2020 has seen an explosion of stablecoins on Ethereum, with nearly $20B in liquidity. The most significant narrative around stablecoin growth on Ethereum has been yield-returning stablecoins like yUSD, algorithmic stablecoins like ESD, and risk-insured stablecoins like mUSD.
DefiDollar aspires to be “a risk-insured stablecoin layer for DeFi” by providing a new stablecoin DUSD, that holds the dollar peg while returning yield. The basket approach diversifies the risk and allows more types of collateral to be onboarded and allows integration with yield generating DeFi primitives. DefiDollar claims the built-in protocol mechanisms along with arbitrage helps keep the peg close to $1.
DUSD is conveniently minted with yUSD, yCRV, DAI, USDT, USDC and TUSD, which are all very liquid, battle-tested stablecoins and yield-returning stablecoins.
The Interest Bearing DefiDollar (ibDUSD) — A simple savings account
DefiDollar has a simple to understand yield-earning mechanism to enable ibDUSD as a powerful savings account built on top of the DefiDollar protocol.
After minting or buying DUSD, one can deposit DUSD in exchange for ibDUSD. ibDUSD aims to be an interest bearing token that gets stronger as protocol accrues income.
The protocol rewards accumulate on the DUSD LP thanks to the following earnings::
- Trading fees generated on the Curve pools (referring to yCRV)
- The yield from the yUSD Peak
- DUSD redemption fee — 0.1%
- The ibDUSD redemption fee — 0.5%
While your ibDUSD earns a share of the DUSD and ibDUSD redemption fees, it’s worth highlighting one will likely eventually pay those same exit/redemption fees. Keep in mind, the 0.5% redemption fee is used to guard against malicious actors trying to frontrun the rewards by deploying capital to the ibDUSD just before rewards are claimed periodically. It is similar to the exit fee in yVaults.
How to Earn 45-55% APY with ibDUSD
First, one must acquire DUSD by either minting it or trading for it. Depending on gas costs, I find trading for DUSD normlaly costs less gas, but if one has a larger amount of liquidity that could be impacted by slippage, then minting DUSD makes sense.
1 – Go to a DEX aggregator like Zapper Exchange to swap for DUSD.
2 – Alternatively, if one prefers minting DUSD, go to the DefiDollar app (Mint) and choose which of the tokens you’d like to deposit (yUSD, yCRV, DAI, USDC, USDT, USDT). It will require 2 transactions (Approve + Deposit).
3 – Then, click over to the Savings tab to deposit DUSD for ibDUSD.
4 – Specify how much of your DUSD to deposit and click Deposit.
That’s it! The yield one earns will accrue to your ibDUSD. Whenever one is ready to exit the ibDUSD position in the future, just return to this Savings tab and use the Withdraw option to get back to DUSD and then use the Redeem option to exit DUSD back to one of the underlying tokens.
The key takeaway is DefiDollar offers a newer, simpler option with ibDUSD to earn yield on stablecoins without taking outsized risk found in other yield farming setups.
BONUS: I just interviewed the DefiDollar team on Yield TV if you’re interested to learn from doing a live screenshare.
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Hi! My name is Lark Davis!
I’m a cryptocurrency investor with years of experience and I’ve been making consistent profits in the crypto space.
I’m passionate about helping others do the same, so I run multiple educational channels on crypto investing.
