eUSD: A STABLECOIN MADE TO LAST
eUSD: A STABLECOINMADE TO LAST
Asset Composition
Security Mechanism:
To provide an additional layer of security, eUSD employs a security mechanism through the staking of RSR (Reserve Rights). This token acts as a safety net in case of a drop in the value of the collateral assets. Staked RSR is used to cover any potential losses from such situations, ensuring that eUSD holders have additional protection.
To know more about eUSD visit Reserve's Register
A Real-World Example: USDC Depeg in March 2023
The collateralization mechanism sounds great, right? It seems impossible for a stablecoin to lose its value—after all, that's where the name stable comes from, I guess.
Mmm… well, that's not exactly true.
Just like the traditional financial system has insurance mechanisms, such as FDIC coverage for cases where banks cannot cover user deposits, stablecoins can also experience depegging from the USD.
That's why eUSD has an additional layer of security provided by RSR stakers, who step in to cover losses in collateral and ensure a 1:1 peg with the USD.
Let's take a real example of how this mechanism works:
• During the collapse of Silicon Valley Bank (SVB) in March 2023, USDC temporarily lost its peg to the U.S. dollar, dropping below $0.90. This event caused widespread concern in the financial markets.
• The over-collateralization mechanism of RSR proved its resilience during this crisis. While USDC's value fluctuated, RSR staking helped absorb potential losses, ensuring that eUSD remained fully backed and stable.
• As a result, eUSD users experienced uninterrupted trust and security, even in the face of significant market volatility.
Rewards for RSR Stakers
RSR stakers play a vital role in maintaining the stability of eUSD. In return for providing this critical safety net, stakers receive yields generated by the investments in Compound and Aave, creating a sustainable model that benefits all participants.
With its robust backing, transparent operations, and innovative risk management, eUSD stands as a reliable and resilient stablecoin, capable of weathering the most challenging financial conditions while prioritizing user confidence and security.
