QuiD Protocol
Credit Emission
Lock Crypto & Mint Stablecoins
“QD” is the denomination for QuiDollars; also an acronym meaning "quantity demanded" in economics and quaque die in medicine ("once a day”, i.e. how often anyone checks their balance). The minting of QD by involves the simultaneous emission of non-recourse debt. The debt is a liability that must be fully backed by crypto collateral in case it is never repaid, or ever unbacked. We dub such crypto liens "Pledges".
When their debt becomes under-collateralised, Debtors forfeit their pledged collateral to Creditors who absorb the debt in return, netting a loss because under-backed Pledges' debt is worth more than their collateral. A net gain would result from absorbing a liquidated Pledge having more collateral than debt (see Price Discrimination). Creditors’ deposits prevent this absorption from rendering QD as a whole under-backed.
Now, what drives the demand for QD at all? Debtors generally wish to retain ownership of their collateral, preserving all of its upside potential and limiting their exposure to its downside risk as much as they can, while obtaining a convenient medium of exchange deriving its value from their collateral.
Many Debtors will redeem QD (see Credit Redemption) or sell it on open markets for crypto, then re-pledge their purchase as collateral to draw even more QD debt against, forming a leveraged long loop. Up to 10x leveraged crypto exposure can be obtained this way if borrowing at the system maximum Loan To Value (debt / collateral) ratio of 90%. Leveraged short exposure can be similarly achieved by borrowing crypto against QD as collateral, then selling it for even more QD to re-pledge and repeat.
The leveraged long loop is particularly useful for arbitrage if QD is trading at slightly above $1 on open markets. More dollar’s worth of crypto can be bought there with the same QD which would otherwise be worth less redeemed at face value ($1) by the protocol. This opportunity often occurs when QD becomes momentarily under-backed due to market stress, causing collateral prices to drop, and creating demand to obtain QD for repaying outstanding debts and their associated accrued costs (borrowing is never free, see Credit Protection ). Arbitrageurs run the risk of their gained crypto continuing to fall in value, delaying their chance to buy back QD cheaper than what they sold it at in order to repay their leveraged debt. This same risk is desirable by Debtors willing to short the crypto in order to profit from its potential fall in price.
Last modified 2mo ago
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