USDQ stablecoins
The concept of pooling , in this case, , is the first step towards understanding how the Q DAO ecosystem works. Users that want to have USDQ stablecoins will first have to pool and reserve their first so that USDQ are issued. So, by definition, no USDQ can be issued without it being collateralized and backed against existing crypto.
The entire Q DAO ecosystem is run by a smart contract. The contract determines if at any point is necessary to liquidate reserves it will do it to stabilize the USDQ at exactly $1 always. The actions taken by the smart contract system are also determined by the community of Q DAO holders. The main governance for the Q DAO and the USDQ frameworks.
USDQ is an ERC20 and can be stored on any ERC20-compatible , like MyEtherWallet or Mist. Users can now trade USDQ and Q DAO on BTCNext.io, a popular crypto exchange. It’s convenient that all pairs at BTCNext.io will be listed with USDQ as the basis currency.
The following scenarios have been run and analyzed to predict the performance of USDQ and how it would react along with its entire framework and security protections. Can the USDQ hold its peg? Let’s find out.
Let’s assume how USDQ would act if it was around before. For this, we will analyze the price of which had a reduction in price towards the last quarter of 2018 and beginning of 2019.
Looking at the beginning of November through mid-December we first find the price dropping from approximately $6300 to around $3200 or lower in some exchanges.
At this time what would happen is that the collateralized positions, known as CDCs will auto-liquidate. This basically means they are quickly sold to the highest bidder on internal auctions available to Q DAO holders. Logically the supply of USDQ would see a reduction.
What would happen next is that enough demand for USDQ will surge to become higher than the supply. Making the USDQ price potentially fluctuate above its target price of $1.
Q DAO holders can use their stake to raise more cryptos to create USDQ stable coins and recover the supply. The holders could perform a vote to change something called the stabilization fee which is the interest charged to the CDCs. In short, this would be an attempt to make it cheaper to create CDCs and more USDQ.
The governance framework for Q DAO holders can use incentives such as changing the stabilization fee to motivate more demand for CDCs. The relation between the demand for USDQ stable coins and demand for CDCs results in a user surge, as Q DAO holders are restrained by market forces from charging excessive fees.
The USDQ stable coin and the Q DAO framework is a legitimate system based on transparency that allows a different more trustworthy stable asset to coexist in a completely decentralized ecosystem.
USDQ supply is meant to always scale along with demand for CDCs.
Also the Q DAO voting system to change the stabilization fund is a highly effective system to stabilize the price of USDQ however it is important to have a rate of participants per each vote. The percentage may vary but it should be around 10% or more of the circulating supply of Q DAO .
If USDQ would ever trade at less than $1 for a long period of time it would make the price of CDCs to go down. This could be beneficial for some parties but it would compromise the brand of USDQ and future growth, so, therefore, it is important for its peg to maintain and not allow negative rates.
The interaction between the demand for USDQ and for CDCs results in an excedent of users, for example, Q DAO holders will be plenty and they would be restrained from charging excessive fees.
Additional challenges for the future could be including Oracles, on-chain governance that would not require its smart contract and finding better collateral options.
Published at Wed, 15 May 2019 07:17:39 +0000
