Decentralized Finance (DeFi) is a new industry that leverages Distributed Ledger Technology (DLT) to deliver financial services. It allows counter-parties to interact directly with each other without financial intermediaries. Stablecoins - crypto-currencies with low volatility - are the back- bone of this new industry. Their supply surged by 388% in 2021, combined with the growth of Total Value Locked (TVL) in DeFi from $1bn in 2020 to $300bn in 2021.
We propose a new stablecoin - Stable Swiss Protocol (SSP), delivering fully on the decentralization and multi-chain principles. Its reference value is to be pegged to a fiat currency (sCCY ) or a basket of currencies. Unlike most of the existing stablecoins (e.g Tether, CryptoFrank), which are off-chain collateralized by fiat currency and other financial products, SSP is backed only by crypto-assets. SSP allows any blockchain user to mint a stablecoin and use it as a store of value, a means of exchange and a unit of account for use in other downstream applications of the user’s choice. Such applications may offer payment systems as well as possibilities to profit from arbitrage opportunities in DeFi using the structural benefits of SSP.
We propose a stablecoin protocol more resistant to market volatility compared to other on-chain collateralized stablecoins (e.g. DAI) and one with a higher diversification and utility potential. Firstly, SSP limits its dependence on the auction duration at decentralized exchanges (DEXes) thanks to its fast-reaction stability pools including the replacement of volatile crypto-currencies with less-volatile collaterals in an event of destress or default. Secondly, it introduces a staking pool and a reserve pool, which further increase the stablecoin’s robustness.
The protocol is managed by the community, owing the governance token of the StableSwiss DAO - Swiss Stable Network (SSN ). Part of the revenue that SSP generates will be used to build reserve pools maintaining stability in the protocol. Part of the revenue will go to a foundation domiciled in Switzerland distributing funds for development. Part of the revenue will be used to burn governance token as part of the stability mechanism.