Equilibrium 101: EQD Stablecoin
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Last Updated on June 1st, 2023
EQD was originally designed to accept EQ as collateral. This was later changed and thus EQD can not be minted using EQ as collateral.
Here is the list of assets currently accepted as collateral:
DOT, eqDOT, USDT, xDOT, cDOT, GLMR, ASTR, INTR, IBTC, ETH, USDC, PARA, GLMR
What is EQD?
Equilibrium’s USD-pegged stablecoin, EQD, functions as a unit of value within the DeFi ecosystem. Within Equilibrium is a stablecoin protocol that uses a portfolio of assets and interoperable modules to derive value presented as a stablecoin pegged to the dollar. EQD offers numerous earning opportunities through its extensive connections with other networks, such as Kusama through Genshiro.
The mechanics behind EQD
EQD is a portfolio-collateral backed stablecoin, with a 1:1 peg to USD. Incentives, risk management, and balancing supply and demand within our stablecoin protocol contribute to the EQD value pegged to the dollar, and our on-chain risk management system and bailout mechanism ensure accurate derivation of the EQD value from set parameters. This results in a stablecoin being backed 100% by liquid digital collateral with excess.
EQD goes into circulation as a decentralized stablecoin when consumers provide different assets as collateral on Equilibrium and mint it.
Each position maintains its related EQD debt besides the collateral assets placed by the user who opened the position that generated the EQD tokens. Until the linked EQD debt is repaid, the collateral assets inside the position remain locked, users are able to withdraw any excess collateral above the initial margin level. Active positions are always over-collateralized, with the value of the collateral exceeding the debt’s value.
Over-collateralizing reserve assets enable users to acquire positions or borrowed EQD. You may collateralize (lock) $100 in ETH and receive $50 in EQD. The Equilibrium protocol then hedges against price changes, using the 2x collateral-to-value ratio.
EQD: The Features
EQD allows Equilibrium users to earn via liquidity provision and market maker pools, which feature incentive programs.
EQD remains the quote currency in all market maker trading.
Market makers also earn volume rewards if they generate over 5% of trading volume on the exchange.
All trading on the Equilibrium DEX is through the EQD stablecoin. When purchasing cryptocurrencies on margin, users who do not have EQD in their possession may trade by shorting EQD. If a user deposits 1 ETH as collateral, they can purchase BTC and end up with 1 ETH, 0.1 BTC, and -1000 EQD on their account (given BTC trades at 10K).
Additional EQD advantages include:
- EQD use cases extend beyond Equilibrium into Genshiro, our Kusama-based canary network, and Epsilon, an official Curve implementation running on Substrate. Its extensive use in three platforms gives EQD a growth advantage, impacting its overall value.
- Like all stablecoins, EQD is immune to the volatile crypto market through over-collateralization and dollar pegging. Moreover, it can be minted against a well-diversified portfolio of assets, greatly reducing your collateral risk and leading to a lowering of your interest fees.
- Its potential demand makes EQD an ideal cryptocurrency for growing user crypto portfolios.
- EQD acts as a routing asset into Kusama and Epsilon for more cryptocurrency growth opportunities.
Stay tuned for more educational content in our Equilibrium 101 series!
About Equilibrium
Equilibrium is a one-stop DeFi platform on Polkadot that allows for high leverage in trading and borrowing digital assets. It combines a full-fledged money market with an orderbook-based DEX. EQ is the native utility token that is used for communal governance of Equilibrium. xDOT is a liquid and tradeable wrapped DOT that unlocks liquidity of DOT locked in parachain auctions and delivers multiple crowdloan bonuses on Polkadot.
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