Everyone’s heard of the term “Stablecoins”:

A 200-billion-dollar bridge between the real and the crypto world, an asset class that mimics money on-chain and brings stability to a space known for its highvolatility. But what makes stablecoins so indispensable and why are there so many of them?

Think of a trader navigating through stormy crypto waters. The markets are unpredictable, with prices swinging wildly like a ship in a tempest. In the past, seeking safe harbor meant a complete exit—converting crypto back to fiat through a process as cumbersome as docking at a distant port. Stablecoins solve this problem by allowing you to store your wealth in a stable asset without leaving the space. They’re not just a convenience; they’re a necessity for anyone navigating the crypto markets.

But to truly understand why stablecoins matter, we need to take a step back and talk about money itself.

Defining “Money”

Money is the backbone of every economy and without it, we’d still be stuck in a bartering trading system - trading chickens for shoes and hoping the other person finds our offer worthwhile. Money solves this problem by giving us a universal standard of value. Nonetheless attributing value to something doesn’t automatically make it money.

Chickens are valuable (especially if you're hungry), but they aren’t money as no one pays in chickens… So how do we define money?

Well, in order for something to be considered money, it needs to tick a few boxes:

• 💰 Store of Value: Money must preserve value throughout time. If your money can rot then it’s not a good store of value. It has to be durable like gold.
• 🧾 Medium of exchange: Its main purpose is to settle transactions. Real money can be used to trade goods and must be fairly accepted.
• 🧮 Unit of account: Proper money serves as an agreed-upon measure of the value of goods. Basically: “What is the price denominated in: USD, EUR, or in ounces of gold?”

Back to stablecoins anon…

A “Stable” Beginning

The early (and now still largely dominant) stablecoins mimicked the functions of money by digitally tokenizing dollars (e.g. USDT, and USDC). Even though these fiat-backed versions are relatively stable and enabled a lot of businesses to operationalize without the need for bank accounts, they’re subject to regulatory scrutiny and are directly tied to the traditional financial system.

A clear example of the uncertainty that comes with fiat-backed stables is USDC’s 2023 de-peg:

USDC, a fiat-backed stablecoin representing 22% of the total stablecoin market (a $46.6B project) suffered a major de-peg after it was revealed that $3.3 billion of its reserves were held in the Silicon Valley Bank (SVB), which collapsed due to a bank run. Because of the news, panic erupted among USDC holders causing its price to fall as low as $0.87. Thankfully, it was later revealed that U.S. regulators would fully reimburse all depositors of SVB, including Circle, the issuer of USDC. That announcement quickly brought the price back up.

It’s crystal clear that FIAT-backed stablecoins introduce the very issues that crypto was meant to avoid: centralization and lack of transparency.

In contrast, Maker DAO was the first to introduce a decentralized stablecoin alternative, $DAI. The major problem with $DAI, however, is that it's capital inefficient - in order to mint $DAI you need to build an over-collateralized position to avoid unbacked loans, that is, a user locks up $150 worth of $ETH for a $100 mint of $DAI.

Despite its inefficiencies, $DAI quickly gained adoption by offering something fiat-backed stables couldn’t: permissionlessness. For the first time ever, users could mint a stablecoin without relying on banks or regulators. Even though it wasn’t perfect, it was a step forward, and it broke the space free from the very idea that “stability” requires a bank, a regulator, or a middleman.

Crypto thrives on disruption, and stablecoins are no exception. The real battleground isn’t in propping up the old system - it’s in building something new, and with more people realizing that stability could be outsourced from other financial systems, the idea of algorithmic stablecoins was born.

Algorithmic stablecoins promised an utopia: decentralization, transparency, and free from fiat’s shackles. But as we’ve seen time and time again, this space is littered with projects that failed miserably (cough Terra’s $UST cough). So, why are protocols still chasing this idea?

Well, because when it works, it’s revolutionary. No banks. No middlemen. Just code, collateral, and market mechanics… The problem? Most protocols cut corners. They centralize collateral, socialize losses, and hide risks behind fancy jargon. Take Terra’s UST for example -- The poster child of algorithmic stablecoin failures. At its peak, $UST was an 18-billion-dollar project, hailed as the future of decentralized money. It relied on minting/burning its sister token, $LUNA, to maintain its peg (burn UST below $1, mint $1 of Luna, repeat)

However, the problem with UST was that its peg hinged on Luna’s stability—a circular trap. When Luna infamously crashed, UST holders panic-dumped, minting endless Luna and vaporizing $40B in days… Ironically, its “decentralized” peg relied on the Luna Foundation’s centralized  Bitcoin reserves.

UST’s collapse wasn’t a code issue—it was a design failure. Proof that algo stables need real collateral and not ponzinomics.

Fast forward to the end of 2023 - Arthur Hayes, the co-founder of the OG crypto exchange BitMEX, was one of the first people to point out these clear issues and propose a new way of creating a value-preserving mechanism for stablecoins. In his piece “Dust on Crust”, Arthur proposes a system that would be able to derive value from 1$ worth of synthetic assets without relying on the traditional banking system or over-collateralization… true digital money.

Presented as NakaDollars (NUSD), it would function as a tokenized fund composed of long BTC spot positions and short BTC perpetual futures. As Bitcoin's price fluctuates, the gains or losses in either leg (long or short) are offset by the inverse reaction in the other, keeping the net value of the fund pegged to $1 henceforth creating a true Delta-Neutral stablecoin mechanism.

Notwithstanding, this mechanism isn’t all sunshine and rainbows either as it carries risks like anything else in the world. Arthur, specifically, pointed out 3 key risks that would need a “Sinking Fund’s” coverage:

1. 🥷 Losses from exchange hacks or theft.
2. 📉 Negative funding rates causing the value of NUSD's backing to drop below par.
3. ⚖️ Socialized losses during Bitcoin price declines.

This rough idea of a NakaDollar, even with all its shortfalls, was enough to spark a wave of protocols building and innovating upon it. We all know the giants of delta-neutral stablecoins, like Ethena and Elixir, but now, there’s a new challenger on the rise - a protocol refining the delta-neutral stablecoin mechanism and it might just be the one to knock Ethena off its throne!

Introducing The Hero: Resolv

Resolv is the protocol behind $USR, a 100% ETH-backed, over-collateralized, but capital-efficient, stablecoin.

As we said before, the problems with current stablecoin options are that they’re: (a) centralized and subject to regulatory issues (fiat-backed stables like USDT or USDC), (b) they require over-collateralization on the user end and suffer in volatile markets (crypto-backed stables like DAI)… or (c) They employ inefficient risk-averting mechanisms where losses are socialized among all holders, incentivizing those who notice the risks earlier to withdraw before a value-collapse… a kind of musical chairs effect that could leave holders stranded (delta-neutral/algorithmic stables like UST, deUSD and USDe).

Resolv aims to battle all of these issues and create a decentralized, transparent, and more secure alternative in a 200-billion-dollar market with what they call a “True Delta-Neutral” (TDN) strategy.

Delta-Neutrality

To maintain $USR’s value pegged to the dollar, Resolv employs a delta-neutral portfolio, which balances risk exposure by holding:

• 📈 Long spot positions of ETH on-chain, and
• 📉 Short futures positions of ETH on centralized exchanges (CEXs)

This portfolio structure creates a hedge for ETH’s price swings where unrealized spot gains offset unrealized futures losses when prices rise, and unrealized futures gains offset unrealized spot losses when prices fall. But, maintaining this balance requires active management:

• ↗️ When $ETH Rises: The short futures position incurs unrealized losses, requiring additional margin to prevent liquidation. Resolv ensures sufficient liquidity is available to top up margins and rebalance the portfolio to maintain delta neutrality.
• ↘️ When $ETH Falls: The short futures position generates unrealized gains. Resolv closes these positions to lock in profits, withdraws funds from exchanges to reduce counterparty risk, and rebalances the portfolio.

A critical challenge in delta-neutral strategies is offsetting the operational costs of futures contracts, including collateral requirements and funding fees, which would otherwise erode the fund's dollar peg over time. To address this, Resolv employs its ETH collateral pool strategically by staking ETH for rewards while simultaneously lending up to 50% of the staked ETH on Aave to borrow additional ETH, maintaining a prudent health factor of 2.0 throughout these operations.

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Through this approach, Resolv maintains ready liquidity for position management while generating sufficient yield to cover futures costs and create additional returns. This dual structure of yield-bearing assets and short perpetual ETH positions establishes both a self-sustaining ecosystem for $USR and a viable revenue model for Resolv.

The Dual-Tranche Architecture

Definition: A “dual-tranche” system is a common financial structure used to split risk and reward between two distinct tiers of participants, or in our case, simply, between two distinct tokens.

Building upon the foundational delta-neutral mechanism further, Resolv introduces a dual-tranche system that, effectively, separates risk and yield between two distinct tokens: $USR and $RLP. This structure allows users to choose their preferred risk exposure (and be compensated for it) and ensures that $USR remains stable.

How Does It Work?

The architecture revolves around two tokens:

1. 🔵 $USR: The Senior Tranche
2. 🔶 $RLP: The Junior Tranche

Each token serves a distinct role in the ecosystem:

$USR: The Stable Senior Tranche

$USR is designed for users seeking stability as it minimizes risk exposure by leveraging a delta-neutral strategy to back it up. Its holders primarily benefit from Resolv’s DeFi components like staking rewards and lending yields, while avoiding the risks tied to centralized exchanges. This ensures that $USR remains a stable, low-risk token pegged to the dollar.

$RLP: The Risk-Bearing Junior Tranche

$RLP represents the junior tranche and carries most of the system’s risks. This token utilizes the excess collateral from the ETH portfolio and it’s holders assume:

• CEX-related risks, such as funding cost fluctuations and exchange defaults (i.e. an exchange failing to pay a trader’s profits).
• Systemic risks, where $RLP withdrawals are halted if $USR collateral drops below 110%. Effectively, $RLP acts as a capital-efficient over-collateralization layer for $USR, as it’s on the risk-seeking users to choose to mint $RLP and not on the users minting the stablecoin to provide additional collateral.

To compensate for these risks, $RLP holders receive a Risk Premium on top of the Base Rewards, derived from the generated ETH yield.

This senior-junior tranche relationship creates a symbiotic structure where $USR's stability is reinforced by $RLP's risk absorption, while $RLP's rewards are generated through $USR's underlying mechanisms. The result is a closed-loop ecosystem that clearly defines and rewards each participant's role, forming the foundation of Resolv's True Delta-Neutral strategy.

Note:

Both $RLP and $USR can be minted on a $1:$1 basis. $USR itself doesn’t generate yield but can be staked for $stUSR, a rebasing token that grows in quantity over time. There’s also $wstUSR, a non-rebasing version of $stUSR whose value increases instead of its quantity. $RLP generates yield in a non-rebasing way, i.e. it increases in value. Reslov’s profit or loss from the accrued funding fees and generated yield is calculated on a 24h epoch after which the losses are absorbed or profits distributed.

In the following section, we’ll go over 2 examples to help you better understand the process of reward distribution, or loss absorption in Reslov’s dual-tranche system. The starting TVL for these examples will be set to $100,000.

Example 1: Reward epoch profit

• $20,000 profit is split:
  • Base Reward (70%): $14,000 ($20,000 x 70%) shared by TVL:
    • stUSR receives $5,600 ($14,000 x 40) which is calculated in the following manner:

\begin{equation}\text{Rewards}(\text{stUSR}) = \frac{\text{Rewards}(\text{BaseTier}) \times \text{Qty}(\text{stUSR})}{\text{Qty}(\text{stUSR}) + \text{Qty}(\text{RLP}) \times \text{RLP Burn Price}}\end{equation}

• ‍Risk Premium (30%): $6,000 ($20,000 x 30%) goes to RLP.
• RLP receives $8,400 ($14,000 x 60%) in a non-rebasing way (i.e. through a price increase):

\begin{align*}
\text{RLP}_\text{price}= \max \left( 10^{-18},\frac{\text{Balance}_{\text{end of epoch}}-\text{USR}_{\text{balance}}}{\text{RLP}_{\text{balance}}} \right)
\end{align*}

• stUSR and RLP both see TVL increases.

• So in total, for this example, RLP got $14,400 ($8,400 + $6,000) out of the $20,000 in profit which is 72% (14,400/20,000) and stUSR got the rest 28% ($5,600)

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Example 2: Reward epoch loss

• $20,000 loss is fully absorbed by RLP.
• RLP TVL decreases, while stUSR TVL remains unchanged, with no rewards distributed.

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KPIs and Metrics

On-chain Metrics

For a detailed view of Resolv’s core on-chain metrics, we’ll be looking at the Resolv Dune Dashboard:

1. Total Value Locked (TVL)

Resolv’s TVL has been growing exponentially and signalling strong user adoption. This surge could potentially be attributed to a few key factors: private LP deals, favorable market conditions, and negative funding rates.

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2. RLP Price Performance

RLP (Price), Resolv’s risk-absorbing token, has been on a steady upward climb since day one. Despite being the “junior tranche” that’s supposed to soak up losses, RLP has seen minimal realized losses—only a 15% max drawdown in APR over a 7-day period.

Extrapolating on top of this further, had you invested in RLP at its inception the APR you would’ve gotten to this day would be 15%.

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3. APR & Yield Performance

Both RLP’s and stUSR’s 7D Average APR has been quite steady. The 7D Avg. for RLP is currently sitting at around 47%, 3.3x higher than stUSR’s 7D APR which is around 14%.

Resolv’s yield generation has also grown exponentially, rewarding both RLP and stUSR holders. The total generated yield is currently $6M.

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4. Staked USR Trends & Holder Metrics

While the decline in staked USR percentage might appear concerning, it actually signals ecosystem growth, as evidenced by rising TVL and USR minting activity. This shift reflects the emergence of new DeFi incentives for USR beyond Resolv's native staking program, indicating broader token adoption and utility across multiple platforms.

(Click here to see all ongoing USR incentives outside of Resolv)

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The number of USR and RLP holders has been climbing steadily, a clear sign that more users are jumping on board.

5. Liquidity Depth

There are plenty of diverse DeFi venues where users can interact with RLP and USR on both Ethereum mainnet and the Base L2 like:

\[\begin{array}{|l|c|c|}\hline\textbf{Protocol} & \textbf{USR Liq. [M]} & \textbf{RLP Liq. [M]} \\\hline\text{Morpho's borrowing and lending vaults} & 18 & 3 \\\text{Pendle’s PT and YT versions of the tokens} & 99 & \text{N/A} \\\text{Euler’s borrowing and lending markets} & 2 & \text{N/A} \\\text{Spectra’s pools} & 45 & 10 \\\text{SynFutures' markets} & 10 & \text{N/A} \\\text{Balancer’s pools} & 1 & \text{N/A} \\\hline\textbf{Total Liquidity:} & \textbf{175} & \textbf{13} \\\hline\end{array}\]

Now looking only at AMM liquidity depth, via GeckoTerminal, we can see that USR has $68M in liquidity in total; Out of which $44.44M is on Ethereum mainnet (split between Curve and Uniswap), and $23m on the Base L2 (Aerodrome slipstream). With USR’s Market Cap being around $600M, it’s depth is a bit over 10% of it’s market cap (not taking into account all the other available venues).

For comparison, USDe is sitting at around 3% depth relative to it’s Market Cap, while deUSD is around 14%.

RLP has around $33M in liquidity in total; Out of which $17.3M is on Ethereum mainnet, and $15.7M is on the Base L2. RLP’s Market Cap is currently sitting at around $85M, meaning it’s liquidity depth is close to 40% of it’s market cap (not taking into account all other available venues).

However, it is important to mention that USR and RLP share 2 liquidity pools (1 on Ethereum and the other on Base) with a combined liquidity of $32M.

Peg Resilience

Now, another very important metric that we often see overlooked in research articles that deal specifically with stablecoins is Peg Resilience… It’s a measure of how well a stablecoin performs its primary function of maintaining a stable value. To evaluate USR’s resilience, we conducted a detailed comparative analysis of other stablecoins, using historical price data.

The Methodology:

1. 🧪 Data Collection:
   • We gathered historical price data for $USR and its competitors (USDT, USDC, DAI, USDe, deUSD) from Coingecko, spanning from each coin’s inception to January 18, 2025.‍
2. 📊 Histogram Construction:
   • Price Brackets: Each bracket spans a $0.025 range (e.g., <$0.95, $0.95–$0.975, etc.), except for the critical range around the peg ($0.99–$1.01), where the brackets are tighter, spaced at $0.01 increments. This tighter spread is intentional and meant to emphasize price data concentration within the ideal stability range.
     • To visualize the stability of each stablecoin, we created histograms that group price data into defined brackets.
3. 🧮 Standard Deviation Analysis:
   • For each stablecoin, we calculated the percentage of price data points falling within ±1 standard deviation (SD/σ) of the mean. This range corresponds to the ideal $0.99–$1.01 price interval.‍
4. 🔍 Comparative Insights:
   • By comparing the price distributions across stablecoins, we gain a clear picture of how resilient each coin is in maintaining its peg. Stablecoins with the highest concentration of prices within the $0.99–$1.01 range demonstrate better peg stability, while those with wider distributions indicate greater volatility.

\[\small\begin{array}{|c|c|c|c|c|c|c|c|c|}\hline\textbf{Type\Bracket} & \leq 0.95 & (0.95, 0.975] & (0.975, 0.99] & (0.99, 1.00] & (1.00, 1.01] & (1.01, 1.025] & (1.025, 1.05] & \geq 1.05 \\\hline\text{USDT} & 14 & 19 & 35 & 1843 & 1605 & 48 & 11 & 18 \\\text{USDC} & 0 & 2 & 2 & 958 & 1270 & 55 & 11 & 0 \\\text{DAI} & 3 & 14 & 17 & 707 & 1007 & 116 & 23 & 1 \\\text{USDe} & 0 & 0 & 0 & 193 & 205 & 1 & 1 & 0 \\\text{deUSD} & 0 & 0 & 0 & 54 & 117 & 0 & 0 & 0 \\\text{USR} & 0 & 0 & 0 & 71 & 67 & 0 & 0 & 0 \\\hline\end{array}\]

Looking at the distribution table above we can clearly see that the most “stable” stablecoins are deUSD and USR with 100% of their historical price data fitting into the first 2σ (standard deviations). While USDC is sitting at around 97% of it's distribution within the first 2σ (standard deviations), USDT at around 95%, USDe at 99%, and DAI only at 90.7%.

Security

Resolv’s security framework is designed to address the risks of delta-neutral stablecoins. Here’s how Resolv ensures the safety of its ecosystem:

1. Custody & Centralized Exchange (CEX) Risks

Resolv’s delta-neutral strategy uses short positions held on centralized exchanges (CEXs), which, let’s face it, comes with its own set of risks—like exchange hacks or defaults. To keep things secure, Resolv implements:

• Diversified CEX exposure: Resolv spreads its futures positions across multiple trusted exchanges, with 50% on Binance, 30% on Hyperliquid, and 20% on Deribit. This way, no single platform becomes a single point of failure.
• Institutional-grade custody: A portion of the collateral pool is held in off-exchange custody wallets managed by Fireblocks (for Deribit) and Ceffu (for Binance). These custodians hold the collateral outside of the exchanges themselves, meaning even if an exchange gets hacked or goes down, the collateral in these wallets remains untouched and secure.
• On-chain transparency: The bulk of ETH collateral is held in an on-chain smart contract wallet, tied directly to Resolv’s mint and redemption mechanics. Everything’s out in the open, so there’s no guesswork about where the funds are.

Resolv also partnered with Apostro to launch a proof-of-reserves dashboard for additional transparency. This tool gives you a real-time look at Resolv’s long and short positions, offering a clear window into the stability of its stablecoin.

2. Smart Contracts

Architecture:

• USR Token Contract (ERC20): Manages the issuance, transfers, and redemptions of USR. It integrates price oracles like Chronicle and Pyth to maintain the $1 peg, ensuring accurate pricing during minting and redemption.
• RLP Token Contract (ERC20): Handles the issuance and transfers of RLP, the risk-bearing junior tranche. It distributes risk premiums and base rewards to RLP holders, compensating them for absorbing system risks. The RLP price updates every 24 hours, driven by a backend service that fetches data from various sources to derive the updated price.

\begin{align*}
\text{RLP}_\text{price}= \max \left( 10^{-18},\frac{\text{Balance}_{\text{end of epoch}}-\text{USR}_{\text{balance}}}{\text{RLP}_{\text{balance}}} \right)
\end{align*}

• stUSR Staking Contract: Allows users to stake USR and earn yield via stUSR, a rebasing/elastic token that automatically increases user balances over time. Holders can view their accruing rewards directly in their wallet balance without additional steps.
• wstUSR Wrapped Staking Contract: Provides a non-rebasing alternative to stUSR, where rewards increase the token's value instead of its quantity, simplifying accounting for users. This contract implements the ERC4626 standard, a framework for tokenized vaults that allows users to deposit assets (like USR) and receive vault tokens (wstUSR) representing their share of the vault. The vault automatically generates yield through strategies like staking, and users can redeem their tokens for the underlying assets plus accrued rewards.
• USR/RLP Requests Manager: Governs minting and redemption requests for USR and RLP. It operates on a state-based system (CREATED, CANCELLED, COMPLETED), ensuring transparency and control over transactions.

Security Measures:

• Access Control: All smart contracts integrate the OpenZeppelin library for access control, utilizing AccessControl or Ownable2Step depending on the specific needs of each contract.
• Upgradeable Contracts: Proxy-based upgradeable contracts are governed by a secure administrative structure. All upgrade actions must be scheduled through a Timelock, enforcing a minimum delay of 24 hours between proposing and executing upgrades. This delay provides a safety window for stakeholders to review and respond to changes.
• Multisig Protection: Timelock's administrative functions are protected by a 3-of-5 multi-signature (multi-sig) requirement, ensuring that no single entity can unilaterally execute critical actions. This adds an additional layer of security and decentralization to the governance process.

On top of this, the Resolv team had a lot of security audits for all of their contracts.

Conclusion

Resolv is transforming the stablecoin landscape through its True Delta-Neutral (TDN) strategy and dual-tranche architecture, effectively addressing traditional stablecoin challenges of centralization, over-collateralization, and capital inefficiency. Demonstrating 100% peg resilience that surpasses both USDT and USDC, Resolv's self-sustaining ecosystem combines staking, lending, and active portfolio management into a unified solution. The protocol caters to both conservative and yield-seeking users through its dual-token model, while incentivizing early participation via the Points Program and upcoming token launch. With a projected airdrop valuation of $135 million, Resolv is well-positioned to establish itself as a leading force in the stablecoin ecosystem.

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