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USDR Collateral Model

The foundation of USDR’s value is built on a collateral model that prioritizes risk management and safety at every level. The focus is on leveraging short-term, highly secure assets such as U.S. Treasury Bills through mechanisms like overnight repos, providing a buffer against market volatility, duration risk, and credit exposure. This selection is not made lightly; it involves extensive due diligence to ensure that only the most stable and liquid assets back USDR, thereby creating a safety net that aims to exceed the standards set by its competitors.

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Risk Management Strategy

RWAX Protocol’s risk management strategy for USDR’s collateral includes:

Counterparty Risk Mitigation

By partnering with established and reputable entities for collateralization, the protocol significantly reduces the risk of counterparty failure. Initial partnerships undergo rigorous scrutiny to ensure they meet RWAX’s high standards for financial stability and operational integrity.

Diversification of Assets

Although starting with a single provider, the plan is to diversify the collateral base over time. This diversification will be a community-driven process, with governance token holders having a say in the inclusion of new assets, further spreading the risk across different securities and issuers.

Liquidity Risk Management

USDR ensures that its backing assets are not only secure but also highly liquid. The use of overnight repos and potentially T-Bills as collateral allows for quick conversion into cash or other assets if necessary, minimizing liquidity risk.

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Safety Protocols

  • Elimination of Credit Intermediaries: The collateral strategy removes reliance on intermediary credit, directly linking USDR’s value to government securities that are considered among the safest investments worldwide.

  • Regulatory Compliance: Any collateral provider must operate within a well-defined regulatory framework, which adds an extra layer of safety for USDR holders. Compliance with financial regulations ensures that the collateral is managed with the highest standards of transparency and accountability.

  • Direct Asset Custody: Assets backing USDR are held with top-tier custodians, providing a segregation of assets that protects them from mismanagement or misuse.

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Transparency to Ensure Safety

Transparency is key to maintaining safety in USDR’s operations:

  • Publicly Accessible Asset Data: An oracle system is employed to provide real-time data on the assets backing USDR, allowing anyone to verify the token’s value at any given time.

  • Fee Transparency: The protocol ensures that all fees, from service to redemption, are clearly disclosed, preventing any hidden costs that could compromise the stability of the stablecoin.

  • Smart Contract Audits: By verifying the smart contracts on public blockchain explorers, the community can confirm the integrity of the token’s code, reducing the risk of vulnerabilities.