The model behind NOME’s $USDbr

Our goal is to implement peg stabilization mechanisms similar to the original Basis algorithmic stablecoin model. According to the model, the target token value of $1 can be achieved by introducing a mechanism to control the money supply by buying or selling bonds. However, we propose a few core fixes to the death spiral problem.

First of all, the rapid growth of the money supply, caused by the active expansion of liquidity, leads to an imbalance in the system: the growth in the volume of the bond market does not keep pace with the growth of the money supply. If the price deviates from the peg, the demand for bonds is insufficient to stabilize the peg.

Thus, liquidity mining allows you to quickly bootstrap a synthetic asset, while simultaneously destroying the stabilization mechanism. The closest term to describe this situation is the “resource curse”, which is observed in resource economies (for example, oil-exporting countries): when resource prices rise, these economies make huge profits, but they do not lead to economic growth, and , on the contrary, destroy the internal non-resource sectors of the economy, leading to negative consequences.

The reason lies in the fact that the economy cannot absorb “extra money”. One of the ways to solve the resource curse is to create a stabilization module, into which extra profits are withdrawn at times of high prices to use them at a time of low prices. So the idea is to implement similar stabilization mechanisms to the Basis model.

NOME model allows to absorb “extra money” to Protocol Owned Liquidity on expansion phase, allowing later use of these funds to keep the peg. Similar to what OHM, Frax, Klondike did. POL into POL…

By having this module inside the protocol, it’s possible to turn dummy TVL and degeneracy into an actual liquidity layer atop of Berachain.

One other core change is the vision itself. Basis-like protocols were only about degeneracy, but there needs to be something fundamental behind all that. As the liquidity deepens, it’s possible to look into Ethena-like models where either directly or through a separate protocol $USDbr could be taking inefficiencies out of the markets. Therefore, embracing its own design which thrives on the disparity between spot and derivative markets.

To see the Stabilization Module, head over to: https://berascan.com/address/0xfF491a00b12BE29413a2B29c2499cac50E4eC35a