?

It is their expiry dates. Every stablecoin has two distinct periods in its lifetime: before expiry and after expiry.

Before the expiry date, stablecoins are issued when borrowed against GBYTE collateral and destroyed when the debt is repaid. They are also freely traded between users (e.g. on ODEX decentralized exchange).

After expiry, every stablecoin has guaranteed liquidity vs GBYTE, exactly at the exchange rate of the benchmark asset/index registered on the expiry date. This is what makes it pegged to the price of the asset/index it is tracking.

What happens if I don’t sell stablecoins before the expiry date?

You can still sell them on this website but the exchange rate vs GBYTE is as it was on the expiry date. That is, your stablecoins stop being stable relative to their original benchmark (USD, BTC, …) and become stable relative to GBYTE.

What are the risks?

Stablecoins may lose their value under some circumstances.

Normally, stablecoins are issued against collateral that is worth much more (typically, 50% more) than the value of the stablecoins issued. If the collateral depreciates, the borrowers normally have enough time to refill the collateral to keep the stablecoins properly collateralized. They have good incentives to do so because if their collateralization ratio drops below certain minimum, their loan is put on auction and the borrower may lose part of its value. However, if the price of collateral drops too much too fast, the borrowers and auction participants might not have enough time to adapt and the whole system becomes undercollateralized. In such cases, the value of stablecoins might drop to reflect the value of the underlying collateral.

As an investor, you need to take these risks into account and expect a higher return compared with risk-free investments.

How are discount stablecoins different from DAI, USDT, USDC, etc?

Discount stablecoins appreciate, while the other ones don’t.

Discount stablecoins are an investment instrument in the first place, while every other stablecoin is a payment medium.

What leverage can I get when taking a long position in GBYTE?

It depends on the parameters of the stablecoin you trade and the current discount. Assuming that overcollateralization ratio is 150% and ignoring discount, you can lock $150 worth of GBYTE collateral to borrow $100 worth of stablecoins, then sell the stablecoins for $100 worth of GBYTE. Your net investment is worth $50 ($150 minus $100 proceeds of the sale of stablecoins) while exposure is $150 worth of GBYTE locked as collateral. That is, the leverage is 3:1 ($150/$50). This is the maximum leverage you can get with 150% overcollateralization, actual leverage is less due to discount, slippage, and trading fees.

What happens if a loan becomes undercollateralized?

It is put on auction. Auction participants bid to add more collateral to bring it back to a healthy collateralization ratio, and the one who offers the largest additional collateral wins the auction. The loan is assigned to the winner while the former borrower loses the right to repay the loan and reclaim the collateral which is still worth more than the loan value.

I want to trade a stablecoin pegged to asset X but it doesn’t exist

If an oracle that posts the price of X already exists, you can create the corresponding stablecoin right away!

If there is no such oracle yet — create the oracle. You have to be a developer though. There are sources of example oracle to help you get started. If you are not a developer and cannot hire one, signal your demand in Obyte discord.