USN is a decentralised stablecoin in the same vein as TerraUSD (UST) and Frax Finance (FRAX), which are both soft-pegged to the US dollar but do not hold dollar cash reserves. In order to mint the USN stablecoin, NEAR tokens—the native cryptocurrency asset of the Near blockchain—must be used as a collateral.
The USN stablecoin effort is being led by an independent team called Decentral Bank, which is organised as a DAO. It is collaborating with Proximity Labs, a DAO contributor.
According to a Proximity spokesperson, USN can be used to effectively bootstrap liquidity for DeFi protocols. Near is home to protocols such as Ref Finance, Burrow, Aurigami, and Bastion, all of which have chosen to integrate the USN stablecoin.
Decentral Bank will pay a 10% annual yield on the USN stablecoin. This minimum yield will be derived from Decentral DAO’s revenue from native NEAR token staking with security validators. According to the team’s Twitter post, this staking process currently earns about 11% return.
Per the DAO, the USN yield will fluctuate based on the NEAR staking percentage and the market value of the tokens, and will likely initially exceed 20% APY for “first lenders” through additional incentives. Notably, the USN yield will begin only after a DAO vote.
The Decentral Bank DAO will have a few stability mechanisms in place to support the USN’s dollar peg. The first is an arbitrage system that will attempt to ensure that the USN stablecoin trades for approximately one dollar in NEAR tokens. The second is a “reserve fund” consisting of NEAR and USDT tokens held by the DAO treasury. It is unclear how much money will be spent on this fund.