Velar PerpDEX to Integrate Bitcoin-Collateralized MUSD Stablecoin

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Velar, a fast-growing protocol that sees itself as the lynchpin on the emerging Bitcoin-based decentralized finance economy, is teaming up with Mezo to add support for its native stablecoin mUSD on its perpetual DEX platform

It’s an intriguing move because mUSD is the first decentralized stablecoin that’s fully collateralized by Bitcoin, paving the way for investors to use their BTC assets to generate DeFi yield without the risks tied to using centralized stablecoins

As Mezo explains, mUSD gives DeFi users a way to maintain full control of their BTC even as they borrow against it, bringing utility to what was once idle capital

Velar is one of the largest liquidity protocols building on Bitcoin and is most famous for its perpetuals DEX, which allows users to trade perpetual contracts in a decentralized way with full custody of their assets. Traders can use the platform to leverage long and short positions on a range of crypto assets, including BTC. It’s set to play a central role in the future of Bitcoin, driving its evolution from a simple store of value into a digital asset with the same utility as altcoins like ETH and SOL

As for mUSD, it’s the native stablecoin of Mezo, a protocol that’s looking to help Bitcoin holders borrow against and earn yield on their BTC holdings without giving up custody. mUSD is backed 100% by Bitcoin reserves, and uses algorithms to maintain a 1:1 peg with the U.S. dollar. It’s designed to maintain Bitcoin’s core principles of self-custody and verifiability

To ensure this peg can be maintained, Mezo requires that users deposit a minimum collateral ratio of 110% when they mint new mUSD. What that means is that the value of the collateralized BTC must be at least 110% of the amount of mUSD that’s borrowed. Should the collateral ratio fall below this threshold, the mUSD loan will be liquidated by the protocol

When mUSD goes live on the Velar PerpDEX in the second quarter, it will be available to buy via a number of dedicated mUSD trading pairs. Velar said it will leverage the tBTC bridge architecture to enable the secure transfer of mUSD to its PerpDEX, where users will be able to trade the asset and deposit it within liquidity pools to earn interest. In addition, borrowers of other crypto assets will be able to use mUSD as a form of collateral to obtain low, fixed-rate loans

According to Velar’s chief executive officer Mithil Thakore, the main advantage of mUSD is that it eliminates the custodial risk that’s associated with older Bitcoin-collateralized stablecoins. In this way, he said it allows users to retain full control over their BTC when using it as collateral

“Its integration into Velar’s PerpDex will allow users to enjoy greater capital efficiency and provide greater freedom of choice when choosing a stablecoin to serve as margin for their perps trading activities,” he added

Following the rollout, Velar will add additional functionality for mUSD in the coming months, as part of a plan to transform it into a multi-utility asset that will sit at the heart of the Bitcoin DeFi ecosystem

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.