[Serenity Premium] Property-Backed Stablecoins - $USDR and $HOME [Initial Review Apr 2023]

Decentralized finance (DeFi) has been buzzing with the concept of real-world assets (RWAs) recently. These assets are physical in nature and can be represented on-chain through tokenization. A typical example of an RWA is a fiat-backed stablecoin, where a US dollar is held in reserve at a bank and then tokenized on a blockchain. In this article, we will delve into the world of stablecoins backed by real estate assets, examining two intriguing projects.

This article is for information only and we have not conducted any verification of the collaterals backing these stablecoins and are not able to assess the investment risks associated with them.

USDR and HOME Comparison Summary Table

Real USD ($USDR)

Overview

Real USD, also known as USDR, is a unique type of stablecoin that is natively rebasing, yield-bearing, and overcollateralized, with its value pegged to the US dollar. It is a product of Tangible, an ecosystem for tokenized real-world assets. USDR is designed to be collateralized by tokenized real estate, which offers two key advantages: yield and price appreciation.

One advantage of backing USDR with real estate is that the tokenized properties held in the Real USD treasury are leased to tenants, generating rental income. This rental yield is paid out daily to USDR holders in the form of a rebase. The Real USD supply expands by the amount of DAI received from rent, and the daily rebase will appear automatically in the user’s wallet. In the event that USDR collateralization falls below 100%, 50% of the rental yield payments will be retained by the treasury as stablecoin holdings. This mechanism helps to maintain the value of the stablecoin and re-collateralize the system.

At launch, Real USD yields around 4.25%, but this yield is subsidized until the stablecoin reaches a certain market cap. Yield subsidies are funded using Tangible Labs’ TNGBL tokens, which are converted into USDR. As the market cap grows and the percentage of treasury assets held in Property TNFTs increases, incentives will be gradually reduced until they are fully replaced by an increase in collected rental revenue.

Minting process

Real USD is minted 1:1 with DAI and can be redeemed/burnt 1:1 for DAI. In some circumstances, Real USD can also be minted with TNGBL, but the total amount of Real USD that can be minted with TNGBL cannot exceed 10% of the amount of USDR minted, minus USDR redeemed.

Redemption process

While Real USD is designed to guarantee redemptions for DAI at any time, there is a small fee charged on all USDR redemptions. If heightened demand for USDR redemptions depletes existing DAI reserves, the treasury issues pDAI or promissory DAI. pDAI entitles the user to claim DAI 1:1 once real estate TNFTs are liquidated and the proceeds are transferred back into the treasury as DAI. This unique collateralization mechanism gives users additional comfort, negating some of the concerns of utilizing a less liquid asset as backing.

Bonding

Tangible also offers USDR bonding, which is a mechanism that enables users to lock up their USDR and receive higher APYs in return. This is beneficial to the protocol as it attracts and locks up a new capital, which helps to stabilize and bolster liquidity.

Users can choose their bonding period and bond with DAI. During the bonding period, they receive USDR at the bonding ROI, which is vested linearly by block. The bond APY replaces the native USDR APY during the bonding period. Once the vesting period is over, their investment will continue to accrue the standard USDR APY provided that it has been staked. Users can bond new funds once their bond period has been completed.

There are three bonding periods available: 10-day, 30-day, and 90-day, with corresponding ROIs and annualized yields. The daily bond limit is set at 10% of the market cap of Real USD, and it resets daily. The bonding incentive is issued through the minting of Real USD with TNGBL. If the maximum amount of USDR that can be minted with TNGBL has already been reached, then bonds will be unavailable until new USDR has been minted with DAI, creating space for new TNGBL to be used for minting.

The illustration below shows how USDR works:

Current USDR Yield

At present, the yield offered by USDR stands at an impressive 19.83%. It's noteworthy that this yield is comprised of two key components: 9.83% from real estate investments and an additional 10% from $TNGBL token incentives. The total supply of USDR stands at 14.67 million tokens, contributing to its stability and potential for growth.

Breakdown of Assets Backing USDR

The current total value of assets backing $USDR amounts to $17.18 million, boasting a collateralization ratio of 117%. Notably, real estate holdings account for 40.76% of these assets, with approximately half being in stablecoins, followed by an insurance fund at 8.38%. Additionally, the $TNGBL platform token comprises 16.37% of the asset share, adding to the diversity and stability of the $USDR stablecoin.