Rose Dollar (RUSD) is a USD-pegged stablecoin that intends to become a leading stablecoin in the Near-Aurora ecosystem and beyond.
Inspired by Abracadabra, RUSD will work similarly to Magic Internet Money (MIM). The process goes as follows:
A user holds some form of token in their wallet that may or may not be interest-bearing, meaning they accumulate some form of value. A common example of this are yvTokens, which are proof-of-deposit tokens; that is, the user has deposited a certain token in a Yearn Finance Vault which executes a bespoke strategy to maximize the user's number of yvTOKENS. Unlike regular tokens on Aurora such as PAD or NEAR, there is no way of further utilizing these types of tokens. Rose wants to change that.
Enter the lending mechanism. Now, a user can put these tokens to use by taking a loan against them.
That's it! Now, the user can use the RUSD for whatever purpose they want. A popular strategy is to take that RUSD and reinvest it into the strategy that gave them the interest-bearing token they just used to take the loan. This can be done numerous times and is called a "looping" strategy, which may amplify the user's gains.
Note that lending for RUSD does notonly support interest-bearing tokens. The lending market for
RUSD can theoretically have any token as collateral.
This lending model also allows for fixed interest rates that are not subject to high market volatility. To learn more about this lending model (Kashi lending & isolated risk markets) and its advantages, see here.
Our goal is to support high-quality, liquid assets that you know and love, for instance, autocompounding positions, LP tokens, money market lending tokens, and even NFTs, so stay tuned!
If you have any suggestions for new assets to have as collateral on our platform, do not hesitate to let us know on our Twitter, Discord, and Telegram!
How will RUSD hold its Peg?
The Rose protocol will always consider RUSD to be equal to 1 USD. The lending mechanism incentivizes arbitrageurs to keep RUSD as close to the 1 USD peg as possible. For example:
Users that hold RUSD-denominated debt which was taken from Rose might notice that RUSD is trading on some market below 1 USD and decide to buy some RUSD at this discount to repay some, or all, of their debt. That means that this trader saved money on their RUSD loan. Through this process of purchasing RUSD on the secondary market, the price of RUSD is pressured upwards and back towards 1 USD.
Users that hold components (valid collateral), might notice that RUSD is trading on some market above 1 USD and decide to open a loan position on Rose. They then sell the borrowed RUSD for another stablecoin, which is akin to short-selling. Here, the trader makes a quick profit as the price of RUSD goes back to the peg of 1 USD. Their mere transaction will induce price-lowering pressure on RUSD back towards 1 USD.
Users that hold other tokens and cryptocurrencies might see RUSD trading differently in two different markets and decide to buy RUSD in one market where the price is below 1USD and sell in another where the price is either at 1USD or above. This can also happen in reverse.
In most cases, a lot of the market-to-market arbitrage is done by automated bots that constantly monitor pools for opportunities to capitalize on these price differences. This has the benefit of having price pegs corrected quite rapidly. This, though, can also be applied to the first two strategies outlined above.