With the value of crypto assets fluctuating wildly, decentralized stablecoins require a certain amount of excess capital to be pledged against the minted stablecoins. Without this so called overcollateralization, these type of stablecoins can become unbacked, if liquidations aren't swift.
The problem with this need for a certain amount of excess value backing the loans, is that it makes the stablecoin expensive to create. As long as the value proposition of decentralization is unclear to the market, decentralized stablecoins simply cannot compete with their centralized counterparts.
Enter DYAD
The DYAD protocol allows users to mint interest-free stablecoins against collateral types like ETH, and the minimum collateral ratio a user has to maintain can be as low as 100%.
DYAD starts out similar to other decentralized stablecoins, and requires users to deposit assets that are worth at least 150% of the value of their minted DYAD. Below that value, they risk liquidation, which is a trigger that can be pulled by other ecosystem participants.
The secret sauce of DYAD is that the excess value of all collateral in the system is tokenized, and users who own the token are able to utilize its value as part of their backing.
Users will always need at least one dollar of collateral for every DYAD they mint, but, if they want, may use any amount of the utility token to bring their collateralization ratio above the required 150%.
Via the redirection of idle collateral to active ecosystem participants, DYAD can be Capital Efficient, Stable and Decentralized at the same time.
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