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DocumentationStabilizersUSPD Stabilizers

USPD Stabilizers

Stabilizers are the backbone of the USPD ecosystem, providing the essential overcollateralization that ensures USPD maintains its 1:1 peg to the US Dollar. This document provides a high-level overview of how stabilizers work and their role in the system.

What is a Stabilizer?

A stabilizer position is represented by a Stabilizer NFT (an ERC721 token). Owning one of these NFTs allows you to provide stETH collateral to the USPD system, participate in the stabilization process, and earn rewards.

For a detailed technical explanation of the entire process, from minting an NFT to capital allocation, please refer to the full system documentation.

View USPD Architecture

How Stabilizers Work

Key Concepts

  1. Overcollateralization: Every USPD token is backed by more than its value in stETH. To avoid liquidation, a Stabilizer’s position must remain above the liquidation threshold, which is at minimum 125%.

  2. Priority System: Stabilizers are utilized for new USPD mints based on their NFT ID, with lower IDs having priority for capital allocation.

  3. Hierarchical Liquidation Rights: The right to liquidate an undercollateralized position is granted to other Stabilizer NFT owners. The threshold at which they can act depends on their own NFT ID. The owner of Stabilizer NFT #1 can initiate a liquidation if another position falls below 125%, the owner of NFT #2 can act at 124.5%, and so on. This creates a hierarchy of enforcement within the system.

Collateralization Process

When a user mints USPD, they provide ETH as the base collateral. The system then taps into the available Stabilizer capital, allocating additional stETH from one or more Stabilizers to ensure the new USPD is overcollateralized above the required threshold.

Become a Stabilizer

Anyone can become a stabilizer by minting a Stabilizer NFT. This is a permissionless process that allows you to participate directly in securing the USPD ecosystem.

Mint a Stabilizer NFT

Risk and Rewards

Rewards

  • Potential to earn fees from providing stability to the system.
  • Ability to extract excess collateral as the price of ETH rises, creating leveraged opportunities.
  • Right to liquidate other undercollateralized positions and earn a reward.

Risks

  • Your position can be liquidated if its collateralization ratio falls below the 125% threshold.
  • Exposure to market volatility and the price of ETH.
Contracts and DeploymentsAdding Collateral