About USX

What is LSR?

LSR is short for “Liquid Stability Reserve”. dForce community has approved the implementation of LSR as per DIP027, serving the purpose of further stabilizing the peg of USX, improving capital efficiency.

How does the LSR work?

The LSR enables users to 1:1 mint and redeem USX for USDC, USDT, and DAI.

LSR is a stability module of USX, allowing users to use USDC, USDT, and DAI to 1:1 mint USX and redeem for reserve stablecoins. Reserve stablecoins will be automatically supplied to dForce Lending, which can be lent out to earn interest - this mechanism ensures that USX minted through the LSR module are always over-collateralized.

Users should treat the LSR as a stable swap, which keeps buying and selling USX exactly the same amount in USDC, USDT, and DAI. Having that said, there is no guarantee you can redeem USX back to the same stablecoin you used to mint USX, because anyone can use the LSR to trade USX against different stablecoins, including those who minted USX from dForce Lending or dForce Vaults.

But all USX outstanding are always over-collateralized.

How much do you charge for using LSR?

We do not charge any fee for the minting and redeeming of USX through LSR.

How much USX can I mint?

The LSR module implements a Debt Ceiling for each reserve stablecoin, representing the maximum amount of USX that can be minted using the selected stablecoin as collateral (please note it may vary on different networks).

Can I redeem USX for the same reserve stablecoin?

Redeeming USX via LSR will be subject to the availability of Reserves (total liquidity supplied to dForce Lending) and Liquidity (total liquidity - some stablecoin supplied might by utilised by the lending protocol).

That being said, there is no guarantee that you can redeem USX for the same stablecoin you used to mint USX. But you can redeem for other stablecoins as long as there is adequate liquidity. Alternatively, you can bridge USX to other networks with sufficient liquidity or sell/buy USX in a DEX (may incur slippage).

This mechanism will make arbitrage super efficient (i.e. sell USX for other stablecoins when the price is higher than $1, and vice versa), which can help USX restore its peg in the shortest possible time.

Why stable reserves don’t match the USX’s circulating supply? Is USX fully collateralized?

Yes, USX is always fully collateralized. There are 3 ways to mint USX on dForce:

  • Supply collateral assets with Collateral Ratio > 100% to mint (borrow) USX on dForce Lending;

  • Supply collateral assets with Collateral Ratio > 100% to mint (borrow) USX on dForce Vaults;

  • Use other stablecoins to 1:1 mint USX via the LSR module.

In many cases, users who mint (borrow) USX from dForce Lending or dForce Vaults, may redeem USX for other stablecoins through the LSR module directly to facilitate different trading/investment strategies, which shall also consume the LSR stablecoin reserves.

But these transactions doesn’t impact the over-collateralization of USX.

How can I redeem my USX when stable reserves in LSR are dried up?

You can always sell USX for other stablecoins on the open market!

We have also partnered with multiple DEXes on different L1/L2 chains to further improve USX’s liquidity. dForce Trade provides you the updated information on DEXes supporting USX swaps.

About dForce Lending

Is it safe to use dForce?

Security is at the top of our priorities. We are taking extensive measures to ensure risk management is implemented on multiple levels:

  • We engaged the world's best audit firms for security audits and formal verifications for dForce protocols, including Trail of Bits, ConsenSys Diligence, Quantstamp, Certik, Certora, PeckShield, SlowMist, SECBIT. Click here to view full reports.

  • We launched a Bug Bounty program on Immunefi to encourage security researchers, white hats, community’s participation in identifying potential vulnerabilities in dForce protocols and receive bounty rewards.

  • We perform risk assessments in accordance with dForce Risk Framework for each asset supported.

  • We collaborate with decentralized insurance platforms to provide covers for dForce users to further hedge smart contract risks.

However, users should note ‌the DeFi industry is still in its nascency, and assume no platform is 100% secure from risks associated, including smart contract vulnerabilities and liquidation risk in highly volatile market conditions.

How do you charge fees for using dForce Lending?

  • When supplying assets: free

  • Loan origination: free

However, a small fee will be charged from interest spread (borrowing interest minus saving interest) to fund the interest reserve, which can be utilized to buy back DF from secondary market or redistribute as bonus to DF holders (subject to governance decision).

Click here to view reserve factor (interest reserve) for each asset.

Where are my crypto assets stored?

dForce Lending is a decentralized money market protocol utilizing smart contracts to facilitate crypto lending. Only users have access to and full control over their funds and we do not hold your asset – this is how decentralized finance works. Please make sure to keep you private key safe as we are unable to retrieve your private keys, access your account, reset your password or reverse transactions. It would be extremely upsetting if you lost your private key as you will permanently lose access to your fund.

Can I withdraw my fund at any time?

In most cases, instant withdrawal is supported. However, deposit must be of greater value than loan demand of the same asset so that investors can withdraw fund at any time (adequate liquidity), that is to say, total availabilities of funds for withdrawal is subject to the size of liquidity pool (total supply minus total borrow), which is decided by Utilization Ratio of the asset. The higher the Utilization Ratio, the higher the supply rate / borrowing rate.

In extreme events of liquidity drain, where the utilization ratio is close to 100% and interest rates are pushed to above market level, investors will be incentivized to supply assets into the protocol for attractive investment returns, and borrowers will have to repay some loans to avoid liquidation of collaterals, which will bring liquidity back to normal level.

Can I pay off or refinance my loans at any time?

Yes. Investors can refinance or pay off your loans (in portion or in full) at any time. Interest will be calculated through the block of loan termination (calculated on block basis).

Can I supply and borrow simultaneously?

Yes. But please also note supply and borrowing are exclusive choices to the same asset. This means, users can supply one type of asset as collateral and take out loan(s) of different assets. For example, users can supply WETH as collateral to take out a USDT loan, but the same user (address) has to pay off outstanding USDT loans before depositing USDT to earn interest.

Is there any investment thresholds?

No. Anyone can participate with the same level of access, independent from your location, credit score, student loan status, or net worth, without validation of a centralized counterparty.

How is interest calculated?

Interest rates will be algorithmically calculated based on market demands (yields-providing) and supply of assets (asset-providing) in every block (approximately 13 seconds on Ethereum and 3 seconds on Binance Smart Chain).

Who pays out interests to asset suppliers?

When an investor supplies a selected crypto asset to dForce Lending, collected funds will be placed into a global lending pool, where borrowers can borrow directly from the pool and pay interest for it. Interests will be distributed to all investors of the same asset on a pro rata basis.

Can you elaborate on the gap between saving rate and borrow rate?

Total Supply*Saving APR+Reserve=Total Borrowing*Borrowing APR 

On dForce Lending, we charge no fees for providing assets or borrowing from the global pool. However, a small fee will be collected from interest spread (borrowing interest minus saving interest) as Reserve, which produces disparity between supply APR and borrowing APR. Accrued fees in Reserve will be utilized to provide additional safeguards to protocol users in extreme events, and facilitate buyback and burning of DF, or redistribute to DF holders as a bonus, subject to governance decision.

How do you source price feeds?

dForce Lending has integrated with ChainLink oracle (and Pyth oracle for Conflux network) to secure price feeds for a variety of crypto assets, which offers a higher level of decentralization and reliability for our users across the dForce network.

Can I participate in the governance of dForce?

Yes, we welcome more participations from DF token holders in the governance process. DF token holders can propose and vote to collectively decide on proposed protocol changes, including onboarding of new assets, supporting of new collateral, and deciding on supply/borrow cap of each asset.

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