What is USDQ? What is Q DAO?
I-Chan Huang is a highly experienced consultant for blockchain technologies and decentralized ecosystems. He currently acts as an advisor in Q DAO project. Products of the project are unique fully decentralized stablecoins (USDQ, CNYQ, JPYQ, KRWQ) backed by Bitcoin.
I-Chan has two prestigious degrees – MA of Economics, SOAS University of London, and BA of Journalism, NCCU, Taiwan. He leverages +5Y in IT, Data Science, and peacekeeping operation for the United Nations, delivering effective Fintech startups and sustainable development goals (SDG) consulting.
Working closely with Platinum ENGINEERING he is managing STO for Eliconn PTE Ltd., which has close relation with FOXCONN Group.
I-Chan regularly publishes in major IT-related and economic-related outlets in HK, Taiwan, and Mainland China. He has a perfect command of Chinese, English, and Thai.
I see the enormous potential in Q DAO Platform as a principally new decentralized blockchain product. Q DAO in an internal governance token, enabling the issuance of such stablecoins as USDQ, JPYQ, CNYQ and others. Q DAO token is used for utility and governance purposes. We designed the system so that Q DAO can help reduce volatility in stablecoins, USDQ. In order to do that, the ecosystem enables the use of smart contracts called “Collateralized Debt Contracts (CDC)” with dynamically changing parameters, fully automated algorithms operating based on changing conditions and a system of incentives for external market participants. USDQ has a soft peg to 1 USD, which means that the stablecoin can temporarily deviate from the benchmark level but always comes back. I am convinced that USDQ ecosystem will bring more democracy to the crypto industry as Q DAO holders take part in votes on proposals which are the only way to introduce changes to the system, needed to retain the stability and reliability of the stablecoin.
I find it extremely liberating that using the USDQ system, any person can “pawn” Bitcoins and generate a completely stable cryptocurrency, ready to be utilized for any purpose whatsoever without any limitations. The collateralized Bitcoins are stored within a special smart contract, enabling a return operation to exchange USDQ into Bitcoin, provided that the usage fee has been paid.
Background for Q DAO coin
Our development team, PLATINUM ENGINEERING, is working on the ecosystem, and we are set to create a decentralized mechanism enabled by the stablecoin softly pegged to USD.
This coin is called USDQ. I believe that this solution has what it takes to grow popular among both crypto enthusiasts, as well as broader business and commerce communities globally. In addition to USD-pegged coin, we are going to introduce more fiat-pegged stablecoins, such as JPYQ, KRWQ, SGDQ, HKDQ, CNYQ, and RUBQ.
The biggest reason we’ve been seeing is the fact that Bitcoin, Ether, and other major cryptocurrencies are prone to excessively high fluctuations in their prices on a daily basis. The volatility is so high that prices can easily jump as high as 25% within just a day and in rare occurrences, they might grow up to 300% within a month.
As of now, USDQ can be collateralized only with Bitcoin, while the stablecoin value is being continuously maintained stable as compared to the USD. I see the future in which stablecoins will promote mass adoption of cryptocurrencies, helping us, as a community, to uncover the enormous potential of the distributed ledger technology.
The ecosystem we are developing functions on the basis of smart contracts activated automatically in order to stabilize the price of USDQ via a series of stabilization mechanisms and incentives for traders.
The ecosystem is open for any person without any restrictions, ready to be used for generation of the stable cryptocurrencies. As soon as USDQ has been created, a user is free to utilize it just like any other cryptocurrency. They can transfer USDQ coins to crypto wallets, pay for goods and services received from their partners, or hold it as a long-term hedging instrument. Another important use case for USDQ is marginal trading with users collateralizing Bitcoins and obtaining a loan.
Underlying smart contracts: Collateralized Debt Contracts (CDCs)
We’ve architected the system in such a way that anybody can access the USDQ platform via the Collateralized Debt Contracts (CDCs) and generate a stablecoin by inputting Bitcoins into the respective smart contracts.
The CDCs we are developing operate in order to simultaneously “lock up” Bitcoins inside, generate the stablecoin and accrue the debt. When the user decides to get Bitcoin back, they’ll need to return the stablecoin USDQ and pay fees in Q DAO tokens, chargeable for the system use. After that, a user will be able to transfer the previously collateralized Bitcoins into their wallet. I see a high level of systemic stability in the fact that any active CDCs are always over-collateralized (i.e. the value of collateral exceeds the value of the loan being extended).
CDCs: Operating Procedure
In this section, I’ll provide a brief description of how CDCs work and how users interact with them in order to access the system.
Stage A (CDC origination and collateral placement) – The user sends the command to the system, requesting that the CDC smart contract is created. Subsequently, another command is transmitted, specifying the size and type of the collateral, which is to be utilized by the smart contract. Upon completion of this stage, the CDC smart contract has been created and collateralized.
Stage B (USDQ generation from CDC) – In the next message, the user specifies the amount of USDQ they wish to receive from the CDC, provided that this amount does not exceed the 166% collateralization ratio. Upon receipt of this command, the CDC automatically records the debt generation and locks the collateral in the smart contract.
Stage C (Repayment of debt and stability fees) – In case that the user decides to turn back the collateralized Bitcoins, they ought to repay the amount of the accrued debt and the Stability Fee, incurred for the system use. Q DAO is the only coin that can be used to repay the fee. As soon as the user has transmitted the respective amounts of USDQ and Q DAO into the CDC smart contract, the smart contract recorded the full repayment of the debt.
Stage D (Collateral withdrawal and CDC termination) – After the user has paid the fees in Q DAO and returned the issued amount in USDQ, the CDC is terminated and the user received the full amount of collateralized Bitcoins.
Now that we’ve clarified on how CDCs work, let’s look into what types of collateral users can place within the system.
Collateral Types for USDQ: Single Collateral vs Multiple Collateral
As a development team, we at PLATINUM ENGINEERING, decided that initially, USDQ enables to utilize only one collateral type, Bitcoin. In the future, we plan to shift from the single collateral to multiple collaterals being used. In this way, the system will be able to support a multitude of different collateral assets.
Price Stabilization Methods
Below, I am going to provide a detailed review on the stabilization methods we use at USDQ Platform.
Target Price – We use “Target Price” applicable to USDQ in the following contexts:
- Determination of the proportion between the collateral input into the CDC and loan extended to the user,
- Calculation of the value that the collateralized Bitcoin has, whenever the Global Resolution occurs. Initially, the Target Price is identified in USD and the denomination is 1 USD, i.e. 1 USDQ is pegged to 1 USD.
Target Rate Feedback Mechanism – We’ve established a highly effective functionality we call “Target Rate Feedback Mechanism (TRFM)”, which is to be activated in case of a drastic change in Bitcoin prices. When it’s engaged, we allow the 1-to-1 peg to be broken, while we retain the original denominations (which means that we continue measuring 1 USDQ as compared to 1 USD, for instance 1 USDQ equals 1.03 USD or 0.90 USD).
Using TRFM, we seek to engage external market participants. Thus, whenever the mechanism is activated, it starts to automatically change the Target Price, creating incentives for external actors to take actions that would result in the USDQ getting back closer to its peg, i.e. 1-to-1 benchmark level. We use the Target Rate in order to determine the scope of changes that, as we expected, will be needed for the Target Price to get closer to the peg within a short period. As a consequence, external market participants start seeing incentives to either hold USDQ (when the Target Rate is positive, i.e. above zero) or borrow USDQ on secondary markets (when the Target Rate is negative, i.e. below zero). Meanwhile, during those periods when TRFM is not engaged, the Target Rate stays at 0%, which means that USDQ experiences no price changes and continues with the 1-to-1 peg to USD.
Upon activation of TRFM, the mechanism dynamically changes the values for the Target Rate and the Target Price, creating incentives for market participants to either hold or borrow more USDQ by changing the balance between supply and demand on the market. As a result, we can incentivize the trading community to take a collective effort in order to push prices in the direction of the variable Target Price, simultaneously reducing volatility and bringing much-needed liquidity which would otherwise be gone with the markets undergoing a severe price shock.
Now I want to share with you a detailed description on what happens in the two cases: when USDQ’s price goes below the Target Price or above the same.
Whenever the TRFM has activated, upon the market price for USDQ falling below the Target Price, the mechanism would automatically increase the Target Rate. This makes it more expensive to generate USDQ via CDCs, resulting in a lower supply of USDQ and thus – with the supply going down – the Target Price increases. Simultaneously, an increase in the Target Rate triggers growth in capital gains, obtainable from retaining USDQ, which pushes up the demand. In this way, the double impact from a reduction in supply and a growth in demand results in the USDQ market price going up, helping it to move faster in the direction of the Target Price.
The same sequence of events, but in reverse, occurs when USDQ price goes above the Target Price: the Target Rate is reduced, which incentivizes more market participants to generate USDQ and, simultaneously, disincentivizes them from holding USDQ. As a consequence, USDQ prices are pushed down, on the trajectory towards the Target Price.
The TRFM is an application of the negative feedback loop concept: whenever the market price starts moving away from the Target Price, the market participants are incentivized to act in order to become a counter-balance to this move.
Sensitivity Parameter – This indicator is used to instruct the system as to the scope of the changes to the Target Rate, accounting for the observed deviation between the target and market prices for USDQ. Upon calculation, the system’s scale is taken into account. The voters can make decisions on this indicator, but during the periods when TFRM is activated, it’s fully driven by real-time market conditions, without a possibility for any direct influence by the governing community.
When both the values for the Sensitivity Parameter and the Target Rate are equal to zero, USDQ is maintained as pegged to the Target Price currently observed.
Global Resolution – This procedure ensures that USDQ holders will receive the value of their holdings, which is calculated as per the Target Price. Being the measure of last resort, it terminates the system’s operations, while making sure that all stakeholders, USDQ holders, and CDC generators, obtain the assets for the net value of their holdings. The decisions within the process are made in a fully decentralized manner, while Q DAO voting community only makes conditions on whether the process should be commenced in the face of severe emergency conditions. Among such events are lengthy periods with chaotic and irrational price moves, hacking attacks, and large-scale upgrades within the system.
Global Resolution: Stage by Stage Sequence
Stage A (Activation of Global Resolution System): The Global Resolution is activated by the so-called global settlers who are duly designated by the Q DAO Governance community. In order to activate the system, a certain majority of these actors should vote in favor of such a decision. The Global Resolution can be activated if the system has sustained a major attack or if the procedure is required due to the oncoming technical upgrade that has been duly scheduled in advance. When the Global Resolution is engaged, the system terminates CDCs creation, which serves to prevent any further manipulation by perpetrators, while, at the same time, the Price Feed is frozen at a particular price level, which will be subsequently employed to process users claims for the repayment of the net value for their USDQ holdings.
Stage B (Process of Claims under Global Resolution): Following the activation of the Global Resolution procedure, a certain period of time is instituted for the keepers process the claims from all groups of stakeholders, including CDC users and USDQ holders. Upon the completion of this process, the system allows stakeholders to furnish their claims for a fixed-size amount in BTC, applicable to CDCs or USDQ holdings.
Stage C (Provision of Collateral Repayment Claims by USDQ Holders and CDC Users): At this stage, all users, who generated USDQ via CDCs or bought USDQ on secondary markets, can transmit a message to the USDQ Platform, requesting that their holding be exchanged in the collateral asset, i.e. Bitcoin. The number of such claims should be calculated as the net value of the collateralized assets, as determined by using the Target Price for USDQ.
For instance, if, as at the time of the Global Resolution activation, the user holds 10,000 USDQ and the BTC/USD price is 5,000 USD, while the Target Price is 1 USD, this means that the user would be able to furnish the claim for 2 Bitcoins. The USDQ Platform institutes no time limits for the provision of the claims for collateral repayment.
Risk Management Policies at USDQ Platform
We’ve made sure that Q DAO holders can vote on proposals for either changing existing risk management approaches or introducing new ones.
Introducing new CDC types: This procedure enables the Governance to create new types of CDC featuring uniquely determined Risk Parameters. It can be used to create smart contracts for either new types of collateral or new sets of risk parameters for already existing collaterals.
Introducing changes to already existing CDC: Using this process, the Governance can amend Risk Parameters for any CDC that is already operational at the platform.
Introducing changes to Sensitivity Parameter: We use this indicator to amend the scope of sensitivity, as used with regard to operations of the Target Rate Feedback Mechanism.
Introducing changes to Target Rate: The governance community is able to make changes to the Target Rate. Essentially, this is done in only one specific case: when the need arises for the USDQ price to be pegged to the currently applied Target Price. In this event, USDQ Governance also determines the value of the Sensitivity Parameter. In all other cases, both the Target Rate and the Sensitivity Parameter are continuously equal to 0%, which deactivates the TRFM and lets the Target Price peg to the current value of the market price.
Designating trusted oracles: We’ve designed USDQ Platform in such a manner, as to enable a receipt of external data from a large number of individually operating oracles with this data being used in internal smart contracts. At the same time, the USDQ Governance determines the so-called “trusted oracles”, deciding on who these nodes are and what their number is. Benefiting from decentralization, the system can continue safe operations with up to half of the oracles sustaining either malfunctions or misinformation attacks by perpetrators.
Introducing changes to Sensitivity for Price Feed: We’ve enabled the Governance can make an amendment to the procedures, used to determine the amplitude of the changes to the price feeds, impacting the prices, internally used within the system.
Designating global settlers: The Global Resolution process is an important component within the defense system against attacks, waged on oracles or smart contracts used for governance. The voting process is used to decide on the names of global settlers and their number, required to engage the Global Resolution procedure.
Basic Introduction to Q DAO and USDQ Ecosystem
In this part, I provide information on the most important features and benefits that Q DAO and USDQ bring to users.
- 1 USDQ is pegged 1 USD (i.e. it equals 1 USD)
- The ecosystem enables to maintain 1 USDQ equal to 1 USD throughout the system of smart contracts, managing collateralized assets and price dynamics. Holders of Q DAO (an internal governance token) vote on major proposals, helping to improve the ecosystem with time.
- Q DAO holders are one of the last lines of defense – they are to buy USDQ in case of major price swings.
- The system is enabled by smart contracts, pieces of code running fully autonomously on blockchain.
- Procedure for Global Resolution is used as a final line of defense.
- Stablecoins are a missing link, vitally needed to bring mass adoption of distributed ledger technology (blockchain).
- USDQ ecosystem can also be used for marginal trading, which is a highly sought-after function among the crypto community.
Maybe you heard about the project MAKER DAO and their DAI?
I want to praise these guys – they are first to create a decentralized stable coin.
We occupy an honorable second place at this race, and basically, we were inspired by the technologies of MAKER`s DAI.
some Q DAO functionality is similar to MAKER DAO, so we decided to use Maker`s terminology because we do believe – their technologies should be a reference for creating any decentralized stable coins.
Why we are using BTC as collateral? 1) Bitcoin is a most liquid digital asset 2) we have many friends who are big Bitcoin holders (BTC whales) or Bitcoin OTC traders. “
We hope even so big guys like Brothers Winklevoss (Cameron Winklevoss and Tyler Winklevoss) will start to use Q DAO. They have a lot of Bitcoins, but they don’t want to sell it. So if they need money – they can pawn their bitcoins to Q DAO and immediately get USDQ.
“why we built Q DAO based on Ether smart contracts, but not Tron (by Justin Sun) and not EOS ( by Daniel Larimer)?
Our genius engineers are love ETHEREUM because of mass adoption of this blockchain, also we respect the approach of Vitalik Buterin (we met him a few times). Maybe in the future, we will consider using TRON or EOS, in case their foundations can provide enough funds to proceed with development.
USDQ is decentralized stablecoin, which uses algorithms to offer higher stability and reliability. Fully on-chain and monitored by high-speed AI robots, ecosystem offers reliable defences against malicious acts and attacks. First run in line of fiat-pegs, USDQ is brought by PLATINUM ENGINEERING Team, looking to edge together innovative solutions in collateralization, using stabilizing mechanisms and neural networks for high-endurance stablecoins. USDQ breaks limits out of this legacy world. USDQ is an ERC20 token and can be stored on any ERC20-compatible wallet, like MyEtherWallet or Mist. Users can now trade USDQ and Q DAO on BTCNext.io, a popular crypto exchange. It’s convenient that all trading pairs at BTCNext.io will be listed with USDQ as the basis currency.
BTCNEXT Exchange – next generation spot and margin trading platform. It is the first Strategic business partner of USDQ stablecoin that is based on a DAO technology. All pairs will be listed with USDQ. BTCNEXT customer service will be happy to answer all of your questions.
I-Chan thanks you for reading this article. He’s always ready to share his vision on what makes USDQ such an outstanding project. I-Chan is convinced that USDQ will become a major disruptor in stablecoins niche, bringing predictive capabilities, full decentralization and pro-democracy governance architecture.
Disclaimer: This overview may not be fully exhaustive and does not assess the viability of any project, nor its team legitimacy. Readers should conduct their own due diligence before using or investing in any of the listed Stablecoins. This article represents the author’s opinions only and should not be considered investment advice. All described functionality in the article is still under development, it can be changed/processed. Please follow the updates.