5.5 Stability Mechanism of USO: Integration of Diversified Mortgage and Algorithmic Regulation
As a stablecoin anchored to the US dollar, USO's stability mechanism breaks through the traditional model of "single excess collateral", and achieves a balance of "risk resistance and flexibility" through the hybrid collateral pool of "cryptocurrency + fiat stablecoin + real asset (RWA) " and dynamic algorithm adjustment.
Underlying Support for Diversified Mortgage Pools
The issuance of USO is strictly based on the principle of "collateral value ≥ total issuance". The mortgage pool is composed of three types of assets, forming a "stable triangle" of risk diversification:
Cryptocurrences (40% -60%): including mainstream assets such as BTC, ETH, BNB, etc., with high liquidity and market acceptance, as an "elastic buffer" for mortgage pools;
Fiat currency stablecoins (20% -40%): including USDT, USDC, etc., with stable value but subject to compliance audit, as the "foundation anchor" of the mortgage pool;
Real assets (RWA, 10% -20%): including off-chain assets such as gold and government bonds (represented by on-chain certificates issued by compliance institutions), which are inflation-resistant and have low correlation with the crypto market, and serve as "anti-cyclical protection" for mortgage pools. The proportion of mortgage pool assets is not fixed and can be adjusted through community proposals (such as increasing the proportion of cryptocurrencies in bull markets to improve capital efficiency, and increasing the proportion of RWA in bear markets to enhance risk resistance).
Dynamic Mortgage Rate and Risk Pricing System
In order to avoid "insufficient collateral due to the collapse of a single asset", the USO introduced a "dynamic collateral rate" mechanism, which adjusts collateral requirements in real time according to the risk level of the asset:
Risk factor assignment: based on asset volatility, liquidity depth, and market acceptance, a risk factor is assigned to each type of collateral (e.g. BTC 0.8, ETH 0.7, small cap token 0.3, RWA 0.9).
·Collateral rate calculation: USO can be minted quantity = collateral value × risk factor. For example, if a user collateralizes $1,000 BTC (risk factor 0.8), up to 800 USO can be minted, ensuring that the collateral value always covers the debt;
·Real-time adjustment: The system monitors the price of collateral and risk indicators every hour through the on-chain oracle. When the volatility of a certain type of asset increases (e.g. ETH falls by more than 10% in a single day), its risk factor is automatically reduced (e.g. from 0.7 to 0.6). Users need to replenish collateral or redeem part of the USO, otherwise liquidation will be triggered.
Algorithm-driven clearing and redemption mechanism
When the value of the collateral is lower than 110% of the total amount of USO issued (safety threshold) due to market fluctuations, the system automatically starts the liquidation process to protect the rights and interests of USO holders:
·Early warning stage: When the mortgage rate drops to 110% -120%, the system sends an on-chain reminder to the user, allowing the collateral to be replenished within 24 hours (such as adding BTC or USDT).
· Liquidation stage: When the mortgage rate is lower than 110%, a "Dutch auction" is triggered - the system lists the collateral at "initial price = market price of the collateral × 1.1", and the price is reduced by 5% every 10 minutes until it is redeemed by the user with USO (the redeemed USO is directly destroyed);
·Excess collateral protection: After the liquidation is completed, if the collateral auction proceeds are still insufficient to cover the debt, the difference will be made up by the "USO Risk Reserve" (drawn from the minting fee, accounting for 2%), ensuring that the USO is always anchored to the US dollar 1:1 and has no redemption risk.
Algorithmic Adjustment on Price Deviation
When the USO market price briefly deviates from $1 (such as $0.95-1), the system guides the price regression through algorithmic adjustment without human intervention:
USO premium (market price > $1.05): increase the USO casting limit, encourage users to mortgage assets to cast USO and sell arbitrage in the market until the price falls back;
USO discount (market price < $0.95): Start "repurchase and destroy" - use the fiat stablecoin of the USO treasury to buy back USO at the market price and destroy it, reduce the liquidity to push up the price; at the same time increase the USO pledge yield (e.g. from 3% to 5%) to attract users to hold rather than sell.
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