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USDU & Earn

What is USDU?​

USDU is Uncap's USD-pegged stablecoin, overcollateralized by WBTC and other Bitcoin-derived assets. It maintains its peg through redemption mechanisms and market-driven interest rate adjustments.

What advantages does USDU offer over other stablecoins?​

  • Bitcoin-native backing: Uses only BTC-derived assets as collateral
  • Guaranteed redemption: Always redeemable for underlying assets at $1 value
  • Built-in liquidity incentives: Protocol Incentivized Liquidity ensures sufficient trading liquidity

How does USDU maintain its peg?​

Uncap's market-driven approach through user-set interest rates enables dynamic peg responses:

When USDU trades above $1, borrowers tend to lower rates due to reduced redemption risk, making borrowing more attractive and holding less appealing, helping correct the price downward.

When USDU trades below $1, arbitrageurs initiate redemptions to restore the peg. Meanwhile, borrowers face increased redemption risk and raise rates, boosting USDU demand and supporting upward price movement.

How USDU maintains its peg

How can I earn with Uncap?​

  • Stability Pool deposits: Earn protocol revenue by depositing USDU into various Stability Pools
  • Protocol Incentivized Liquidity: Supply liquidity for USDU on incentivized external DEXes

What generates the yield for Stability Pool participants?​

Yield comes from two sources:

  • Interest payments: 75% of each collateral market's revenue flows to its Stability Pool depositors, paid in USDU
  • Liquidation gains: Your USDU purchases collateral from under-collateralized loans at approximately 5% discount, paid in Bitcoin

All yield is sustainable, scalable, and "real" - generated without token emissions or lockup requirements.

Is there a lockup period for Stability Pool deposits?​

No lockup periods apply. You can withdraw USDU deposits whenever desired.

What yield can I expect from Stability Pool deposits?​

Yield reflects the rates borrowers pay, since 75% of borrower interest flows to Stability Pool participants. The effective yield can exceed the average borrowing rate when less than 75% of USDU supply sits in the respective Stability Pool.

This yield amplification distinguishes Uncap from traditional money markets where lending rates cannot exceed borrowing rates.

Why does Uncap use multiple Stability Pools?​

Multiple pools serve several purposes:

  • Create separate collateral markets for different collateral assets with independent market-driven rates, using Stability Pool backing to dynamically allocate redemptions across available collaterals
  • Compartmentalize risks by giving depositors control over collateral exposure in liquidation scenarios

How do risks differ across Stability Pools?​

Users can select Stability Pools based on their risk preferences and comfort level with specific collateral types. By choosing pools associated with particular collaterals, participants can customize their risk exposure and potential return profiles.

This compartmentalization helps manage systemic risk, preventing liquidations in one asset class from disproportionately affecting the entire ecosystem.

Note that all USDU holders, including depositors, remain exposed to overall peg maintenance risk across all collaterals.