Litepaper

A floating $1.00 pegged stablecoin backed by Liquid Staking Tokens with NFT controlled vaults. Built for Arbitrum.

Abstract

Open Dollar ($OD) is a more flexible and powerful governance-minimized stablecoin that seeks to dampen volatility of Liquid Staking Tokens (LST) and boost liquidity between tokens while providing a new tradable vaults primitive. LSTs are the most important yield bearing assets in DeFi, with predictable long term rewards. Long term LST holders wish to access the value of their tokens without selling their assets or missing out on yield. LSTs and other assets can be locked into Collateralized Debt Positions (CDP) via Non-Fungible Vaults (NFVs) in order to borrow the $OD stablecoin. As the first CDP protocol with NFVs, new use cases can be built on Open Dollar, for example an NFT marketplace that automatically sells a vault position before it is liquidated. Governance minimization prevents long term centralized capture of the protocol and creates better security guarantees for users.

Liquid Staking Tokens

Liquid Staking Tokens (LSTs) are a crucial component of DeFi, serving as the most predictable source of yield in the ecosystem. The consistent, long-term nature of LST rewards attracts long-term holders seeking stable returns. However, one major challenge for LST holders is accessing the value of their holdings without relinquishing ownership or missing out on potential yield. Depositors in the Open Dollar protocol earn 100% of the yield on their LSTs while borrowing $OD. Open Dollar makes it easy for LST holders to borrow with low interest loans, to create leveraged positions, and to reinforce liquidity between LSTs.

Non-Fungible Vaults

Unlike traditional Collateralized Debt Positions (CDPs), where ownership is tied to an account, NFVs uniquely associate ownership of the collateralized assets with NFTs. This approach creates a new primitive to build additional markets on and opportunities for users. Vaults can be sold through existing NFT marketplaces, automations can sell user vaults to arbitrageurs without having to pay liquidation penalties, and existing NFT infrastructure can be used in new ways. With a more capital efficient market for liquidatable vaults there is less risk when creating leveraged positions.

Governance Minimization

Governance minimization is a core principle of Open Dollar's design, serving as a safeguard against any long-term centralization of protocol control. New collateral types can only be added by a DAO governed by Open Dollar Governance ($ODG) token holders. However, the DAO’s power is extremely limited as it can not set new stability rates for existing vaults, mint new $OD tokens, change the distribution of fees, or update many of the preset or market determined parameters of the protocol. This approach aims to establish robust security guarantees for platform users and prevent undue influence over the system's operation.