Why Cygnus Finance
Tether and Circle, the current providers of the industry's dominant stablecoins, USDT and USDC, are sitting on hundreds of billions of dollars of liquidity and taking in more than a billion dollars a quarter from real-world investments, but holders of USDT and USDC don't get to share even a single cent of that.
The U.S. Treasury rate is one of the most important interest rate parameters in the world, and for holders of U.S. dollar-denominated assets, the U.S. Treasury rate is also the base rate to which they should refer.Cygnus Finance provides an entry point for all on-chain USD asset holders to enjoy the yield rights of U.S. Treasuries while holding stablecoins.
Unlike other RWA project parties, Cygnus Finance uses the rebase mechanism to match off-chain earnings based on the characteristics of smart contracts, which ensures that all users can participate in the mint and redemption of cgUSD at $1. It is not necessary to calculate the holding cost and income because of the complicated price change mechanism.
Since cgUSD is based on short-term U.S. Treasury issues also have a natural advantage in terms of reserve transparency. The cgUSD's reserves are made up of a few very simple and easy to understand components:
T-BILL
cgUSD uses short-term U.S. Treasuries (T-Bills) with an average maturity of no more than 90 days as its main reserve asset. U.S. Treasuries are considered the safest dollar-denominated asset.
Cygnus Finance's potential holdings of short-term U.S. Treasuries (T-Bills) consist of only the following specific assets:
Treasury bills or bonds that are close to maturity.
A money market fund that invests in short-term U.S. Treasuries.
Treasury ETF.
A reverse repurchase agreement (repo) collateralized by U.S. Treasuries.
More specific investment requirements are listed below:
Final maturities limited to 397 days or less
U.S. dollar-weighted average maturity not to exceed 90 days and U.S. dollar-weighted average duration not to exceed 365 days
not purchase any securities that are not daily liquid assets unless, immediately after such purchase, at least 10% of its Total Asset Value will be invested in daily liquid assets and unless, immediately after such purchase, at least 30% of its Total Asset Value will be invested in weekly liquid assets, the Fund will not purchase any securities that are not weekly liquid assets.
Mutual funds; index-tracking securities, including ETFs
Invest at least 99% of its total assets in cash, U.S. Treasury bills, notes and other obligations issued or guaranteed as to principal and interest by the U.S. Treasury, and repurchase agreements secured by such obligations or cash.
Repurchase Agreements
U.S. Treasuries
U.S. Government Risk Money Market Funds and ETFs
Avoid NRA withholding tax by investing 97% or more of your assets in qualified interest income (QII) through a RIC
Assets in Transit
Due to the unique nature of RWA investments, when cgUSD is minted or redeemed directly through the Cygnus Finance platform, it is inevitable that there will be assets "in transit" for a short period of time.
Although Cygnus Finance is committed to minimizing the transit time of these funds, force majeure factors such as waiting for fiat currency exchange, waiting for partner banks, partner brokers and other financial institutions to open up fiat currency transfers, and waiting for the market to open up, will still result in the transit time not being determined by Cygnus Finance.
Assets in transit typically represent a small percentage of reserve assets, and Cygnus Finance will minimize the time in transit and non-market risk while ensuring that assets are safe and low depletion.
On-chain liquid assets
In order to protect all users' needs for quick redemption, a small portion of the assets will stay on the chain as liquid assets.
In order to reduce the interest rate risk and the risk of fluctuation of stablecoin value brought by this part of necessary liquidity, the protocol will choose risk-free liquidity mining and other defi operations in the market to obtain a certain amount of safe interest; all the interaction behaviors of this part of the assets will be guaranteed by the form of interaction data on the chain of announcements to ensure transparency.
After the subsequent introduction of DAO governance, the right to use this part of the asset will all be voted by DAO.
Collateralized Buffer Assets
In order to protect cgUSD holders from interest rate risk and the Federal Reserve's unconventional policies, cgUSD will use an overcollateralization system to some extent. This overcollateralization serves as share protection and can offset, to some extent, changes in the value of the underlying asset due to further increases in interest rates.
Once overcollateralization has a certain amount of reserves, Cygnus Finance will identify, through community voting or otherwise, one or more insurance partners to further protect against extreme market conditions by purchasing asset insurance and reinsurance.
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