Benefits

Benefits

USDX and the system around it add a number of benefits to a number of user types. New benefits and more applications of these benefits will be discovered over time.

Mortgage Repayment

Earning yield by deploying USDX enables a real estate owner to repay their mortgage significantly faster. Yahoo!Finance recently published a report on the benefits of a homeowner making one (1) extra mortgage payment per year, “let’s say you have a $300,000 mortgage with a 30-year loan term and a fixed interest rate of 6.75%. Your monthly payment is about $1,946, and you make 13 payments of $1,946 per year rather than 12. That single extra annual payment will shave almost six years off your repayment term, so your home loan will be paid off in roughly 24 years rather than 30.”

If someone purchased a $500,000 property by putting 20% down payment ($100,000 down) and borrowing $400,000 at 6% APR for a 30-year fixed-rate mortgage, staked with Stable, and deployed all they could (80% LTV, so $0 to start) into a bond that yielded 9% (a 3% positive spread) each month for the duration of their mortgage, they would pay off their mortgage 5 years and 2 months early. 62 months and $176,680.48 would be saved. This chart shows the difference in their mortgage principal balance over time without Stable and with Stable.

Spend without Selling

One of the key advantages of this system is the ability for real estate owners to spend the yield generated from their collateral without needing to repay it. Real estate depositors grant Stable the authority to lend USDX they are not borrowing to earn yield, so that deposited properties earn yield like bonds or a money market account. Depositors can opt out of this feature but will not earn yield on unused deposits. Stable lends that liquidity to other borrowers who pay a monthly APR and put up collateral like Bitcoin (BTC), Ethereum (ETH), or gold.

Assuming a 4% APY on unused deposits, a depositor with 4,000,000 unused USDX would earn $10,000 per month ($120,000/year). By default, yield earned on unused USDX applies to outstanding interest owed (APR) on borrowed USDX and then to the borrowed amount of USDX. This flexibility allows real estate owners to use their equity for investments, consumption, or other financial opportunities.

This real yield is paid in dollars (or fiat backed stablecoins) and can be used within DeFi or otherwise, enabling the depositor to earn $10,000 a month, or make a purchase of $100,000 that would be repaid automatically within a year.

Portfolio Optimization

Sophisticated actors in the real estate world may already borrow against their portfolio to capitalize on basis trades, arbitrage, or simply to lever up with additional acquisitions. USDX enables them to borrow at a lower rate in real time 24/7/365 and easily capitalize on DeFi or other onchain opportunities. USDX lines having the ability to revolve brings flash loans to the party. With a plethora of traditional opportunities coming onchain, there are a fantastic number of great things to capitalize on.

Looping Example

A simple use of USDX for portfolio optimization is looping. Looping is borrowing money at a lower rate and performing a basis trade multiple times (redeploying the borrowed capital into similar opportunities that yield a higher rate).

Let’s say a new asset (“Asset A”) has been approved as collateral for USDX, and USDX can be borrowed against the asset at 9% APR up to 80% LTV as long as the borrower pays a $10 one time fee (per share) to help fund credit default swap insurance on Asset A. Asset A is valued at $10,000 per share, 10MM shares exist, and Asset A provides a base yield of 10%.

Jao, a portfolio manager, buys 10,000 Asset A that have been tokenized by Stable, and he then borrows 80MM USDX for an effective rate of -3.5% ((0.8 * 0.9) - (1 * 0.10)).

Only 10,000 can be deposited per entity, but another asset (“Asset B”) was also approved, is valued at $10,000 per share, offers a 10% yield, and can be borrowed against at 9% up to 80% LTV. Jao uses the 80MM USDX they have borrowed to buy 8,000 of this Asset B.

Jao notices that yet a third asset (“Asset C”) was approved as USDX collateral, and it is also $10,000 a share, offers a 10% yield, with a max USDX LTV of 80% at 9% APR.

Here is how Jao’s portfolio looks:

Asset Tier	Asset Value	Yield (10%)	Borrowed	Debt Cost (9%)
Asset A	$100.00M	$10.00M	$80.00M	$7.20M
Asset B	$80.00M	$8.00M	$64.00M	$5.76M
Asset C	$64.00M	$6.40M	—	—
Total	$244.00M	$24.40M	$144.00M	$12.96M

Instead of earning 10% on the initial $100MM investment, the manager is now earning a net 11.44% after paying 9% APY to borrow 80% LTV against Asset A and Asset B. Don’t forget Jao has 30,000 shares and incurred a one time cost of $300,000 to help fund credit default swaps against the shares, making the 1st year’s yield 11.14%.

Stable tokenization does not disable assets from participating in their traditional financial ecosystem. In fact, Stable is able to source cash lines of credit for some users. The goal is for onchain finance to win because it is better and enabling traditional assets with Stable is obvious.