NEAR Foundation to fund USN Protection Programme
The NEAR Foundation has set aside $40m USD for a USN Protection Programme grant, designed to protect users from a recent issue relating to USN by ensuring eligible USN holders can redeem their USN on a 1:1 basis with USDT.e. The Programme is now live, run by a subsidiary of Aurora Labs, and can be found here.
Decentral Bank (DCB) recently contacted the NEAR Foundation to advise that USN – a NEAR-native stablecoin created and launched by DCB independently of NEAR Foundation – had become undercollateralised. DCB confirmed that this was due to an initial algorithmic version of USN (v1), which is no longer algorithmic since its upgrade to v2 in June, that was susceptible to undercollateralisation during extreme market conditions.
This collateral gap of $40m USD is fully covered by the USN Protection Programme. This gap is fixed and not linked to the $NEAR token price in any way (and $NEAR has never had a hardcoded burn/mint relationship to USN).
Given the issues described above, the NEAR Foundation is recommending that DCB wind-down USN in an orderly manner. To assist with this process, the NEAR Foundation has provided a $40m USD grant to a subsidiary of Aurora Labs – one of the NEAR ecosystem’s most prominent contributors – to set up the USN Protection Programme which is now live. Redemptions will begin once DCB has taken certain steps to ensure an orderly wind down. This Programme will be available for 1 year (until 24th October 2023). Eligible USN holders can choose to redeem their USN through the USN Protection Programme or can exchange their USN via any other available route. We’re confident this action best safeguards users and the wider NEAR ecosystem by funding the known collateral gap.
The NEAR Foundation is confident that as the ecosystem grows and matures, this type of intervention should not be required in the future. Moving forward, the NEAR Foundation expects to be working with the NEAR Digital Collective (NDC) and wider community to set up a funded initiative with the remit of developing robust community standards and guardrails, in particular in relation to stablecoins, to help ensure that users are protected in situations of rapid innovation, and evolving markets and regulations.
Note: this article is a summary of and based on the assumptions in a longer article describing events relating to USN and information on the USN Protection Programme (including eligibility requirements and excluded jurisdictions incl. the US) in more detail – this can be found here
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