Frequently asked questions about USDR.
Is USDR an algorithmic stablecoin?
USDR is a fully collateralized stablecoin, not an algorithmic one. For every dollar of market cap, there is equal to or greater than that amount of money in the treasury. Treasury assets include DAI, tokenized real estate, protocol-owned liquidity (DAI-USDR pool on Uniswap v3) and our native token TNGBL.
New USDR is created when either DAI or TNGBL are used to mint USDR. For every $1 of DAI or $2 of TNGBL deposited, the USDR market cap expands by $1. For every $1 of USDR that’s redeemed, the market cap contracts by $1. The $1 price of 1 USDR is always tied to the number of USDR in circulation being equal to the market cap of USDR.
What backs USDR?
USDR is backed by four primary buckets of assets:
  1. 1.
    Tokenized, yield-producing real estate - The core of USDR is the treasury of tokenized real estate. The rental yield from these assets supply the yield for USDR.
  2. 2.
    DAI - Some of the DAI used to mint USDR is held as DAI in the treasury for redemptions.
  3. 3.
    Protocol-owned liquidity - 20% of the market cap of USDR is held as protocol-owned liquidity in a DAI-USDR pool. Any time new USDR is minted and the LP is below 20% of market cap, the LPis topped up. This ensures that there’s always sufficient liquidity for swaps in and out of USDR.
  4. 4.
    Tangible’s governance token TNGBL - Up to 12% of the market cap of USDR can be backed by TNGBL. TNGBL is used to mint USDR at a 2:1 value ratio and is used by the protocol to provide various incentives.
The market cap of USDR is the 1:1 relationship between the total number of USDR in circulation and the various assets at their representative percentages backing each token.
The total backing of USDR will exceed 100% and with some assets represented at a higher percentage in the total backing than they are in the market cap.
How does USDR maintain its peg?
The price of 1 USDR is always equal to $1. This is managed by the number of USDR in circulation and the market cap of USDR which is fully collateralized by assets in the treasury. As DAI and TNGBL are deposited into the treasury, new USDR are minted 1:1 to the expansion of the market cap. As USDR is redeemed, the market cap shrinks 1:1 for every USDR burned. There is no peg to maintain at the protocol level.
USDR may trade on a DEX above or below $1 based on market demand. A higher demand for USDR may cause the token to trade at a premium. The opposite may be true if sales of the token are higher than normal. However, the spread in the market is not the protocol peg. The peg is based on the USDR in circulation and the fully collateralized market cap, which is aways at a 1:1 ratio, holding the $1 peg.
What is the USDR supply based on?
The USDR supply is primarily based on minting and redemptions. For every $1 of DAI or $2 of TNGBL that goes in, the supply increases by 1 token. For every $1 redeemed, the supply reduces by 1 token.
Another source of supply is rental income. The money that comes into the treasury each month as rent from tenants is converted to DAI and then used to mint USDR. This new supply is distributed to stakers through the daily rebase.
Once 130% overcollateralization is reached, additional appreciation in the properties will be added as supply and distributed to stakers as additional daily yield in the rebase. This issuance of new supply will be automated based on our property valuation oracles. New appreciations above 130% will be minted as new supply and distributed.
Where does the USDR yield come from? What is the rebasing mechanism?
USDR yield comes from the rental income of tokenized real estate. Each month rent is collected from tenants. That money is converted to DAI and placed into a smart contract which distributes the income to sUSDR holders through a daily rebase.
Once USDR has reached 130% overcollateralization, any additional appreciation in the underlying properties will be distributed to stakers as additional yield in the daily rebase.
The USDR yield should be largely unaffected by fluctuations in the price of the tokenized properties. Rent will continue to be collected regardless of property valuations. Only once the collateralization of USDR falls below 100% will yield be diverted to the treasury to regain 100% collateralization.
Why does USDR use a two token system?
Launching a new stablecoin with low liquidity meant we needed our liquidity pools to be as capital efficient as possible. Uniswap v3 is the most price-efficient pool in the market right now, where we’re able to set incredibly tight price bands where even significant imbalances in the pool i.e. 90% DAI and 10% USDR won’t result in us losing peg.
The downside to Uni v3 is that rebasing tokens are not allowed in these pools as they’ll offset the capital efficiency. For this reason, we launched USDR with a two-token system. Swaps to USDR can be efficiently managed in Uni v3 and yield is earned by staking those tokens on the USDR site.
How does Tangible manage the USDR protocol-owned liquidity?
20% of all of USDR’s market cap is held in the protocol-owned DAI-USDR pool on Uniswap v3. When new USDR is minted, up to 20% of new market cap is automatically taken from the treasury and added to the pool on Uni v3 as protocol owned liquidity. This ensures that there’s always sufficient liquidity for swaps in and out of USDR.
If user liquidity is added to the pool and it exceeds the 20% required by the protocol, new funds added to the treasury will be diverted elsewhere until the 20% needs to be topped off again.
Real estate is extremely volatile, are you concerned that the real estate market is going to nuke?
Like any other market, the price of real estate can rise and fall based on a number of factors. However, unlike crypto or equities, the real estate market is significantly less volatile. The drops occur over a much longer timeframe and are generally less substantial in terms of the loss of value.
Here are three indicators we can use to project a decline in the housing market based on the last housing market crash:
How will a declining housing market impact the value of the USDR treasury?
With the housing market already in decline and the USDR treasury growing, it’s important to note that the treasury will not incur the full loss of market value as new properties added during a decline will be purchased closer to their bottom. The entire treasury will never fall by 20% as the whole treasury wasn’t added in only one purchase at the top. Take this hypothetical chart for example:
As shown, a growing treasury offsets the total decline in asset prices as the assets added get closer to the bottom.
How will a declining housing market impact USDR’s yield and collateralization?
A drop in the value of the treasury’s underlying assets does not automatically mean a loss of yield for holders. USDR’s yield is primarily derived from rental income, not the valuation of the assets themselves. As such, we expect to continue collecting the projected rent from tenants in managed properties, despite any paper loss on the underlying asset itself.
Further, the collateralization rate of the USDR treasury isn’t completely dependent on the price of housing. An appreciation in the price of TNGBL can offset losses to property valuations. Yield earned from protocol owned liquidity can also be used to bolster losses.
That said, a decline in the estimated value of the treasury’s real estate assets will lower the collateral value of USDR. If the collateral value drops below 100%, rental yield will be diverted into the treasury as DAI until the backing is back at 100%. While the yield to holders may decline or pause at times to collateralize the treasury, the stoppage in yield will not be total or permanent given the additional sources of protocol collateralization.
Will a declining house market force USDR liquidations?
No, the real estate in the USDR treasury is owned outright, it’s not financed, it’s completely unleveraged. The only mechanism that can force USDR asset liquidations are redemptions from holders. If the redemption amount of USDR exceeds the DAI in the treasury, assets will be liquidated in order to fulfill redemptions. In this case, pDAI will be issued to allow Tangible adequate time to appropriately liquidate assets, extracting maximum value from the assets.
However, as long as the market cap of USDR is fully collateralized and yield payments flow to holders, we don’t foresee a drop in housing being an automatic trigger to redemptions.
How does a declining housing market benefit USDR?
With an expanding market cap, Tangible will have the opportunity to DCA into new property purchases, adding assets to the treasury at or close to the bottom of their recent valuation. The more assets that are added towards the bottom, the greater the increase in valuation will be when the market turns around.
This is no different to what institutions like Blackstone are doing, preparing $50 billion vehicles to buy up residential property during this downturn.
What is the selection process for the properties in the treasury? Do they all come from Tangible’s marketplace?
We have a team who identify high-yield properties which are added to the marketplace and subsequently the USDR treasury. These properties are already tenanted with an established high yield. This established yield also serves to insulate these properties from price volatility as the markets move.
The majority of properties currently in our pipeline are in the UK where we have a property management team and realtor relationships established with a large number of high-yield locations identified. We don’t have any geographic restrictions and plan to diversify locations as we grow with the US next on the list. In addition to internally sourced properties, Tangible will list properties from any owner looking to sell, provided they pass due diligence with our team. However, we’re not actively seeking out user properties at this time.
What happens when there are no tenants leasing the property, resulting in zero rental income? How does the ecosystem accommodate such a scenario?
2% of the property value is held in a vacancy reserve. This supplies yield in the event of a vacancy. Once the property is tenanted again, a percentage of the yield from that location will be used to resupply the reserve. Many of our current properties have tenants on government aid meaning the rental reliability is extremely high, over 99%.
What is the relationship between Tangible and USDR? How do both products build on one another?
USDR sits under Tangible as one of our primary products, alongside our marketplace of tokenized real world assets.
USDR allowed us to build strength on strength. With the systems and organizational knowledge in place to purchase, tokenize and manage real estate, it was a simple leap forward to apply that infrastructure to the design of a fully collateralized stablecoin.
There are many stablecoins available on the market. What features does USDR possess that make it stand out from the rest?
  1. 1.
    USDR is fully-collateralized/over-collateralized and designed to become more collateralized over time as the real estate assets in the treasury appreciate.
  2. 2.
    It’s the only stablecoin backed by real estate. It’s really the only money that’s backed by real estate.
  3. 3.
    Real estate is a proven store of wealth unlike the fiat backing other stablecoins. Unlike stablecoins backed by crypto, real estate is a human primitive with timeless demand and substantially less volatility than digital assets.
  4. 4.
    USDR has a native source of real yield, distributed vai daily rebase, built directly into the token itself. Rental income is extremely reliable/consistent and uncorrelated from the performance of crypto markets.
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