Importance to the Space

Why the US Treasury is the most important financial instrument on earth

The $30tn US Treasury market is the largest, most liquid, and most important financial market on earth, acting as the foundational collateral for funding financial balance sheets, the reference pricing rate for every financial asset on earth, as well as the FX reserve asset for international sovereign entities.

This is due to its unique qualities:

  1. Stability

  2. Liquidity

  3. Yield

This allows US Treasury Bonds to act as:

  1. Transactional Money

  2. A Store of Value and Savings Instrument

  3. Pristine Collateral

Yet to date, an analogous asset has not existed within crypto. Why?

Why the Internet Bond can be the most important instrument in DeFi

stETH and USDC serve different roles within the DeFi ecosystem, but neither alone are the solution for a reasonably stable value-accruing collateral asset. USDC currently functions as the most important asset within DeFi, while all major exchanges are heavily reliant on USDT as quote & settlement assets for their order book markets.

This is despite their weaknesses relating to:

  1. Centralized custody risk

  2. Fully internalized economics: "return-free risk"

  3. Fundamental reliance on the US Banking System

Combining the qualities of on-chain assets with a delta hedge to achieve a synthetic dollar backing for USDe allows for:

  1. Transactional Money

  2. Store of Value

  3. Reasonably Stable Backing

  4. Censorship Resistance

The Internet Bond, sUSDe, therefore combines the relative stability of existing stablecoins with the censorship resistance of native assets. Users in permitted jurisdictions are able to stake their USDe to receive sUSDe to receive rewards generated by the protocol. USDe can therefore play an important role as a reserve asset supporting other DeFi applications that require backing (for example, stablecoin issuers) or as a collateral asset on money markets.

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