What is USN: the NEAR-native stablecoin

USN is a fast, scalable and cheap stablecoin hoping to improve NEAR Protocol’s usability

A stack of white coins with the NEAR logo                                 
Decentral Bank said USN holders will earn a minimum of 11% APR – Photo: Shutterstock
                                

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Cryptocurrency investors have the luxury of multiple stablecoins to choose from. USN is a new stablecoin being built on the NEAR network with a mission to drive more usability on the network.

But USN is far behind other implemented stablecoins, with it going live in late April 2022. It still has a lot to prove investors that its stablecoin is both functional and hacker-proof.  

What is USN?

Terra was one of the first to demonstrate how stablecoins can drive demand for a network. USN is hoping to do the same for the NEAR protocol, with the stablecoin designed to improve liquidity and usability on the blockchain.

Having only launched on 25 April 2022, USN is still testing the waters in this market. The coin is “soft-pegged” to the US dollar, meaning its price equals $1 without holding any dollar cash reserves.

USN is hoping to be a fast, cheap and stable cryptocurrency that can be utilised by NEAR Protocol users. The NEAR network, which claims to be “the world’s first certified climate-neutral blockchain” was designed as a community-run blockchain with usability at its core. It has since claimed to have developed solutions to the problems facing blockchains today, mainly low transaction speeds, high costs, and poor interoperability.

NEAR’s stablecoin was launched by Decentral Bank DAO, a new decentralised organisation. Members of the DAO will be able to vote on staking rewards, integration of USN, and other aspects.

The announcement of USN comes a week after BEAN, another stablecoin avoiding US dollar reserves, saw $76m of its funds drained in an attack. NEAR’s new stablecoin says it has done enough to secure its future from a similar attack.

How does USN work?

USN coin combines a number of different techniques to stabilise the cryptocurrency. It firstly uses an arbitrage smart contract that allows for the exchange of NEAR and USN. This tries to ensure that USN trades for a dollar’s worth of NEAR tokens. Arbitrageurs can exploit the price difference when USN loses its peg, helping it return to a $1 value.

The stablecoin is also backed by a reserve fund, which is currently double-collateralised. The collateralization is designed to automatically back USN with a fund that is constantly greater than 100% of all USN. This means in extreme cases the DAO can buy back all USN and stabilise the price.

Decentral Bank also launched the stablecoin with a USDT and USN pool on Ref Finance, to offer even more stabilisation of the asset.

How to mint USN?

Despite only launching recently, there are multiple ways for investors to get their hands on the new NEAR stablecoin. Users are able to turn their NEAR coins into the USN cryptocurrency by using a smart contract with the stablecoin’s address.

Third party NEAR-enabled wallets, including Sender Wallet, have started accepting swaps to USN as well. Finally, the NEAR exchange Ref Finance has allowed users to swap between USN and other assets.

For those wondering what is USN coin used for, there are benefits to holding the stablecoin. The DAO can vote to stake its NEAR reserve fund, giving USN holders automatic earnings. A recent Twitter post from Decentral Bank said the minimum earnings represent a 11% annual percentage yield.

USN’s competitor

NEAR is not the only established network to launch a new stablecoin. Justin Sun, founder of the Tron blockchain, announced Tron would launch the USDD on 5 May 2022. Sun wrote in an open letter: “TRON DAO joined hands with major blockchain players to launch USDD (Decentralized USD), the most decentralized stablecoin in human history, making finance accessible to all by applying mathematics and algorithms.”

USDD will function very similarly to USN. Instead of NEAR, USDD uses TRX and allows arbitrageurs to be rewarded for maintaining the $1 value of its stablecoin.

Sun’s letter gave an example: “When USDD's price is lower than 1 USD, users and arbitrageurs can send 1 USDD to the system and receive 1 USD worth of TRX.”

Both of the two stablecoins are incredibly new to the market and therefore hard to judge. But at the end of the day, USN was designed to funnel more liquidity into the NEAR Protocol and subsequently drive adoption of the ecosystem, just like Terra.

The future of USN

Decentral Bank has revealed its plans for both the short and long term future of the USN cryptocurrency. It wrote on a blog post: “In the near future, users can expect $USN to be integrated on CEXs as well as other chains.”

The next steps will be implementing the stablecoin into the protocol, so users can pay gas and storage fees in USN. This will drive more utility for the cryptocurrency.

The Motley Fool believes that USN coin could drive success on the NEAR Protocol and come close to Terra. It wrote: “NEAR is about a third the size of Terra by market cap. It will take a long time and a lot of adoption for it to become the next Terra.

“But with the pending launch of its USN coin, NEAR seems to be taking the first steps on this path. Even if it doesn’t eclipse Terra, there is still a lot of room for upside between where it is now and where Terra sits.”

FAQs

Decentral Bank is yet to release specific details on USN’s current supply. But the whitepaper noted: “The system adjusts the supply of USN in response to changes in demand to keep its price stable.”

USN was created by Decentral Bank DAO, a decentralised organisation pushing for more usability on the NEAR Protocol.

USN is pegged to a dollar through arbitrage. Instead of using cash reserves, a smart contract allows traders to maintain the $1 price of USN using the NEAR cryptocurrency.

Holders of USN can also gain passive income from the stablecoin when voters decide to stake its reserved supply of NEAR.

Further reading

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