How OMEGA works
Loans create oUSD, the stability pool stands behind them, and the fees borrowers pay are shared with the people who keep the system safe.
#The cycle
- A borrower locks ADA in a loan of their own and borrows oUSD against it. The oUSD is created at that moment.
- The borrower pays a borrow fee, a yearly rate fixed for 90 days at a time.
- The fees are shared every week between OMEGA stakers, stability pool depositors, the protocol's own safety funds and liquidity.
- When the loan is repaid, the oUSD is destroyed and the ADA goes back to the borrower.
oUSD only ever exists because someone borrowed it against more than twice its value in ADA, or because someone swapped USDCx for it one for one in the peg module.
#Who does what
| Who | What they do | What they earn |
|---|---|---|
| Borrowers | Lock ADA and borrow oUSD | Keep their ADA and its staking rewards |
| Stability pool depositors | Deposit oUSD that repays loans in trouble | A share of revenue, ADA from liquidations, OMEGA rewards |
| OMEGA stakers | Stake the OMEGA token | 35% of revenue, OMEGA rewards |
| Liquidity providers | Add to oUSD and OMEGA pools on Minswap | Pool fees, OMEGA rewards |
| Keepers | Run routine jobs anyone may run, like liquidations and updating the price guard | The liquidation bonus, where there is one |
#When ADA falls
If ADA's price falls far enough that a loan reaches 70% of its ADA's value, part of that ADA is sold to repay it. The stability pool's oUSD repays the debt and the pool receives the ADA at a discount. The borrower keeps whatever ADA is left over. See Liquidations.
#Real yield
Everything depositors and stakers earn comes from real activity: borrow fees, the peg module's swap fee and liquidations. No running costs are taken out of it. The OMEGA rewards programme comes on top, from a fixed budget, and falls each year.