The stablecoin market in DeFi is overwhelmingly dominated by USD-based products. Given the importance of Foreign Exchange as the largest market in traditional finance, a healthy selection of tokenised fiat currencies is likely to be a key driver in DeFi’s future growth.
Additionally, DeFi’s USD-denominated status quo creates a risk for the considerable portion of users from elsewhere, who are subject to volatility in exchange rates when cashing-out to fiat to pay their rent, bills, etc.
Angle Protocol aims to help build out this non-USD layer for DeFi, increasing the on-chain offering of fiat currencies. Currently, it offers the first liquid, decentralised, Euro-pegged stablecoin, agEUR, and plans to launch other currencies in the future.
agEUR is an over-collateralised stablecoin, meaning there is more value backing the stablecoin than there are tokens emitted. This protects against the possibility of a “bank run” situation, because there will always be enough collateral to swap for each token.
However, the design of agEUR also maximises capital efficiency by allowing for slippage-free swaps between the token and collateral at a 1:1 ratio at all times. This also ensures that the peg can be maintained via 3rd party arbitrage, rather than through actions of the protocol itself.
As well as the stablecoin product, Angle is the first protocol to offer on-chain leverage on Foreign Exchange rates via perpetual futures (up to 100x) and incentivises users to provide liquidity between agEUR and dollar-backed stablecoins. These two products are the sources of the additional funds which keep the agEUR product over-collateralised. Angle also plans to incorporate agEUR borrowing on volatile collateral in the near future.
Users of the above receive yield in the form of the project’s ANGLE token, which can in turn be locked for vote-escrowed veANGLE. veANGLE is non-transferable, but allows for holders to vote on governance matters as well as have their say on the emission of ANGLE rewards.
Behind the scenes, Angle also lends out a portion of its collateral via protocols such as Compound and Aave, generating further revenue which is redistributed as incentives to veANGLE holders and LPs.
ANGLE holders can deposit their tokens into Stake DAO’s Liquid Locker, receiving sdANGLE in return. Staking sdANGLE brings many benefits: maximum protocol APR, platform fees (5% performance fees on ANGLE strategies), and SDT incentives, as well as boosted voting power on ANGLE. sdANGLE can be swapped back at any time via the sdANGLE-ANGLE factory pool on Curve. Stake DAO also offers a strategy built on top of Angle Protocol’s USDC-agEUR pool, earning fees based on trading volume as well as additional ANGLE rewards.