All You Need to Know about the $WUSD Collateral Mechanism
The word “collateral” basically means something of value given as a guarantee to obtain something else.
As far as you may already know, $WUSD is the crypto-collateralized stablecoin, backed by WorkQuest Token ($WQT), $WUSD is pegged against the U.S. dollar and allows users to employ a basket of crypto-assets as a reserve.
But how does the token collaterazation work when it comes to $WUSD generated through the DeFi products of the WorkQuest Platform?
Any user can issue $WUSD in any of the collateral pools and further use the tokens in a savings product, pension program, lending or borrowing, insurance, payment for work on the platform, etc. The release of $WUSD is regulated by smart contracts.
Any funds that you will earn on the platform have nothing to do with your collateral of previously issued $WUSD, they will simply be deposited to your wallet. Users will also be able to burn $WUSD and return the collaterals at any time.
$WUSD can be backed by ETH, BNB, WQT for 150% — 200% and USDT, USDC for 102% — 105%. Any user will be able to choose the percentage of collateral, bring collateral and issue a $WUSD stablecoin to pay for work on the platform or use it in other DeFi functionality on the WorkQuest platform.
What happens in case of a sharp market crash?
At WorkQuest we have developed a mechanism to quickly notify the users if the additional collateral is needed to protect users from losses.
If nevertheless, the moment of liquidation of the collateral comes, then part of the collateral will be transferred to the liquidation auction, where everyone will get a chance to buy the collateral asset at a small discount, and in this way, the platform will be able to restore the $WUSD peg to the price of $1 and will regulate their general circulation on the market.
At the moment of excess collateral (in the event of an increase in the price of assets), additional $WUSD will be issued, and when there is a shortage of collateral (in the event of a decrease in the price of assets), the collateral will be liquidated at the auction to restore the peg of $WUSD. Thus, there will be no unsecured $WUSD in the market. In the future, we may be able to add additional pools if needed. In this case, we can use WorkQuest DAO and choose desired assets by voting.
In the future, we plan to develop a DEX on the WorkNet network, after which $WUSD will also be available for purchase for other assets.
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