In this article, we invited our friends at Content Guild to interview our Founder & CEO to learn more about Open Dollar:
Following the bear of 2022 and the resurgence of 2023, a new year has arrived for DeFi, and there’s no shortage of fascinating new projects and protocols. Here at Content Guild, we know that DAOs are only as good as the people within them, and we’re thrilled to have had the opportunity to engage in an insightful conversation with Joseph Schiarizzi (@cupOjoseph on X), the Founder behind Open Dollar, an innovative new protocol emerging from the RAI ecosystem.
In this exclusive interview, Joseph unravels the story of Open Dollar; a tale of innovation borne of necessity, resilience borne of mathematics, and the pursuit of a truly transformative DeFi experience.
The journey of Open Dollar began in the wake of the 2023 USDC depegging event, a moment which shook the crypto community and served as a wake-up call for many, including Joseph:
"The USDC de-peg was a real eye-opener, because it happened despite all the supposed security nets and safety assurances," he recollected. He went on to observe this is partly due to the fact that USDC cannot be redeemed for its underlying collateral, significantly impairing the asset’s usefulness when compared to traditional lending mechanisms:
“DeFi won’t be useful until it can at least satisfy the table stakes of traditional finance. Traditional finance, notably in the context of housing loans, exemplifies user-friendly leverage systems. For instance, putting down 5% on a house equates to acquiring 19x leverage on that property. Scenarios like this are commonly the only realistic way that an average person can experience significant leverage power in their lifetime. Which is important, right? Additionally, the traditional housing market provides the flexibility to sell a mortgage or house, using the proceeds to settle the loan — a level of fluidity currently lacking in DeFi.”
This is where Open Dollar steps in, aiming to revolutionize DeFi by introducing transferable Non-Fungible Vaults (NFVs), which we will discuss in more detail below. Just as one can transfer a mortgage or sell a property in the traditional financial sector, Open Dollar's NFVs aim to provide similar fluidity and user empowerment within the DeFi landscape.
At the heart of Open Dollar lies its most innovative feature – Non-Fungible Vaults (NFVs). NFVs, unlike anything in the current DeFi landscape, offer unparalleled flexibility and control, allowing users to transfer and trade their financial positions as never before. We asked Joseph to break them down for us:
"NFVs are a game-changer, fundamentally different from anything in traditional finance," he explained with palpable enthusiasm. “These vaults bring a new dimension of utility, security, and risk tolerance to DeFi.”
"What we're introducing with NFVs is not just a new financial instrument; it’s a whole new way of thinking about and interacting with financial assets in the DeFi space."
NFVs stand out by uniquely associating the ownership of collateralized assets with NFTs, a departure from traditional Collateralized Debt Positions (CDPs) where ownership is tied to an account. This innovative approach enables the creation of additional markets and user opportunities that were previously unattainable. Unlike standard DeFi vaults, NFVs offer several advantages:
Market Integration and Flexibility: “NFVs can be traded on NFT marketplaces, integrating seamlessly with existing NFT infrastructure. This opens up new avenues for market development and user engagement.”
Innovative Liquidation Solutions: “Automations can facilitate the sale of user vaults to arbitrageurs without incurring liquidation penalties. This feature significantly reduces the risk and cost associated with liquidations.”
Enhanced User Control: “Users can redeem their $OD for their specific vaults or purchase vaults from the open market that align better with their collateral preferences. This flexibility in managing collateral positions is a significant shift from traditional DeFi norms.”
Increased Capital Efficiency: “With a more capital-efficient market for liquidatable vaults, users face reduced risk when creating leveraged positions. This efficiency enhances the overall stability and appeal of the platform.”
ERC-721 Standard and Dynamic Display Images: “Open Dollar’s NFVs are based on the ERC-721 standard, featuring dynamic display images that automatically update to show vital information such as deposited collateral, risk scoring, and debt minted. This real-time display enhances transparency and user understanding of their financial positions.”
Open Dollar’s commitment to security and stability is exemplified by its native stablecoin, $OD, a key aspect of its innovative financial ecosystem. Joseph provided insight into the mechanisms that make $OD distinct in the realm of stablecoins, particularly its overcollateralized nature and the sophisticated stability mechanism it employs. This approach, coupled with Open Dollar's rigorous auditing processes, solidifies the platform's reputation for security and reliability in the DeFi space.
$OD, Open Dollar’s native stablecoin, is overcollateralized as one of two core methods of maintaining its peg.
“Being overcollateralized means that the collateral balance backing $OD exceeds the actual market value of the stablecoin itself. This ensures that there is always more value supporting $OD than its circulating market cap, which provides like a buffer against market fluctuations and instills confidence in its stability.”
Open Dollar employs a novel stability mechanism akin to RAI’s PID controller, in which algorithmic adjustments to debt prices incentivize actions to maintain the $1.00 peg.
“When users borrow debt from the OD protocol, their debt is priced at a specific level. The PID controller then adjusts the debt price higher or lower, creating incentives for the market to collectively maintain the stablecoin’s peg. These adjustments are intentionally subtle, minimizing market impact and towards a stable peg for $OD, which should let us avoid significant fluctuations like those observed in RAI. We’re completely rebuilding the controller system to be dollar pegged.”
"We are committed to publishing our code openly, and everything we launch on mainnet adheres to our highest security and safety standards."
The Code4rena audit process is unique in that it invites a large pool of talented auditors to stress test the protocol in creative ways, effectively open-sourcing the entire process. This contrasts with more centralized audit firms that may focus on quantity over quality. Code4rena fosters a naturally competitive environment where auditors vie to identify bugs and claim bounties, resulting in a comprehensive and thorough audit process.
Joseph went on to mention this would be only the first of many, with an additional audit by another leading firm beginning shortly in preparation for their mainnet launch.
Open Dollar is now accessible in Testnet and will be live soon, but getting here has been anything but smooth, with a significant challenge emerging when Arbitrum unexpectedly withdrew their Goerli support, compelling a swift and strategic shift to Sepolia. This moment tested the team's agility and adaptability, qualities that Joseph believes are crucial in the fast-evolving DeFi space:
"Yeah, our quick thinking and flexibility really paid off during the switch," he told us, with a sense of pride and accomplishment.
And because of that, Open Dollar is now in a phase of active community engagement, inviting users to test and explore the protocol as mainnet approaches.
Looking towards the future, Joseph shared exciting developments in the pipeline – the mainnet launch, the introduction of the $ODG governance token, and a marketplace for NFV trading. These initiatives are set to expand and enrich the Open Dollar ecosystem, offering users new avenues of engagement and investment. Read more about Open Dollar governance.
Joseph ended our discussion by encouraging the Content Guild community and anyone else interested in learning more to, "Dive into our Discord, participate in our testnet, and explore the innovative world of Open Dollar.".
Open Dollar is a DeFi lending protocol built on Arbitrum for borrowing against liquid staking tokens while earning staking rewards and providing CDP liquidity with Non-Fungible Vaults (NFVs).