Explore OUSD - Stablecoin that Earns Yield on the Fly

Explore OUSD - Stablecoin that Earns Yield on the Fly

By Brawnd0 | CryptoLetter | 26 Oct 2020


Origin Protocol is a cryptocurrency project that is designed to enable real peer-to-peer commerce. Their ethos is simple - remove the middle-man and cut down on fees. 

Currently, the entire commerce industry is run through intermediaries. Want to list something on eBay? Pay the listing fee. Are you calling an Uber? Pay the Uber fee on top of paying the driver (who deserves the payment). Additionally, it is easy to have your eBay account of Uber profile revoked if you don’t agree to their Terms of Service.

However, the project recently launched another stablecoin asset to complement their entire protocol - OUSD. It's a token that combines characteristics of $AMPL, $YFI & $USDT. Let's see how one token achieves that!

1. What is OUSD?

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OUSD is a stablecoin asset released by the Origin Protocol in September 2020 that automatically earns a yield for holders that keep it in their wallets. 

Currently, holders of OUSD can earn an APY (annual percentage yield) that varies around 7-9% just by holding OUSD. Unlike other interest-yielding defi assets, there is no need to stake OUSD or lock it.

Furthermore, rewards are instantly converted to OUSD and sent straight to your balance to be auto-compounded. 

The entire idea of OUSD is to allow holders to take part in the entire DeFi lending/farming ecosystem without having to conduct the complicated process of continuously hunting for the best yield and locking funds into a protocol AND at the same time being able to hold a stable asset. I

2. How OUSD is minted? 

OUSD is totally backed on a 1:1 basis by other stablecoins. Users convert their USDT, USDC, or DAI into OUSD, and it can be instantly redeemed at any time on the Origin Dollar Dapp. It is important to note that there is a 0.5% exit fee to redeem your underlying asset (USDC, USDT, or DAI), and this fee is distributed to the remaining participants in the pool.

If you are purchasing small amounts of OUSD - say, maybe $50 - it’s probably better for you to just buy it on an exchange such as Uniswap as you will still be earning the 7.14%. In the following tutorial, I will be buying around 100 OUSD directly from the dApp, locking my own funds. It is important to note that even with buying $100 on the dApp, there will be a varying transaction fee depending on the network congestion - but I’ll take it for the sake of the tutorial.

On the other hand, for larger purchases, it most certainly best to mint the OUSD yourself. 

Let me quickly run through how to do this with you. Before we start, you will need either USDT, USDC, or DAI to swap to OUSD. You can get these on your favorite centralized exchange (Binance, Coinbase, etc.) or even just head to Uniswap to get them. You will also need to have a MetaMask wallet set-up.

Firstly, we need to head to the OUSD dashboard and Connect our wallet to the dApp;

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After hitting “Connect,” you will be asked which wallet you want to connect with. For this tutorial, we will be using MetaMask;

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Next, a separate MetaMask wallet will pop-up asking you to confirm that you would like to connect your MetaMask to the OUSD dApp. Simply hit “Connect” - there are no transaction fees involved in this;

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Once connected, you will be directed to the OUSD dApp to swap our stablecoins for OUSD. You can see that there are three stablecoins to choose from, USDT, USDC, and DAI;

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In my wallet, I have 50 DAI and 50 USDC. They were automatically recognized with the maximum amount inserted into the search field. I will be using both of these to get near to 100 OUSD. However, you can use only one if you want. 

After selecting the stablecoins you wish to use and entering the amount of OUSD you wish to buy - simply hit “Buy Now” to make the purchase. The platform will show you an estimated amount of OUSD you will receive - in this case, I will get almost 100 OUSD from my 50 DAI and 50 USDC;

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After hitting “Buy Now,” a window will pop up, asking you to grant permission for the dApp to use your DAI and USDC. You have to click “Approve” for both of these cases (or whichever stablecoins you are using to buy OUSD with);

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After hitting ‘approve’ for each Stablecoin, a MetaMask window will pop up, asking you to confirm that you want to permit the dApp to use the coins. Hit “Confirm” in both of these cases. Note: There is a transaction fee involved with this;

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Once the transaction has been mined, the window will change to the following;

Side note: the fee for approval might be lower if you do it with just one token

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There will be green check marks next to the stablecoins you are using.

Important! The fees on Ethereum network were very high the day I started to write this article. The part below has been done around 46 hours later, hence the significant change of APY on my dashboard. 

All we have to do now is click “Buy OUSD.” As usual, a MetaMask window will pop up, asking you to confirm the transaction.

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Once the transaction has been confirmed, the OUSD will be in your wallet;

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That’s it! You now have your OUSD in the wallet.

3. How OUSD Generates Yield?

Now that we have OUSD sitting in the wallet, I am sure you wonder how it even generates a yield?

Ultimately, there are three different methods that OUSD generates a yield with. These are; Lending, Market Making, and Rewards.

Lending
OUSD is integrated with leading platforms such as Compound, Aave, and dYdX. Users that lend funds to these lending protocols they earn interest. The OUSD smart contract will be lending the underlying asset (DAI, USDC, and USDT) to these lending protocols as part of the strategy to earn a yield.

Market Making
OUSD is also integrated with automated market makers (AMMs) such as Uniswap, Curve, and Balancer. When users deposit liquidity into these protocols, they earn from the fees when swaps are conducted through their deposits.

As OUSD would be lending your stablecoins, there is no worry about impermanent loss. 

The OUSD protocol routes the USDT, USDC, and DAI to highly-performing liquidity pools and passes the OUSD holders’ earnings in the form of a yield. 

Rewards
When depositing liquidity into the AMMs and lending platforms mentioned above, the AMM protocols and lending platforms also distribute rewards to users as an additional incentive. For example, Compound provides $COMP, Balancer provides $BAL, and Curve gives $CRV.

These reward tokens are automatically converted into stablecoins to be re-deployed into the yield-strategies. The yield earned from these rewards is then distributed to OUSD holders.

4. How OUSD is different from Ampleforth?

OUSD took the concept of an elastic supply from Ampleforth and tweaked it in a way that there is no such thing as negative rebase. For those who don't know, with Ampleforth, every 24hours an even of rebasing occurs and if the price of an AMPL falls below $0.96 per token, the amount of AMPLs in your wallet will be reduced. 

OUSD should never rebase negatively. 

This is because that OUSD is backed 100% by stablecoins, and rebasing should only occur when the amount of OUSD minted is tied to the realized gains earned by the underlying strategies. As the OUSD protocol gains from earning through Lending/AMMs/Rewards, the protocol will positively adjust the money supply. 

In addition to this, AMPL only rebases once per day. Conversely, OUSD is frequently being rebased in real-time as yield is generated.


Brawnd0
Brawnd0

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