Davos Protocol operates as a Collateralized Debt Position (CDP) platform, allowing users to lock up assets such as Liquid Staking Tokens (LSTs), Liquid Restaking Tokens (LRTs), and other reward-bearing assets to mint the omnichain stablecoin, DUSD.
Davos Protocol deviates from traditional CDP models, which often feature near-zero borrowing rates, by adopting a more dynamic and unbiased monetary policy. Borrowing rates within the protocol are not only determined by a dynamic system that selects the higher of two rates – the Consumer Price Index (CPI) or a central bank reference rate – but are also tailored to the risk profile of the collateral used.
This means that assets deemed riskier may incur a higher cost of borrowing, reflecting their risk profile. This approach ensures a balanced and realistic borrowing rate, more closely aligned with the true cost of capital and the inherent risk associated with different types of collateral.
Upon depositing collateral, users can mint DUSD, an omnichain stablecoin. This stablecoin is pegged to the dollar and offers users a reliable asset that can be used across multiple chains, thanks to the protocol's omnichain functionality. DUSD can be used within the Davos ecosystem or on any of the partnered chains like Ethereum, Polygon (PoS), Arbitrum, Optimism, BNB Chain, and Polygon zkEVM.
