Stable Jack v1
aUSD and xAVAX
Stable Jack v1 has accepted only sAVAX as collateral. Through the mechanism behind Stable Jack, sAVAX collateral is divided into two tokens, which are aUSD (Yield Token), and xAVAX (Volatile Token).
aUSD is a decentralized yield-bearing stablecoin that is fully collateralized and backed by AVAX LSTs. It has no exposure to the risks of centralized actors and TradFi while depending on the AVAX economy.
There are several reasons to prefer aUSD instead of USDC or USDT.
Yield-bearing: aUSD can generate a native LST yield for the depositors in the Rebalance Pool, which will range around 12-15%. However, your idle assets on USDC or USDT won’t earn you yield.
Peg stability: aUSD is always collateralized at a 1:1 ratio backed by AVAX LSTs. Moreover, as there is no collateralized debt position (CDP), there won’t be selling pressure for aUSD, which allows to maintain a stable peg compared to other models. In the worst scenario, even if the protocol fails, aUSD will be pegged to AVAX so that users won’t lose their principal.
No borrowing cost: Compared to CDP models, users do not borrow stablecoin, so there is no borrowing cost.
No liquidation risk of the collateral: As the users do not open a collateralized debt position, there is no liquidation risk for the collateral.
No exposure to counter-party risks: aUSD is a decentralized stablecoin that has no exposure to TradFi and is an Avalanche native stablecoin that is anchored by the AVAX economy.
No over-collateralization: Compared to the existing decentralized stablecoin models, there is no over-collateralization requirement for aUSD minting, which increases the capital efficiency for the end user.
xAVAX is a volatile AVAX token that mirrors the price volatility of AVAX exponentially similar to leveraged contracts without funding fee or liquidation risk. It can be seen as a looping token as well, which allows you to increase your exposure to AVAX price without bothering with all the looping process. Moreover, you can also see it as a tokenized perpetual contract that can be used in DeFi.
There are several reasons to prefer xAVAX:
Leverage AVAX position: xAVAX typically offers leverage around 1.5-2x which will allow users to have exponential gains from AVAX’s price appreciation.
Extremely low liquidation risk: Traditional perpetual contracts carry inherent liquidation risks, however, the liquidation risk of xAVAX is almost impossible as the CR of the protocol has to be lower than 100%. Even in this case, the user still holds xAVAX and its price can rise again. Compared to leveraged contracts, you’re not wiped out.
No funding cost: Traditional perpetual contracts can be costly, especially for long-term holders. In contrast, xAVAX has zero funding costs as it is not a leveraged contract but a token that mirrors the AVAX volatility exponentially.
Simplifying looping: Looping is achieved via CDP stablecoins to allow users to have increased exposure to AVAX, however, it requires many transactions which is hard to manage and costly. Instead of creating a looping position manually, you can just buy xAVAX and have the same results.
Bullish on AVAX: xAVAX is an appealing option for those with a bullish outlook on AVAX and seeking long-term exposure.
DeFi composability: xAVAX is a DeFi-composable product that can be used in DeFi activities to further benefit from the token such as LPing, yield farming, and being used as collateral. This will allow more yield opportunities for xAVAX holders
Not affected by market makers: Most of the time sudden liquidations in leveraged contracts happen due to market maker speculation of upside or downside wicks. However, this can’t happen in the case of xAVAX.
No centralized party risk: Leverage contracts are exposed to the CEX’s arbitrary actions such as closing the position, limiting the position amount, or changing the leverage. These can’t happen if you hold xAVAX as there is no way that the protocol can interfere.
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