UZD is a rebase token with a balance that grows in proportion to Zunami Protocol APY
UZD is a rebase token that increases in value in proportion to the APY of the Zunami Protocol. It is over-collateralized by stablecoins allocated in Curve Finance pools and minted using ZLP. UZD is secure from depeg as it can be redeemed with USDT, USDC, or DAI at any time. Users can receive UZD by minting it through the Zunami interface or by swapping it in the Curve.
UZD v1.2 features
With UZD 1.2, it has become a "pool-aware" token, meaning it stops rebasing when it's in a pool but continues when it's outside. CRV, CVX, originally intended for rebasing, are locked or used for bribing instead, while received veCRV and vlCVX are used for voting.
Design of UZD solves stablecoin trilemma
UZD is decentralized as it's collateralized by a variety of stable crypto assets, protected from depeg with its instant redemption mechanism, and highly capital-efficient due to the native APY from the best pools on Curve.
To view the current portfolio of stablecoin pools that are collateralizing UZD, you can visit the "Current Strategies" section on the Zunami application's main page.
UZD is collateralized by stablecoins that are stored in Curve pools, generating income. UZD is also a rebase token, meaning that the quantity of UZD increases in proportion to the income generated by its collateral, equivalent to the APY of Zunami.
While in the Curve pool, UZD's rebase function is disabled, and the rewards in CRV, CVX, and FXS are directed to Zunami's treasury instead of being sold to increase the quantity of UZD. The UZD economy is designed in such a way that the rewards generated are enough to cover the next bribe and maintain pool incentives, creating a self-sustaining cycle where bribes essentially pay for themselves.
The UZD economy model
Let's consider a scenario where the UZD/FRAXBP pool holds $1 million, with 75% in UZD and 25% in FRAXBP, and the Zunami protocol has a 13% APY. Based on these parameters, the pool will generate around $2,062 per week for bribes.
Based on the fee generated from the pool spent on incentives, we can calculate the pool's APR. Using the Emissions / $1 spent from llama airforce, which was 1.42 in the 41st round on Votium. This means that for every $1 spent on incentives, you received $1.42 in CRV emissions. With $2,062 spent on bribes, we can receive $2,908 in CRV emissions per week, resulting in an APR of 13.96%. This impressive performance shows that the UZD/FRAXBP pool provides excellent returns even without additional investments.
The rewards generated by the pool are affected by the proportion of UZD in the pool and the APY of Zunami. Let's examine various scenarios: If the Zunami APY is 7% and the UZD proportion is 80%, the APR will be 7.90%. With a 30% UZD proportion and a 12% APY, the APR will be 6.7%.
Due to the UZD/FraxBP pool's high A parameter (500), the team can maintain a significant UZD proportion without jeopardizing the peg and providing LPs with steady, high returns.