Overview of Q DAO Stablecoin Ecosystem
Cryptocurrencies offer a wide range of benefits for users around the world. However, high volatility in their prices prevents mass adoption. Users are not willing to trade in digital assets that might experience huge price changes in just a couple of minutes. Even the most popular coins, such as Bitcoin and Ethereum, aren’t able to deliver stability with price movements for up 20% being a usual occurrence.
At the Q DAO Platform, users can generate various stablecoins, currently USDQ and KRWQ are available. USDQ uses Bitcoin as its collateral, i.e. in order to create USDQ users need to lock up their Bitcoins in a smart contract. The stablecoin’s price is pegged to United States Dollar. Stablecoins are seen as an important enabler, paving the path toward mass adoption of DLT-powered digital currencies. In contrast to other stablecoins on the market, USDQ is fully decentralized with all of its components residing on top of the blockchain. The KRWQ (and other stablecoins, planned to be launched in the future) act in the similar way, but are pegged to their specific fiats (KRW for KRWQ). In order to simplify the description, we are referring below only to USDQ, but the reader should understand that the same always applies to all other stablecoins, such as currently available (KRWQ) and planned (CNYQ, JPYQ and others).
Any person can purchase and sell USDQ via exchanges, brokers or OTC deals. It’s an ERC20 token and brings a convenient ease of transfer without any limitations of any kind. USDQ holders can earn additional profits, receiving the Savings Rate, accruing on their holdings.
Q DAO is a blockchain platform, integrated with Ethereum smart contracts. It provides a number of enablers for sustainability of the generated stablecoins, such as CDPs (collateralized debt positions), automated price adjustment processes with feedback mechanisms, as well as a system of incentives for external actors.
The stablecoins (USDQ, KRWQ and others) can be generated by any person who has Bitcoins at their disposal. Subsequently, these ERC-20 tokens can easily fulfill a wide range of functions, acting similar to other cryptocurrencies. Among the biggest use cases are cross-border value transfers, payments for goods and services to accepting businesses, as well as long-term savings. Additionally, the stablecoin generation system sets the foundation for a highly convenient and robust margin trading platform.
Collateralized Debt Position Smart Contracts
Any person can use Collateral Assets in order to create USDQ at Q DAO Platform. They do this by interacting with a special smart contract, identified as “Collateralized Debt Position”. The Q DAO Governance, made up by holders of the Q DAO governance token, is charged with making decisions on Collateral Assets, allowed for the use.
CDPs are simultaneously used to mint USDQ and accrue the debt. The user can withdraw the Collateral Assets at any time upon repayment of the USDQ amount, equal to the loan originally received. CDPs implement the “excessive collateralization” principle, assuring that the debt value never exceeds the value of the Collateral Assets. The technique enables CDPs to dampen a negative impact from sudden price movements for the Collateral Assets.
Process for CDP Operations
- Stage 1: CDP Creation
The user registers at Q DAO Platform. The user needs to specify only the email, so that the ecosystem can furnish notifications on important events. In this way, we assure a high level of anonymity. The user receives the wallet and 3 private keys (private key to user’s BTC wallet, private key to our network and private key to Ether network (with the last key provided optionally)), used to access various functions within the ecosystem.
- Stage 2: CDP Activation
The user transfers a required amount in BTC to their BTC wallet within the Q DAO Platform. Then, the user sets the desired parameters for the loan to be obtained.
- Stage 3: USDQ Generation
The ecosystem checks the availability of the required amount of the collateralized assets (for instance, Bitcoins, which the user has previously collateralized within the system). Upon a successful completion of the verification, the ecosystem mints the respective amount of USDQ and furnishes the same to the user’s wallet. Now the user can utilize the received stablecoin as he wishes.
- Stage 4: Equilibrating Collateral
Subsequently, the user can adjust the collateral depending on the changes to the collateral price. Should the collateral’s price go down, the user must add up the collateral or repay a portion of the USDQ-denominated loan. If the user fails to take any action, the ecosystem will perform the forced liquidation process. Should the collateral’s price go up, the user can increase the USDQ-denominated loan amount, withdraw a portion of the collateral or avoid taking any action at all.
- Stage 5: Withdrawal
The user furnishes a request to the ecosystem for the funds withdrawal. The user should repay to the ecosystem the earlier received USDQ-denominated loan and the Stability Fee, which accrues throughout the loan term and payable in Q DAO token. The user utilizes the private key in order to sign the transaction, enabling the user to get the collateral assets back to his wallet.
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