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title: USN - tl;dr
tags: [tldr, content]

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# USN - tl;dr

Hello and welcome to tldr with me, Ben

Today we will be covering USN, the new stablecoin hosted on NEAR. 

What is it?

How does it work?

Does USN stand for Ur So Nice?
- awww you're so sweet you're gonna give me a cavity.

Now before we get started, I am *not* a financial advisor! Not even a little bit.
<!-- it's true! Ben is NOT a financial advisor. -->

This is an educational (edutainment?) series focused on the technology that makes blockchain work.
<!-- He once thought a spreadsheet was used for making a bed -->

I don't offer financial advice, make price predictions, or anything of that nature.



## Overview
Stablecoins are cryptocurrencies that are designed to be, well... stable  relative to other cryptocurrencies like Bitcoin. They are typically "pegged" to another asset like the Dollar or EURO which is held in reserve as collateral.
<!-- check out the tl;dr on stablecoins -->

$USN is a stablecoin on NEAR protocol issued into cirulation and managed by a DAO called Decentral Bank.
<!-- If you don't know what a DAO is, look out for our TL;DR on DAOs! -->


$USN is a semi-algorithmic, "double-collatoralized," stablecoin with an on-chain arbitrage mechanism backed by $NEAR, as well as $USDT.


## What Does This Mean?

The initial supply of $USN has a 2:1 backing from $NEAR and $USDT.
- this means the Decentral Bank always holds more $NEAR and $USDT in its reserves than $USN in circulation, making it an "over-collateralised" stablecoin.

The treasury is partially managed by a smart contract that automatically buys or sells $NEAR when it perceives a market imbalance.

All of this works to ensure that one $USN will always be minted for 1 dollar worth of $NEAR.


## How Does This Work?

$USN maintains its peg in several ways:

First there is **on-chain arbitrage**.
- The $USN smart contract allows the exchange of $NEAR and $USN with zero slippage and minimal commissions. 
- So if $USN drops to 99 cents, it can still be exchanged for 1 full dollar's worth of $NEAR.
- And if $USN becomes worth _more_ than 1 dollar then it could be sold on one of the many exchanges for a potential profit.
    
Second, a self-balancing **Reserve Fund** guarantees that more than 100% of the value of issued $USN is backed in reserve at any given time.
- Self-balancing means the treasury is managed in part by a smart contract that automatically buys or sells $NEAR or USDT when it percieves an imbalance.
- So, in theory, the Decentral Bank could buy back all issued $USN tokens in a worst case scenario, and still have something leftover in reserve.

Third, Ref Finance Stable Swap Pools.
- Decentral Bank has seeded a USN / USDT stable swap pool on Ref.finance(ref.finance) at launch time offering additional stabilization of $USN in the open market. 
- In the future, $USN can be supported by more stablecoins as it grows in adoption. 


## USN vs other Stablecoins

Some key points that differentiate $USN from other stablecoins: 

1. $USN is overcollateralized from day 1, so even if everyone cashes out at the same time, there are more than enough assets to back it.
2. No new $NEAR tokens are generated or burned to support the minting of $USN.
3. The Reserve Fund is 100% on-chain, which means greater transparency.
4. Any $NEAR used in minting $USN is staked by Decentral Bank and used to over-collateralize the $USN in circulation.


## Possibilities

### What value does $USN bring to the NEAR ecosystem? 

- stability
    - $USN brings a stable medium of exchange natively to NEAR
    - more stability means greater trust
- lower barrier to liquidity 
    - you can convert your $NEAR to a stablecoin without leaving the network, which significantly reduces transaction costs.
- lower barrier for participation 
    - You don't need to do any math or google an exchange rate to know that $5 USN equals $5 US Dollars,
    -  making it easier for everyday users to participate in the crypto economy. 



## Conclusions

$USN is still in the early stages of its growth.
Right now $USDT is the only **stablecoin** backing $USN.
There are plans to further over-collaterise USN by adding more assets to the reserve which should help strengthen its durability and credibility.


Thanks for watching this episode of tldr.
Let us know what you think!
And until next time, I'll see you on-chain.

###### tags: `tldr` `content`