What is USC and How does USC work?

USC: The World’s First Scalable Stablecoin Protocol Backed by LSTs

Exploring Rebase LSTs

Rebase LSTs belong to the Liquid Staking Tokens (LSTs) category, where the quantity of tokens held by the owner grows as staking rewards accumulate. Notable examples include Lido's stETH and Stakewise's sETH2. To illustrate, using Lido's stETH as a reference, Ethereum holders engage in staking their ETH through the Lido protocol, receiving stETH tokens in exchange, which mirrors the value of their staked ETH. As staking rewards accumulate, the stETH balance expands proportionally, a phenomenon called "rebasing."

Minting USC with ETH and LSTs

Chi Protocol allows users to mint USC, a capital-efficient stablecoin with intrinsic yield at a 100% collateral ratio, using ETH or rebase LSTs as collateral. Chi Protocol only accepts stETH and ETH; however, governance will consider adding other rebase, non rebase and non-custodial LSTs as collateral.

The minting process for USC consists of 2 stages.

  1. Deposit: Users deposit ETH or stETH, which are then sent to the reserves of USC. If ETH is deposited, that is automatically converted into stETH via Lido.

  2. Mint: With a collateral ratio of 100%, users can mint USC with their collateral assets with no minting costs

ETH Buffer

A small percentage of the ETH deposited into Chi Protocol is kept unstaked. This helps to facilitate redemptions from the arbitrage contract when the price of USC is below 1 USD, and the protocol has excess reserves.

Stake USC & Earn

USC holders can stake USC to earn additional USC, stCHI, and stETH. Holders can also provide liquidity in the USC/ETH liquidity pool on Uniswap and earn stCHI incentives on top of trading fees. Furthermore, USC/ETH LPs can stake their position in Chi Protocol to earn stCHI and stETH, and also participate in DSO to buy discounted CHI tokens while earning boosted trading fees on their positions.

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