Equilibrium’s Stablecoin Now Has $17.5M in Insurance That Pays Out Automatically

Equilibrium will hold 6.5 million EOS tokens in reserve as an insurance policy for users should its stablecoin lose its peg.

AccessTimeIconDec 12, 2019 at 2:05 p.m. UTC
Updated Sep 13, 2021 at 11:48 a.m. UTC
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Stablecoin issuer Equilibrium has self-funded a $17.5 million insurance policy for its EOSDT token.

According to CEO Alex Melikhov, Equilibrium’s EOSDT is now backed by smart contracts that pay out consumers if the dollar-pegged token crashes through its collateralized floor. Much like how America’s FDIC insures consumers’ traditional bank deposits against a run, Melikhov says these smart contracts inject certainty, and stability in the face of “black swans.”

Security comes in the form of a hefty doomsday reserve totaling 6.5 million EOS tokens, worth about $17.5 million at the time of publication. Called the “Stability Fund,” this rainy-day reserve is spread across three smart contracts that maintain equilibrium.

“If the system is triggered, a mechanism will calculate how much additional capital is required to collateralize the system up to 100 percent,” Melikhov said. “This makes sure that every user who has generated EOSDT stablecoin on our framework will get back their funds even if the collateralization of the system will drop below 100 percent.” 

Equilibrium says it has taken steps to lock down the Stability Fund. It contracted with DeFi consultancy firm EOS42 to conduct a security audit of its smart contracts, and verified with the auditors the fund will only release funds under the set conditions.

Other withdrawals face a transparency-focused slow-walk, Melikhov said. Equilibrium must give 30 days’ public notice for any fund movement outside the reimbursement system. 

“These conditions are coded into the contracts,” Melikhov said.

In the long term, Equilibrium is betting that added transparency and assurance will help further grow what has already become one of the largest single EOS token pools. Melikhov said 4.5 million collateralized EOS tokens place EOSDT at the front of EOS-based dapps.

Melikhov said he hopes Equilibrium’s work could set up “some sort of standard for the industry,” particularly other DeFi projects.

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