Equilibrium, a multi-chain framework for building asset-backed stablecoins and decentralized finance (DeFi) products, has used its own capital to establish the cryptocurrency industry’s first Stability Fund. Worth 6.5 million EOS (approximately $17.5 million), the fund aims to provide users with an insurance buffer to protect against market volatility.
Equilibrium, a multi-chain framework for building asset-backed stablecoins and decentralized finance (DeFi) products, has used its own capital to establish the cryptocurrency industry’s first Stability Fund. Worth 6.5 million EOS (approximately $17.5 million), the fund aims to provide users with an insurance buffer to protect against market volatility.
The Stability Fund’s 6.5 million EOS coins are locked in separate, discrete smart contracts that are activated in the event of volatile market swings that may otherwise lead to system insolvency. The fund is triggered when the total value of EOS collateral falls below the collateralization threshold of 100 percent and can no longer adequately back the existing EOSDT in circulation. EOSDT is a U.S. Dollar-pegged stablecoin that was launched as the first Equilibrium product, and serves as the framework’s base layer stablecoin.
“We have established the Stability Fund with our own assets as an affirmation of our commitment to EOSDT,” says, Equilibrium CEO, Alex Melikhov. “This fund provides an additional layer of security and fully aligns our interests with our owners – we have skin in the game.”
For Equilibrium, establishing this fund is one of the first steps towards significantly reducing collateral requirements without compromising system stability. With collateralization reduced from 170 percent to 130 percent as a result of the fund’s launch and recent technology updates, EOSDT now has amongst the lowest collateral requirements in the industry when compared against required ratios for other projects: MakerDAO’s 150 percent, Synthetix’s 750 percent, and BitUSD’s 200 percent.
The smart contract algorithm will automatically restore the entire EOSDT collateral level to 100 percent and there will be no penalty for under collateralized positions. These smart contracts have already passed a security audit by EOS block producer EOS 42, the pioneer of EOS mainnet security and can be viewed online: Contract one, contract two, contract three.
The development of on-chain liquidation, combined with an insurance system that provides liquidity to undercollateralized positions, will allow for additional reductions in collateralization requirements to 120 percent. This will make generating EOSDT an even more powerful mechanism for leveraging EOS, as the Stability Fund translates immediately into a significant decrease in the collateral to debt ratio. This gives position holders access to further liquidity.
“There are very real benefits and flexibility for users which should be a catalyst for the further development of EOSDT,” Melikhov continued. “The Stability Fund will significantly reduce collateralization requirements. This creates additional opportunities for leverage and will consolidate EOSDT’s reputation as reliable collateral of digital assets.
Equilibrium is a framework that lets the community generate assets pegged to multiple currencies against liquid crypto collateral, and develop DeFi applications on top of it. The EOSDT stablecoin currently holds more than 4.5 million collateralized EOS worth roughly $12.5 million. This makes it the biggest EOS-based decentralized application (dApp) in terms of EOS balance. EOSDT users have generated over 4.4 million EOSDT stablecoins since launch, accruing 0.55% profits on their collateral.
