USDA: Argo's Stablecoin
USDA is a dollar-pegged stablecoin over-collateralized by yield-earning tokens deposited into Argo. USDA is valued at $1.00 when used for borrowing and repaying on Argo. USDA can be used like any other stablecoin.
When a user opens a vault and borrows, USDA gets minted and sent to the user's wallet. Argo then charges an interest rate on USDA debt, based on the type of yield-earning asset engine. When USDA debt is repaid, the initial loan amount of USDA is burned, and the accrued interest is paid to the protocol treasury.
Maintaining USDA's Peg
While USDA is always valued at $1.00 on Argo, it can trade off-peg in secondary markets. Three arbitrage scenarios exist, each with its own arbitrage opportunity to help bring the price back to peg:
- If USDA < $1.00, users who have USDA debt can buy it at a discount and repay their loans on Argo at a lower cost. This purchase will help increase USDA's price.
- If USDA > $1.00, users can borrow USDA from Argo and sell it for other stablecoins, securing a profit. This supply increase will help lower USDA's price.
- If USDA's price differs on two markets (e.g. if $1.01 on one and $0.99 on another) - users can buy it on the cheaper market and sell it on the pricier market. This will help balance peg across markets.
Since USDA's utility depends significantly on its liquidity, we plan to partner with leading AMMs/DEXs to list USDA pairs with other stablecoins and cryptoassets.