XUSD, in its current form, is a precursor (technical preview) of the Babelfish stablecoin aggregator. Its purpose is to act as a "trustless stablecoin translation device" - meaning it facilitates the conversion of multiple USD-pegged stablecoins with each other at a fixed 1:1 ratio. This functionality is already partly operational using Sovryn's ETH and BSC bridges, where users can convert many stablecoins from ETH and BSC blockchains to Sovryn XUSD on the RSK chain.
The list of convertible stablecoins:
Today XUSD already has its advantages and use cases, which will be improved further over time as Sovryn, alongside Babelfish, continue to realize its vision - a multi-chain, aggregated "liquidity lake," coordinated via decentralized futarchy governance.
Learn more about Babelfish and the vision of XUSD here.
Reduce risk - Currently, the two largest USD-pegged stablecoins by market cap - USDT and USDC - account for ~80% of the USD stablecoin market. Moreover, USDT is responsible for ~88% of daily trading volume (as of the time of writing - 20 June 2021). Along with this impressive market dominance comes systemic risks; put simply, if one of the top stablecoins is compromised, whole marketplaces and platforms (like Sovryn) could be affected severely. By pooling liquidity from multiple networks and approved providers, the potential impact of one stablecoin being compromised is reduced.
Deepen liquidity - Before XUSD, Sovryn exclusively used rUSDT as the stablecoin of choice for the platform. This worked very well and operated as expected, providing a secure USD-pegged token for users to trade with on Sovryn, as well as improving awareness of the RSK ecosystem and its role in DeFi on Bitcoin. However, using only one stablecoin limited the potential liquidity that could flow into Sovryn. By using XUSD, more liquidity can be injected from multiple chains and providers, allowing users more options to bring liquidity onto Sovryn and increasing the platform's total liquidity. The key to using this newfound liquidity is the aggregation of XUSD. Had Sovryn began accepting and creating new AMM pools for each new stablecoin on the platform, liquidity would be spread thin over those many pools, leading to high slippage and failure of functionality in closing margin and lending positions. By aggregating multiple incoming stablecoins into one token, only one new AMM pool (XUSD-BTC) needed to be created, resulting in far deeper stablecoin liquidity on Sovryn, again leading to lower slippage and healthier trading tool functionality.
Ease of use - XUSD allows users to bridge multiple stablecoins (DAI, USDT, USDC, BUSD) from the Ethereum and Binance Smart Chain networks to XUSD, for use in the Sovryn ecosystem. It also allows users to bridge their stablecoins OUT of Sovryn with just as much ease through the ETH bridge, or the BSC bridge. Want to provide liquidity from BUSD on BSC and exit into DAI on ETH? No big deal! Want to take profits into USDC on BSC and USDT on ETH? Done! All you need to do is engage the Sovryn bridge and make it happen.