The Application of the Standards (SDS) in the Alchemint’s Stablecoin Issuance Mechanism
Since the day 1 of Alchemint established, we always receive these questions from the community, what is the use of the project token SDS? Is SDS is the stablecoin?
Thus, we need to clarification, the SDS itself is not tablecoin, Standard SDS is the project token of Alchemint. In the project of Alchemint, the stablecoin issued by the over-mortgage mechanism is SDUSD, and the SDUSD will be anchored the US dollar with a 1:1 ratio.
The SDS token of Alchemint project has the following two functions:
1. The stablecoin is issued through the over-collateralized digital asset NEO. When redeeming the collateral NEO, the SDS is required to be paid as collateral service fee. This part of the SDS will be brunt after payment.
2. As an important certificates to participate in the governance of Alchemint’s platform.
Alchemint’s over-collateralized mortgage-issuing mechanism was stabilized by over-collateralizing digital assets, which was first implemented by EOS founder Daniel Larimer on his early Bitshare project. Alchemint will use the NEO network and NEO digital assets as a starting point to allow users to issue stable digital certificates anchored on the NEO network through the over-collateralized NEO digital assets.
If the user holds the digital asset NEO and mortgages it into the smart contract warehouse SAR, the corresponding stable certificate SDUSD can be obtained. At this stage, the mortgage rate set by the Archimedes system is 200%, and the user’s mortgage is equivalent to $100 of digital assets in the SAR, then it will get $50 SDUSD, which is equal to $50. This SDUSD can be arbitrarily circulated in the market, just like any cryptocurrency, but the value is anchored to the value of the US dollar. The value behind each SDUSD is not fiat currency reserve, but an excess of digital asset collateral. The centralized digital stable currency, such as USDT and GUSD, however, is anchored in equal amounts through a dollar-based asset reserve through a centralized organization.
When the user obtains the SDUSD through the mortgage NEO, if he wants to redeem back the NEO in the SAR, he needs to return the corresponding amount SDUSD to the SAR mortgage. At the same time, the redemption of the collateral NEO requires payment of the SDS ascollateral service fee. This part of the SDS will be brunt as a fee.
That is to say, as Alchemint’s excess mortgage mechanism is used more widely, the total amount of SDS will deflate over time. At the same time, with the integration of Alchemint’s cross-chain mechanism and multi-asset mortgage model, the use of SDS will be more extensive.