Tokenomics

The Tokenomics for xUSD is relatively simple. The token is borrowed from a vault by a user creating a CDP using a supported crypto type as collateral. The user is then able to use the token as they see fit. Some options include:

• Pairing xUSD with an ASA on a decentralized exchange (dex) to generate swap fees.

• Staking in an xUSD staking contract

• Gaining leverage on your position by selling your minted xUSD into your collateral asset, placing that asset in your vault, minting more xUSD and continuing this loop.

• Swapping to USDC and pulling your debt off chain for use in trad-fi

When the time comes to close a CDP, the debt can simply be repaid to the protocol and the backing collateral is released back to the users wallet.

Users don't have to mint xUSD to use it, however. Much of the xUSD supply lives on dexes across the Algorand ecosystems, this facilitates buying and selling of xUSD, which in turn determines the price of the token. If too many users have opted to sell xUSD in a short period of time, either from leveraging or buying into a trading pair on a dex, the protocol enters a situation in which there's too much xUSD floating around on the market. This causes the value of the token to deviate from the ideal $1.00 peg, usually to a lower price

Losing the peg is not desirable for a stable-coin, as people are using it due to it's ability to maintain its value. To deal with this issue the xUSD protocol has measures in place to ensure that as time passes, the price of xUSD will return to the peg at $1.00.