bvUSD Explained
A new digital gold standard for stablecoins
What is bvUSD?
bvUSD is a capital-efficient, USD-pegged stablecoin issued by BitVault, a DeFi protocol designed for institutional-grade borrowing. Unlike traditional fiat-backed stablecoins like USDC or USDT, bvUSD is overcollateralized and backed primarily by Bitcoin derivatives, ensuring a resilient and decentralized foundation.
As a permissioned fork of Liquity V2, only whitelisted institutions can borrow and mint bvUSD, reducing smart contract risks while maintaining DeFi’s efficiency.
What makes bvUSD unique?
bvUSD is built with strong stability mechanisms and institutional-grade capital efficiency:
Overcollateralized: Backed initially at 40% Loan-to-Value (LTV)
BTC-backed stability: Uses nBTC by Matrixport (currently 2,000 BTC) as collateral.
User-set interest rates: Borrowers determine their own rates, allowing dynamic adaptation to market conditions.
Direct redemption: Always redeemable for $1 worth of BTC (or other collateral) by whitelisted entities, creating a natural peg arbitrage.
Institutional liquidity: Permissioned entities ensure liquidity stability through whitelisted Stability Pools and controlled minting and redemption.
Stability Mechanisms - How does bvUSD maintain its peg?
BitVault employs several stability mechanisms to maintain the bvUSD peg:
Over-collateralized System: bvUSD is initially minted at a 40% LTV, with up to 75% LTV thereafter.
Multi-collateral Support: Allows multiple assets as collateral, optimizing capital efficiency with isolated risk management and dynamic LTV.
Controlled Minting & Redemption: Whitelisted entities mint bvUSD via Troves; redemption enables $1 peg arbitrage.
Whitelisted Stability Pool: Approved entities deposit bvUSD to absorb liquidations and earn discounted collateral.
Automated Liquidation: Auto-liquidates below threshold; Stability Pool repays debt.
Peg Maintenance: 1:1 bvUSD-BTC conversions (or other collateral) and adaptive redemption fees maintain peg.
Supporting Stability Mechanisms
BitVault incorporates additional stability mechanisms through bvUSD utility:
bvUSD Smart Vault: Allows bvUSD holders to deposit tokens and receive sbvUSD, earning returns from a multi-strategy yield product managed by Keyrock.
bvUSD Liquidity: DEX, CEX, and option market liquidity ensures fair market arbitrage.
VCRAFT: Serves as a governance and reward token, bought back using DEX and protocol revenue streams.
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