Runs on Radix Q&A: EtherealDAO | The Radix Blog | Radix DLT
Rolled out in June 2023, the ‘Runs on Radix‘ program enables dApps to effectively showcase the benefits of operating within the Radix ecosystem. This entails an improved user experience, applications strengthened by the Radix Engine, and a scalable network poised for extensive adoption. The introduction of ‘Runs on Radix’ received robust support from the Radix developer community, with over 45 projects expressing keen interest within just a month of its launch.
Radix Publishing will speak with many participants over the coming months, providing the Radix community with a comprehensive guide to each project.
Here are some key things you need to know about EtherealDAO: A revolutionary project attempting to bring stability back to stablecoins.
- EtherealDAO, with its innovative peg-keeping mechanism & Integrated Automatic Arbitrage, attempts to revolutionize the way in which the peg of a stablecoin is kept.
What is EtherealDAO?
The purpose of EtherealDAO is to ensure the upkeep of the EUSD synthetic token. In Zygo’s own words, he describes EtherealDAO:
“Not only do you get stability via a composable token that can be used in DeFi, but the project itself is meant to stabilize people. It’s meant to create a structure of organization within the community that will allow it to thrive more than it would without any guardrails.”
In addition to EtherealDAO, the EtherealDEX module will also play a crucial role in ensuring the full vision of the project is fulfilled by housing both the TriPool and Automatically Arbitraged EUX Pool.
You might be wondering, what problem does this exactly solve? According to Zygo, EtherealDAO is here to stop Decentralized Crypto Backed Overcollateralized Stablecoins (DCBOS) being de-pegged.
DCBOS are stablecoins that are over collateralized, meaning that the assets that back them are worth more than the coin itself.
For example, $1,000 worth of Ether may be held in reserve to collateralize the $500 value of a cryptocurrency-backed stablecoin. Whilst it gives a certain level of assurance that they’re of value and therefore stable, it comes with the risk of liquidation of collateral if markets are volatile. Although the DCBOS aims for stability, the collateral assets are still subject to market fluctuations. If the collateral’s value drops significantly, it could trigger liquidation, affecting both borrowers and lenders.
Furthermore, an intrinsic limitation of DCBOS is that they have to be overcollateralized, which reduces the available liquidity in the system and making it less capital efficient than for example a fiat-backed stablecoin (although that comes with its own set of tradeoffs such as lack of decentralization).
Zygo had this to say on the peg-keeping mechanism:
“The peg-keeping mechanism makes the ECDP owners aligned with the monetary policy of EUSD, by forcing issuance of stablecoins when the demand for them rises.
It does so by adding, to the EtherealDEX, with certain guards in the process, the ability to mint directly from user positions by adding collateral to them when the price goes outside of the peg band. This triggers the Automatic Arbitrage, either a burn or a mint from the least/most collateralized position.”
Zygo explains that this is a novel technique iterated upon the inventions of previous projects; he is keen to continue innovating in this field and push beyond the “glass ceiling” of current DeFi ability.
The Story Behind EtherealDAO
Currently, Zygo is the sole founder of EtherealDAO. He became interested in Web3 & DeFi at a young age but had no means to enter the market. After securing a job as a smart contract developer on Cardano a few years later, they took more of an active role within the DeFi ecosystem. They mentioned:
“Building is what makes me happy, and anything that stands in my way is unnecessary – And Radix makes the least amount of things stand in my way.”
According to the EtherealDAO website, the team gives further reasons as to why they began building on Radix:
”Radix is an extremely promising distributed ledger technology which, after several years of development, is now poised to become a leader in the cryptocurrency space. Its special focus on addressing the specific challenges of interoperability, scalability, and user-friendliness — for both builders and end users alike — has created an exciting prospect for decentralized finance and its mainstream adoption. This emerging ecosystem is a natural fit for an ambitious stablecoin project like EtherealUSD, and we are eager to leverage its innovative features.”
You can watch the full interview with EtherealDAO below:
All information about EtherealDAO was provided by the EtherealDAO team and has not been verified by Radix Publishing, RDX Works, or their associated companies.