LUSD

When it comes to the traditional DEX model, you earn part of the swap fees as an incentive for providing liquidity. Sometimes, the rewards you earned can not cover the impermanent loss. That's why we decided to add another layer of reward for traders, LPs, and community members. This revolutionary approach has a name: LUSD.

LUSD is a special token that acts as Lumnia's method to distribute part of its earnings to users, fully backed by selected stablecoins on Somnia. LUSD has no fixed supply as anyone can mint and redeem it anytime, anywhere.

Unique Features

• LUSD is not pegged but is fully backed by the most trusted stable assets on Somnia

• With a unique mechanism, LUSD's price can not go down, and can not be lower than its collateral's value

• LUSD holds value down to the last holder even when everyone sells out

• The value of LUSD can increase faster after a massive dump

• Anyone can redeem LUSD for stables at any time

• There’s no maximum supply

Collateral Sources

• Users deposit stables at the market rate to mint new LUSD.

• Part of the fees from transactions on Lumnia will be converted to stables and deposited into the collateral to back LUSD. This deposit does not put new LUSD in circulation.

• There is a 1% LUSD redemption fee. The collected fees will go back to the collateral to back LUSD. This will drive the price momentum of LUSD steadily over time.

Mint & Redeem

LUSD can be minted with zero commissions at any time by depositing stables at the current rate via the LUSD UI. Users can redeem the value of their LUSD at any time by depositing their LUSD into our website/contract and receiving stables at the current rate in return.

The LUSD redeemed from users will be removed from the circulating. Redemptions will have a 1% fee attached and will be used for:

• 0.5% to the Collateral

• 0.5% to buyback and burn LUM

Auto-rebasing

When collateral increases, many stablecoins increase the supply to maintain the peg or let it be over-collateralized. And when collateral decreases, many stablecoins have to lower the supply again to maintain the peg. LUSD itself is not a stablecoin. Therefore, there will not be a peg. Every 8 hours, the value of the LUSD is recalculated with the following formula:

LUSD price = Total Collateral Value / Circulating LUSD Supply

All transactions on Lumnia that generate fees combined with the redemption fees will have a portion of their amount converted to stables and deposited into the LUSD collateral. This means that LUSD will now be over-collateralized. So, instead of letting it sit there like that, we will rebase the value of LUSD at the new rate.

In this sense, LUSD is much better compared to other stablecoins.

• Similar to countries appreciating their currencies when their economy is doing better, the better the ecosystem does, the more LUSD can appreciate in value.

• The value growth is collateralized by various stablecoins and part of Lumnia's protocol earnings.