About USSD

The institution of money holds a crucial place in human civilization. By decentralizing it, we strive to safeguard our collective progress and enhance our ability to overcome future challenges.

USSD assumptions

Long-Term Growth Of BITCOIN:

We believe the crypto market will grow continuously, especially over periods exceeding 50 years.

Four-Year Cycles:

We assume a global four-year cycle in the crypto market, synchronized with BTC halving events as the first and the biggest cryptocurrency.

No to DAO:

We don't subscribe to DAO (Decentralized Autonomous Organization), seeing it as non-transparent and possibly manipulated. Major cryptos like BTC and ETH operate without DAO structures. We can use DAO tech for community interaction when a time-proven decentralized anonymous human proof or AI (Artificial Intelligence) are developed.

StableCoin problems

Since Bitcoin's inception, its main advantage has been decentralization. However, when it comes to stablecoins, various solutions with differing levels of centralization risks and mechanisms have emerged. Currently, three types of stablecoins are discernible: centralized (e.g., USDT, USDC), backed by well-known assets (e.g., DAI, LUSD), and algorithmically crypto-backed by new assets (e.g., AMPL).

Stablecoin Comparison
Transparency Transparency based on auditor report Transparent by paper proof Transparent by paper proof Partly transparent by code Transparent by code
Source of Collateral Short-term US Treasuries, cash, etc. Short-term US Treasures, cash in US banks Short-term US Treasures, cash in US banks Backed by ERC20 (ETH, wBTC), Real World Assets token funds, USDC Crypto backed (including USDT)
Crypto Collateral Ratio ~2% 0% 0% ~150% ~500%+ projections
Full Collateral Ratio Claimed 100% Claimed 100% Claimed 100% Claimed ~278% ~500%+ projections
Regulated Status Hong Kong entity US entity Several entities US entity No entity
Centralization Level of Token Management Team can freeze tokens and manage collateral Team can freeze tokens and manage collateral Team can freeze tokens and manage collateral DAO can manage collateral, no one can freeze tokens No one can freeze tokens or manage collateral
Project Management Centralized, manual Centralized, manual Centralized, manual DAO managed, manual Autonomous
Business Model Returns on treasury investments Returns on treasury investments Returns on treasury investments RWA token funds partnership % + DAI borrowing interest model Non-profit, all profit opportunities are equal for everyone
Stablecoin Comparison
Type Pluses Minuses
(e.g., USDT, USDC)
  • Very similar to bank money.
  • More stable peg to 1 USD in historical context.
  • Backed by well-known assets.
  • Tokens can be blocked.
  • No blockchain-level transparency.
  • Not censorship-resistant.
  • No direct access to redeem of stable coins.
  • Risks of insufficient collateral coverage
  • The collateral is subject to regulatory control
Backed by well-known assets
(e.g., DAI, LUSD)
  • High level of transparency.
  • DAO manipulation might happen with collateral (in case DAO existence).
  • System complexity with collateral can lead to unpredictable results.
  • Risks of insufficient collateral coverage
Algo crypto-backed by new assets
(e.g., AMPL)
  • Censorship-resistant.
  • High level of transparency.
  • Reward mechanism for stable coin holders.
  • Backed by not well-known assets that can go to zero.
  • Not a stable peg to 1$.
  • Risks of insufficient collateral coverage
  • Unreliable rewards lead to systemic risks.
Autonomous Secure Dollar
  • Censorship-resistant.
  • High level of transparency.
  • Reward mechanism for stable coin holders.
  • Backed by well-known assets.
  • Simple structure.
  • Collateral is not managed by any entity.
  • Transparent, lasting reward framework.
  • Lacks historical proof of a stable peg to 1 dollar.
  • Risks of insufficient collateral coverage.

Whenever you choose a stablecoin, you must weigh the risks of centralization or collateral management. In other words, your tokens could be banned, or the collateral could devalue or disappear.

Through analysis of stablecoins, it was identified the following ideal characteristics for a stablecoin.

An ideal stablecoin should be:

Characteristics of an Ideal StableCoin

  • Censorship Resistant: Capable of resisting censorship.
  • Collateralized by Well-Known Assets: Supported by assets with a recognized reputation.
  • Collateralized by Deflationary Assets: Backed by assets that exhibit deflationary tendencies.
  • Blockchain-Friendly Collateral: Assets in the collateral should pose minimal risk to the current blockchain.
  • No Collateral Management Risks: Absence of risks associated with collateral management.
  • Overcollateralized: Collateral exceeds the value of the stablecoin.
  • Reward Anti-Inflation Mechanism: Mechanism in place to reward and counteract inflation.
  • Simple and Transparent Structure: Structure that is straightforward and transparent.
Additionally, for a stablecoin starting from scratch, it should:
  • Eliminate Risks in Initial Development: Mitigate risks during the early stages of development.
  • Provide High Rewards for Developers: Offer substantial rewards for developers without escalating collateral risk.
  • Motivate Early Participation: Encourage participation from the outset.

USSD v2 Architecture

Main Collateral Strategy

Until 1971, the simplest system was the US dollar backed by gold. Gold served as an effective collateral due to its rarity, verifiability, durability, and widespread acceptance in the global community. As gold became scarcer through mining, it became an asset with deflationary traits, exhibiting high volatility and significant growth in its early stages. In contemporary times, the average historical growth of the gold price aligns roughly with global inflation rates.

For strategies combating inflation, increasing the collateral ratio, and fostering project development, it's essential to accumulate or have a growth factor in assets. To maintain simplicity in the model, the only feasible option for a growth factor is its collateral.

Among the most capitalized digital assets in the crypto space, BTC and ETH stand out due to their deflationary mechanisms. Consequently, these assets have been chosen as the primary collateral elements.

Given the high correlation between ETH and BTC, their inclusion in the main collateral enhances diversification.

To make the collateral more stable and steady, it's a good idea to include a small amount of another stable coin. The USSD development team chose a stable coin based on specific criteria, prioritizing:

  • Eliminate Risks in Initial Development: Mitigate risks during the early stages of development.
  • Motivate Early Participation: Encourage participation from the outset.

To ensure room for collateral growth, a portion of 5-15% from the total USSD balance is set aside for this stable coin. The most suitable choices are USDT for the Arbitrum USSD version and DAI for the erc20 USSD version.

Additionally, it's important to mention that for certain networks (L1 and L2), wrapped versions of assets are used when using the original versions is not possible. The same criteria used for stable coins apply to the wrapped versions of BTC and ETH.

Cryptomarket stabilization mechanism

Bitcoin follows a cycle of ups and downs, especially tied to its halving events. Looking at the chart, it's evident that shortly after Bitcoin's halving, its price begins to rise.

Halving can be roughly divided into three equal phases after halving, each lasting about one year. Here's a general strategy for collateral accumulation during these phases:

  • First Phase (First year after halving): Bitcoin (BTC) is growing. It is reasonable to accumulate BTC and ETH in the collateral.
  • Second Phase (Second year after halving): BTC is at its high levels. It is reasonable to stop accumulating BTC and ETH and focus on accumulating only stable coins.
  • Third Phase (Third and fourth year after halving): BTC is at its local minimums. It is reasonable to accumulate BTC and ETH in the collateral.

Very approximately, minting USSD for BTC and ETH is possible in the first, third, and fourth periods. In the second period, it’s possible to mint USSD only for Stable Coin (USDT in USSDv2 Arbitrum).

Minting and redeem mechanism

The minting and redeem mechanism involves users exchanging crypto assets, such as USDT, wBTC, or wETH, for USSD and vice versa.

The process is relatively straightforward.Users can mint USSD:

  • For stable coins (USDT) if ((number of USDT)/(total balance) < 0.15 OR it is currently the 2nd phase of the cycle (refer to the phase stabilization mechanism).
  • For wBTC and wETH if (Stable Coin balance)/(total balance) >= 0.05 AND it is the 1st, 2nd, or 3rd phase.

If a user sends assets that do not fit the criteria, the transaction will be reverted, and the user will pay gas for this unsuccessful transaction. Any other assets not accepted as collateral assets (e.g., spam tokens) will be stuck in the collateral indefinitely.

Users can redeem USSD (withdraw or exchange) for collateral assets following these rules:

  • The user will first receive 1 stable coin in collateral (USDT) for 1 USSD, provided there are stable coins in the collateral balance.
  • Secondly, the user will receive wBTC for USSD according to the current market price taken from ChainLink.
  • Thirdly, the user will receive wETH for USSD according to the current market price taken from ChainLink.

This order is designed to decrease the changing levels of core assets in the collateral.

Insurance capital

Cryptocurrency markets can be very unpredictable, and there's a chance that the value of the collateral might go down for a while. To maintain a high over-collateralization ratio, we introduced insurance capital, which includes crypto assets. This capital will be used if there's under-collateralization.

The main question was what kind of asset to include in the insurance capital. We set some criteria for this:

  • The price of this asset shouldn't be closely connected with collateral assets like BTC and ETH.
  • It should be decentralized.
  • It should have a balanced deflationary mechanism.
  • Its level of capitalization should be low at the time of USSD deployment.

The insurance capital asset chosen was BGL (BitGesell). BGL is a variation of BTC with its own blockchain, a mechanism that burns 90% of transaction fees, undergoes halving every year, and has a capitalization of less than $5 million.

ICT tokens

By contributing BGL (wBGL) to the insurance capital, users can mint ICT (Insurance Capital Treasury). The minting of ICT will follow these progression ratios:

  • Initially, 1 ICT can be minted for 1 wBGL during the first 3 months after deployment.
  • Subsequently, every 3 months, the exchange rate of ICT will increase by 1.
  • The progression will stop increasing when the ratio reaches 10 wBGL for 1 IC

This progression was selected to ensure a fair distribution of ICT tokens, particularly benefiting valuable contributors to the insurance capital at the project's early stage.

Risk-reward for ICT token holders

USSD's main focus is on security. Those who value security can play a role in providing it and, in return, get rewarded for their contribution.

The reward system for ICT token holders activates automatically when the Collateral Ratio reaches a level of 1.05. These rewards are paid as interest to ICT holders. To claim these interests, ICT holders need to stake their ICT in a smart contract.

The interest is calculated at a rate of 4.2% per year based on the Collateral market value. It is paid through the creation of new USSD tokens every 24 hours, at a daily rate of approximately 0.011507% (4.2%/365). The distribution of interests is based on the proportion of staking shares held by ICT holders.

For example, if a total of 500 ICT were minted, and 400 were staked for claiming interests, with David staking 100 ICT, his interest share would be 25% (100/400).

ICT holders can claim their interests by using a withdrawal function.

Anti-inflation mechanism for USSD holders

To protect funds from centralization issues and inflation, an anti-inflation mechanism has been introduced in USSD. USSD users can stake their USSD tokens to receive a share of the interests.

Similar to the reward system, the interest for USSD holders will be automatically activated when the Collateral Ratio reaches the 1.05 level. These interests will be paid to USSD holders and can be claimed by staking USSD in the smart contract.

The interest is calculated as 1.8% annually based on the Collateral market value. It is paid through the minting of new USSD every 24 hours, using a simple percentage of 1.8%/365 (or approximately ~0.0049315% per day). The interests will be distributed according to the staking shares of USSD.

For example, if a total of 3,500,000 USSD were minted, with 500,000 staked for claiming interests, and David staked 100,000 USSD, his interest share would be 20% (100,000/500,000). If the collateral ratio of the main collateral is 150%, overall interests income will be 94,500 USSD.
David's interests share will be 18 900 USSD (94,500 * 20%) or 18.9% interests Annual Percentage Yield (APY) would (18,900/100,000).

Risk management mechanisms

Wrapped token centralization risks

Before a trusted and time-proven decentralized bridge is developed, every wrapped token carries centralization risks. Due to various ways the owner can manipulate the smart contract of the wrapped token, manual and limited defense mechanisms were implemented in USSD:

  • The USSD owner can change the stable coin to another stable coin once. For example, in the Arbitrum contract, the USSD contract owner can change USDT stable coin to DAI (0xDA10009cBd5D07dd0CeCc66161FC93D7c9000da1).
  • The USSD owner can remove stable coins from the collateral structure once. In this case, USSD will be backed only by BTC and ETH.
  • The USSD owner can switch the insurance capital coin from WBGL to WETH once.

Bank run in under collateral cases

A "bank run" is like a panic game that happens when a stable coin doesn't have enough collateral. This means there's a chance you might be late in getting your money back from the stable coin, and the best strategy is to withdraw as much as possible.

To stop this game, we added something called "proportional redeem." This lets users who don't want to wait for the collateral value to recover redeem their collateral in proportion to the collateral ratio.

For example, if the collateral ratio falls to 98%, USSD holders can redeem 1 USSD for $0.98 worth of assets.If the collateral ratio falls below 95%, those who don't want to take any risks connected to the collateral and want to redeem will get USSD with a 5% discount.

For instance, if the collateral ratio falls to 93%, USSD holders can redeem 1 USSD for $0.884 (93% * (100% - 5%)).

So, users who don't like risks will pay a bit more to reduce risks for those who are willing to wait for the collateral ratio to recover.

Insurance case scenario

If the rate drops below 90%, the insurance capital will begin distributing funds to the main collateral. This means that every 24 hours, 1% of coins from the insurance capital will be moved to the main collateral until it reaches 90% again.

Autonomous ICEBreaker

Local currency stablecoin franchise

The Autonomous Community has found a marketing fund dedicated to exploring marketing strategies for stablecoins. We plan to share the successful outcomes with the project's founders.

We're in search of technology entrepreneurs to pioneer a local currency stablecoin project, backed by secure and thoroughly audited open-source code. For example, autonomous South Korean won or Brazilian real.

Earnings for the Founder of the Autonomous Stablecoin: The founder will receive 1% of the total value of the stablecoin's collateral yearly. For instance, with a collateralization ratio of 3:1 and a total balance of local stablecoin of $100 million, the annual passive income could reach $3 million.

how to join

To join as a founder, there is one first step: write me to hi@ussd.ai


Here is our proposition template but we are open to any new ideas.

Proposition of the Founder:

- A brief overview of your experience
- Vision and strategy for your local stablecoin

Steps for Stable Coin Creation:

1. Identifying the ideal founder.
2. Adding the founder to our secret group.
3. Deployment of the contract.

Obligation founder agreement

- Remain anonymous for personal and project safety.