A Stablecoin with PWRs, designed to be the most useful stablecoin on the market
PWRD is low-risk savings product. Designed to offer safer access to DeFi yields, tokenised as a stablecoin with built-in yield and protection. Its value is backed by three of the most traded stablecoins on the market—DAI, USDC, and USDT—but also protected against problems with any of them.
As Gro Risk Balancer spreads risk across stablecoins, this helps to protect PWRD if one of DAI, USDC, or USDT fails or gets censored. It then offers Deposit Protection, as the risk tranching mechanism means that any loss of capital from stablecoins or yield strategies is first absorbed by the Vault, letting PWRD generate yield more safely.
How do we make sure PWRD is safe?
We actively manage our exposure to DAI, USDC, and USDT to ensure we are not over-exposed to any of them that the failure of one stablecoin would compromise the value of PWRD. We do so through measuring not only our direct exposure from the strategies, but also monitoring the underlying collateral of DAI to measure indirect exposure. We then make sure our total exposure of any stablecoin is being protected by Vault.
Let's look at an example. Assume our direct exposure to the three stablecoins are 34% DAI + 33% USDC + 33% USDT - this does not mean our exposure to USDC is only at 33% as DAI is partly collateralised by USDC. Therefore, we would add on top the risk exposure of USDC that is used as collateral to mint DAI.
At the moment, 55.6% of DAI is collateralised by USDC and DAI overall is over-collateralised at 218% (see here for latest data). In case USDC fails, this means DAI would go from being over-collateralised at 218% to under-collateralised at [218% - (218% * 55.6%)] = 96.8%, meaning every DAI could only be redeemed for 0.968 USD. Therefore, we add the 3.2% value drop for DAI into our risk exposure to USDC. Our total exposure to USDC is therefore 33% (direct exposure to USDC) + 34% * 3.2% (indirect exposure to USDC since it is used to collateralise DAI) = 34.088%. We use this figure to assess if we need to adjust our strategies to ensure PWRD is sufficiently protected by Vault.
Some of you may note that the difference of total exposure in this example (34.088%) and direct exposure (33%) does not differ that much to warrant this lengthy explanation. But we also go beyond this and stress-test more extreme scenarios - like when USDC fails and ETH value drops drastically at the same time (which is important since 33% of DAI is collateralised by ETH) to ensure PWRD value is not compromised even in that case.
To track Gro Protocol's exposure to various stablecoins, please go to our dApp (https://app.gro.xyz/) and scroll to the bottom to view our dashboard.
To better understand the mechanics behind PWRD's Deposit Protection by Vault, check out this page!
On top of this, PWRD's price is designed to be more stable than its component stablecoins. Exchanges in and out of PWRD are done using Curve as a price oracle to price the deposited assets. This allows the protocol to have a responsive valuation of stablecoins and offer the fair exchange rate prevalent in the market. In order to prevent price instability due to manipulated Curve prices, we use Chainlink as a second line of defence to sense-check prices. This design allows PWRD to remain closer to the USD peg even if one of its component stablecoins deviates from it.
Finally, holding PWRD generates yield from Gro Protocol. While the PWRD token itself is pegged to the dollar, yield accrues to holders of PWRD through a rebasing mechanism as additional tokens into your wallet, without requiring any claiming or staking actions.
PWRD is a superior stablecoin offering both built-in deposit protection and yield. It's fully backed by three major stablecoins, but can handle the failure of any of them. It has built in yield, delivered as a stream of new tokens straight into your wallet. Plus, the longer you hold it, the more of the HODL contribution you'll get. We dare you to find a better stablecoin.