Frequently Asked Questions
The Davos Protocol is a decentralized platform designed to address the yield challenges associated with stablecoins. Unlike traditional DeFi platforms, Davos harnesses the power of Liquid Staking Tokens (LSTs) and other reward-bearing tokens. By leveraging these tokens, Davos offers a resilient omnichain stablecoin, DUSD, enabling users to compound their returns through borrowing incentives and revenue redistributions.
The 'flywheel effect' in Davos Protocol creates a self-reinforcing cycle of growth. Borrowers are incentivized based on their collateral type, leading to increased protocol revenues. These revenues are then strategically redistributed to various participants like DUSD liquidity providers, lenders, and the DSR. As the APR of pools rises, there's a corresponding increase in TVL. This boost then leads to higher emissions, further channelling more revenue back into the ecosystem, and creating a positive feedback loop.
LSTs are tokens that represent staked assets and their associated rewards. In the Davos Protocol, LSTs play a pivotal role by serving as collateral. By utilizing LSTs, users can maintain their staking rewards while simultaneously borrowing the protocol's native stablecoin, DUSD. This allows users to amplify their yield potential by benefiting from both staking rewards and opportunities within the DeFi space.
For Ethereum, the minimum is 300 DUSD. On Arbitrum and Optimism, it's 100 DUSD. For Polygon zkEVM, BNB Chain, and Polygon (PoS), the minimum borrowing amount is 50 DUSD.
On Ethereum, for instance, the protocol requires a minimum deposit of 0.25 ETH as an LST, which translates to approximately 300 DUSD. Nonetheless, with this collateral amount, users can’t borrow the full 300 DUSD as that would mean they’re at 100% utilization. Following the protocol’s guidance, users are advised to maintain their borrowing below 66% of their collateral’s value. Thus, with the aforementioned 0.25 ETH collateral, a user would be best positioned to borrow up to 198 DUSD.
DGT, or the Davos Governance Token, empowers holders with the ability to vote on protocol changes, ensuring democratic decision-making. By holding veDGT (vote-escrow DGT tokens), users can actively participate in governance, deciding on borrowing incentives allocation and the redistribution of revenues, among other pivotal decisions.
Davos Protocol prioritizes the security of its users' assets. The platform has undergone rigorous smart contract audits, and by implementing over-collateralization strategies, it intends to ensure that the issued stablecoins are backed by assets of greater value. However, as with all investments, it's crucial to be informed and cautious, and always maintain a healthy collateralization ratio to minimize risks.