🖊️Scalability in USDs: Capital Efficiency and Growth Potential

USDs is designed with scalability at its core, leveraging a delta-neutral hedging strategy and a 1:1 collateral ratio. This approach allows USDs to achieve high capital efficiency, positioning it as one of the most scalable synthetic dollars in the industry.

1. Capital Efficiency through Delta-Neutral Backing

USDs is backed at a 1:1 ratio, achieved by offsetting collateral volatility with a delta-neutral hedge. This capital-efficient model enables USDs to maintain stability without requiring overcollateralization, which is common in other on-chain stablecoins:

• Delta-Neutral Efficiency: By using short positions on derivatives markets to hedge collateral price changes, Solenes can mint USDs at a 1:1 collateral ratio. This minimizes the capital locked up, ensuring scalability without compromising stability.

• Comparison with Overcollateralized Stablecoins: Traditional decentralized stablecoins often require a 150% or even higher collateral ratio, locking up significant capital that limits scalability. For instance, some stablecoins require up to 200% overcollateralization, reducing liquidity and increasing the cost of minting stable assets.

With Solenes’s delta-hedging approach, USDs is highly scalable, overcoming the challenges of capital inefficiency and allowing expansion to billions of dollars in circulation without relying on centralized, traditional assets.

2. Leveraging CeFi Liquidity for Scaling

To scale effectively, Solenes taps into the vast liquidity of centralized exchanges, where open interest on perpetual futures markets is much higher than on decentralized exchanges. By using these liquidity pools, Solenes can expand USDs issuance substantially beyond the limits of purely decentralized exchanges:

• Liquidity Constraints on Decentralized Exchanges: Relying solely on decentralized exchange liquidity can restrict scalability due to limited capital and higher risks of hacks and exploits.

• Access to High Liquidity: Centralized exchanges provide >25x the open interest in perpetual futures, allowing USDs to scale exponentially while still maintaining decentralization in its design.

This access to deeper liquidity enables Solenes to scale USDs effectively within both centralized and decentralized finance ecosystems, ensuring that it remains robust even at large volumes.

3. Diverse and Scalable Collateral Base

USDs’ scalability is further supported by its flexible collateral options, which can expand as the protocol grows. Solenes uses multiple assets with sufficient market liquidity, such as SOL and stSOL, with the potential to incorporate other assets in the future as the derivatives market expands. Here’s how this approach enhances scalability:

• Current Collateralization Options: Solenes’s initial collateralization involves liquid staking assets like stSOL, allowing it to tap into a large and growing pool of staked assets. This model has room for expansion as more liquid staking assets become available on the Solana blockchain.

• Expandable to Other Assets: As more assets gain derivatives market liquidity, Solenes can incorporate them into USDs collateralization, further increasing the scalability of the protocol.

This scalable collateral base allows Solenes to expand USDs issuance into the tens of billions while maintaining a fully decentralized model. By leveraging liquid staking assets and delta-neutral hedging, Solenes ensures that USDs can meet growing demand without compromising stability or decentralization.