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Decoding USDA: Unveiling Angle’s USD Stablecoin Mechanisms

7 min read - by Noé Caporal, Sogipec

USDA, Angle's USD stablecoin, operates with a modular infrastructure and relies on various mechanisms aimed at maintaining stable prices while offering features like savings, borrowing, lending, and forex.
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A few days ago, we introduced USDA, Angle’s upcoming USD stablecoin.

If it’s the first time you've heard of USDA, know that USDA will be the most complete & reliable yield-bearing USD stablecoin. It will offer a savings solution, the same liquidity as USDC, cross-chain availability, borrowing & leverage features and advanced anti-depeg mechanisms. With USDA, and EURA (formerly agEUR), Angle Protocol will lead the charge in creating the most robust and streamlined onchain foreign exchange (forex) hub.

But how will USDA work concretely? What are the mechanisms behind the stablecoin?

Here is everything you need to know.

A modular infrastructure

USDA is going to be a composable piece of infrastructure relying on different modules through which the stablecoin can be minted.

veANGLE holders will play a central role in USDA composability. They will vote, govern and parametrize. Any new minting module — which allows the creation of additional USDA — could be added, revoked, amended and updated at any time through onchain governance votes. All changes will be fully transparent. Before any update, there will be a 24-hour timelock allowing stakeholders to anticipate any decisions they may not agree with.

Each module will have its own trade-offs, unique features, and risks. The Angle DAO will be advised by an independent Asset Liability Management Committee responsible for ensuring sound risk management and an approach to handle all these modules, how users interact with each other, and the management of every module.

Now, let's break down the different modules.

1. The Transmuter

The Transmuter is the most important component of the USDA infrastructure, serving as a Price Stability Module. It will empower users to effortlessly swap a whitelisted collateral asset for the stablecoin at its oracle value, with no fees. Conversely, it will allow for the redemption or burning of USDA in exchange for one or all of the collateral assets in the backing.

Thanks to the Transmuter, users will be able to seamlessly mint and burn USDA from USDC without incurring any fees or experiencing slippage. The system will automatically monitor its exposures to the assets held in reserves. Advanced rebalancing mechanisms will ensure that Angle Protocol avoids overexposure to any single asset, while also incentivizing market makers to restore reserves to their target exposures.

As part of this mechanism, Angle will integrate tokenized securities, T-bills and DeFi yield-bearing assets into the backing, allowing the Protocol to generate yield on its reserves.