Open Dollar Token Launch and Feature Highlights
Now is the time to elect your Open Dollar delegates! Today, eligible users can claim their ODG tokens, marking a significant milestone for Open Dollar as it establishes DAO governance functions ahead of its Mainnet launch next month. Know an ideal candidate? Be sure to contact and nominate them on Tally!
This article dives deeper into the main features of Open Dollar, how it works, and what makes it special.
Non-Fungible Vaults
Open Dollar’s Non-Fungible Vaults (NFVs) are a new primitive in DeFi & unique to the Open Dollar protocol. Unlike Collateralized Debt Positions (CDPs) on other platforms where ownership is tied to an account, NFVs link ownership of the position to unique NFTs for each vault. This feature gives users the freedom to transfer, sell, or trade their position at any time, even without repaying the underlying outstanding loan.
NFV Features and Benefits
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Liquidity: NFVs make CDPs transferable and liquid, allowing trading in the open market.
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Capital Efficiency: NFVs can be sold to avoid liquidation or to access the remaining value of the collateral versus the outstanding loan.
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Compatibility: NFVs are compatible with all blockchain wallets and NFT marketplaces that support ERC-721.
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Dynamic display images: NFVs show the current status, health, collateral, and debt of the vault with time-stamped updates.
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Wallet Management: Users can monitor and manage their CDPs independently from the protocol's interface.
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Composability: Facilitates easy batch transfers and cross-chain compatibility.
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Security Benefits: Integrates into compliance and escrow services for enhanced protection against bad actors.
NFVs simply give users more freedom, safety, and control over their assets than ordinary CDPs. Users would never take out a 30-year mortgage on a home if they could never sell it until you paid it off, why does borrowing against your LSTs have to be any different?
The Open Dollar Stablecoin
OD is Open Dollar’s robust and over-collateralized stablecoin backed by LSTs. OD’s $1.00 floating peg is maintained by the protocol’s algorithm which adjusts its redemption rate by repricing debt and incentivizing vault managers to take actions that restore its value.
How does this work & how can you take advantage of these incentives?
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OD’s market price deviates above $1.00
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OD’s market price deviates below $1.00
If market conditions cause the value of OD on exchanges to rise above $1.00 (ex. $1.02) the protocol adjusts the redemption price downward.
In this scenario, OD becomes cheaper inside the protocol compared to the market & borrowing power against deposited collateral increases. Vault managers can borrow more OD, effectively at a discounted rate, and sell it at the higher current market price on exchanges to take advantage of this arbitrage opportunity for a roughly 2% gain. Once sufficient amounts of OD are sold to return prices to $1.00, the protocol returns the redemption price to normal again.
This also works in reverse for scenarios where sell demand exceeds buying pressure on exchanges, which could cause OD to drop below the $1.00 (ex. $0.98).
The protocol would adjust the redemption rate in the opposite direction and users are incentivized to buy OD from the market at the discounted rate to repay their outstanding loans before the price returns to normal. This action would net the difference between the purchase price of OD and the reduction of the outstanding loan for each OD repaid, or roughly 2% in this example.
Features
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Stable: OD uses a dynamic control system called a PID controller, which continuously adjusts the redemption rate to maintain its $1.00 floating peg.
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Over-Collateralized: Every OD minted in circulation is backed by an excess of high-quality collateral value, serving as a buffer against extreme market turbulence.
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Transparent: OD’s minting, backing, redemption, and supply are fully transparent and governed by the protocol.
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Flexible: OD can be redeemed for different collateral than what the user originally deposited in the protocol.
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Arbitrage: When OD's market price deviates from its $1.00 peg, the system's adjustments create arbitrage opportunities to restore it.
In addition to competitively low borrowing rates of 2% APR or less and minimal-governance, Open Dollar is ready to set a new standard for leveraging LST assets with safety and predictability.
Learn more about NFVs
Learn more about the OD stablecoin
Open Dollar is a DeFi lending protocol built on Arbitrum for borrowing against liquid staking tokens while earning staking rewards and providing CDP liquidity with Non-Fungible Vaults (NFVs).
Try the Open Dollar App today and follow Open Dollar on socials.