At the surface level, the life of a USD-pegged stablecoin seems to be quite boring. Its value never goes up, never goes down, and it’s merely another tool for leveraging value within an emergent economy.
But crypto volatility can’t just disappear overnight. Sitting right under all that predictable stability of a cryptocurrency like EOSDT, the https://eosdt.com/usual volatility still rages under the collateral that backs the stablecoin. However the market moves, EOSDT can maintain its value because it’s overcollateralized by a minimum of 130%. The EOS that backs an EOSDT position could lose significant value without any negative impact on that EOSDT stablecoins.
And for those moments when the market really does https://eosdt.com/move downward rapidly, EOSDT’s smart contracts are on permanent watch for the right time to liquidate undercollateralized positions.
Here’s how an EOSDT position might go through its lifecycle.
Opening the position
Let’s suppose a trader has a surplus of EOS on hand and wants to preserve that value against an uncertain market. Using EOSDT’s self-service gateway, he locks up 3,000 EOS to generate the according amount of EOSDT stablecoins.
He shrewdly decides to collateralize at 150% instead of the minimum 130%. This gives his position some breathing room in case the EOS market crashes suddenly. At 150% collateralization on 3,000 EOS, the trader gets approximately $6,500 in EOSDT stablecoins. His collateralized debt position is now open.
Our trader now has a crypto wallet that’s effectively stuffed with tokenized dollars. EOSDT’s price doesn’t change because EOSDT isn’t a speculative financial instrument, so our trader decides to spend some of it.
He might use it to send money to someone on the other side of the world. He might send his tech-savvy nephew some EOSDT for experimentation’s sake. Any merchant that supports EOSDT stablecoins can accept it as payment as though it were cash.
Just as the cash in your wallet is yours to spend as you see fit, EOSDT can fill the same use via the blockchain.
A number of exchanges on the EOS blockchain support EOSDT for making trades. Just as you change money when you enter a new country, it’s completely possible to change out your EOSDT for other cryptocurrencies.
Leveraging the position
EOSDT’s unchanging price doesn’t mean it can’t also be a money-making tool. Suppose the trader wants to take action on his theory that EOS values are going to rise.
Yes, he parted with a lot of EOS in order to generate EOSDT, but he can still get that EOS back by closing his position. He only needs to use his newly acquired EOSDT to buy more EOS. If the EOS market climbs, then those gains are leveraged — he gets to keep some of the EOS he purchased after selling enough to repay the EOSDT he borrowed.
With that EOS now worth more than it used to be, he has successfully leveraged his EOSDT position.
The end of the position
EOSDT positions can close a few different ways.
The trader might decide to close it manually. This is done by simply paying back the EOSDT plus any applicable fees. Doing so releases his initial EOS collateral from EOSDT’s smart contracts and he regains custody of the same cryptocurrency he used to have.
But his position can also be automatically liquidated without any input from him at all. If the EOS market crashes such that his position’s level of collateralization falls below the minimum 130% threshold, it gets margin called. EOSDT’s smart contracts step in to automatically liquidate that position, then others have the option to purchase that liquidated collateral at a discount.
It’s a decidedly less pleasant way for an EOSDT position to come to the end of its life, but it does happen.
Users can track government parameters and global indicators for the EOS/EOSDT trading pair, drill down into the collateralization ratio, and gain insight on their staking rewards with help from clear, simple charts.
By now you’ve got a clearer view into the life of the EOSDT stablecoin. Sure, the value doesn’t rise or fall anything like Bitcoin’s, but this emergent piece of financial technology can already drive some compelling use cases.
Disclaimer. EOSWriter does not endorse any content or product on this page. While we aim at providing you with all the important information we could obtain, readers should do their own research before taking any actions related to the company and carry full responsibility for their decisions, nor this article can be considered as an investment advice.