Best Way for Incognito StableCoin

I think I have found the best solution to create an Incognito StableCoin.
However this would require additional feature implementation that we currently do not have.

The Idea:
Users are able to exchange USDC, USDT, and DAI, 1:1 for an Incognito StableCoin. When this exchange happens, the original StableCoin (USDC|USDT|DAI) will be put in to a vault. The Incognito StableCoin is then minted on the spot and given to the user.

The coins in the vault get added to liquidity (via one sided provide) and gain rewards. Since the rewards are in PRV, we can take the earnings and add it to the liquidity of the Incognito StableCoin. All you have to do is mint more of the Incognito StableCoin to pair it with the earned PRV, this can be done automatically. As time goes on, more and more liquidity will be added to the pool.

If the markets aren’t regulating the price correctly,

  • We could open up the vault to have reverse exchange’s, from Incognito StableCoin to other StableCoins. (I think there should be a variable fee charged for this conversion as we want to incentivise doing transactions through PRV on the open markets instead of through the Vault)

  • We could allow the Incognito StableCoin to exit the network via an ERC-20 smart contract. This means 3rd party’s could regulate the price as well, making the StableCoin public.

This would give us the advantage of not being at risk from government blacklists. If Incognito’s USDC address’s got blacklisted for some reason, the pUSDC still works on the network, and all the liquidity can be exchanged for our Incognito StableCoin instead. If it can exit on the Ethereum network via smart contract, even better.

What do you think?

It would also not be bad if people transferred their USDC/DAI/USDT to the vault every time they wanted to trade to the Incognito StableCoin. The bigger the vault becomes the more liquidity that would be generated for the Incognito StableCoin, and it’s not like the coins disappear. They get added to liquidity. However it would be best to incentavize when selling Incognito StableCoin to go -> PRV -> USDC/USDT/DAI, that way we keep PRV useful and the vault doesn’t get hit with any potential losses from withdraws.

Click Here For A Cleaner Explanation


While I understand and agree with the sentiment there are some problems with your proposed implementation.

Mostly it deals with the fact that USDC USDT and DAI are not exactly pegged to the USD in the same way. With USDC you have the backing with coinbase, with USDT you have the backing with tether, and with DAI you have a fully decentralized collateral system. DAI’s value in comparison to USDC or USDT is not going to be as stable do to the variability of the underlining assets which provides DAI’s consistent value.

Incognito currently has 1 for 1 pegging of all the assets you have listed. Just in their p form. This p form can be transacted directly on incognito’s network privately. Do to how incognito’s collateralization system works (not truly trustless) you can be pretty sure that when you have a p form you can burn it and get the equivalent coin outside of incognito.

What you are proposing is at the core a kind of porportioned pool index with a consistent minting system. When you put in for example USDT to the pool you get the equivalent ratio (which has just expanded by you putting in USDT) of pstableindex tokens. The value of these tokens are portional to the value of the pool divided by the amount of tokens minted. Aka if the pools total value of all assets are 1000 there will be 1000 pstableindex tokens.

It all sounds good in theory but what if tether is found to be less valuable than the other tokens? Maybe because they might be doing fractional reserve systems making the USD to USDT pegging incorrect. Let’s say an audit returns that only 75% of all USDT tokens are truly backed by their reserves. That means USDT is now only worth $0.75. Apart of an index of three similar valued assets with equal weight the total value asset after correction will be $916.41 from $1000. That’s a big problem to fix and can only be remindated by making sure the only people who can mint the pstableindex are those who put all three assets within a specific pool and gained three pstableindex tokens in return. That way when people withdraw they need to withdraw all of the 3 individual assets at the same time. If you don’t do that, while the value of the pool will not have as much pricing volatility as a single underlining asset it will be extreamly volatile still because now all parts of the index will affect it. If you allow people to mint pstableindex tokens of certain value with an underlining asset which is either greater or lesser than the token’s current value there is tons of bad things which can happen to that pool. For example if that tether reserve problem came to be well people would go and mint TONS of pstableindex tokens with USDT thus making the share of the pool lobsided to USDT and thus get all pstableindex tokens devalued. It would cause a kind of volatility into the index price. If it’s of equal share well the pstableindex would stay at 0.9164USD until tether is corrected. But with the ability to have people mint pstableindex tokens only by a single part of the index, well the price would not be portional to an equal index value but the portion of the pool to the combined value of the total pool. Thus people would mint tons of pstableindex using USDT to get USDC or DAI thus making the total value of the pool in fact the lowest value of the part of the index. It would end up with $0.75 or so in the tether example. That is some kind of devergence loss which I wouldn’t put any funds in.


Maybe it would be best to mint based on the average amount of PRV that equals $1 USD. For example on incscan, I believe the price of PRV is determined by all the StableCoins collectively, but proportionally with the pools as well. If we do that, then I guess we can technically mint an Incognito StableCoin using any coin as every coin has a PRV pool. Then PRV would be going into the vault, and I guess that PRV could be staked, or directly added to the liquidity pool by pairing it with newly minted Incognito StableCoins.

The problem is, you would have to figure out a way to decide whether or not to mint a coin, or trade it with the pool instead.

1 Like

I submitted before I wrote everything. Please read it again.

PRV’s value is not backed by anything at all just market rate. There is no backing on USD or anything of the such. Incognito could in fact do what DAI does with ETH just with PRV and create a stablecoin directly on incognito’s blockchain. That would be cool.

1 Like

If it goes into a vault to be used as backing it can’t be touched. If it is touched and move elsewhere there will be a deviation of value because it’s not backed.

Think of it this way. I give you 100 awesome bucks for 100 USD. Then I take 50 USD and spend it elsewhere. I say it’s a great investment and at any time I should be able to get that 50 USD back. However when it comes time to trade back I say “well sorry but I don’t got the funds fully accessable right now.” In that case can you really say the 1 awesome buck is directly proportional to 1 USD no in that example the moment all the vault’s value wasn’t liquid the 1 awesome buck was equal to the portion which is liquid. So 0.50USD per awesome buck. Really makes you think about what value money has when it is no longer backed by gold.

I see your point,
If a bunch of those coins start to fluctuate in price, I guess it’s harder to identify what $1 really is. One way to get around this is to change how much of a particular StableCoin it costs to mint a new token. If the vault is locked up, then purchasing a Incognito coin is a one way transaction. If a StableCoin price deviates, and it’s already in the vault it doesn’t really matter too much. This is because you would be exchanging via the pDex (using PRV) and not through the vault.

Lets say for example the value locked up in the vault goes down compared to the amount of Incognito StableCoin that is in circulation. You don’t necessarily need to back the coin up completely with the vault, as long as you can trade it on the open markets, your good. If the price goes down far enough, you can open the vault to bring arbitrage opportunity (since we use AMM’s). Once the price goes back up, you can close it up again. As long as it consistently reliable and opens up to adjust for price decreases, I think it could work. Maybe we could take the earnings and put half in the liquidity pool, and use the other half to increase the vault amount.

If the coin is also redeemable outside the platform by others providing liquidity then it makes it more secure. And if your really worried about the value in the vault, you can stake the earnings to bring the vault value up.

Kinda shooting yourself in the foot here. If the value of the exchanged stable coin has a lot of deviation or is of lesser value to exchange it’s not really a stable coin equivalent. It’s price, do to the inliquidity of the valuting process, will always be lesser than the total value of the vault.

The asset is not going to be at all stable. It’s in fact going to have massive volatility. You can’t pool a token and use the token’s backing itself to provide it’s value. That will just make it completely worthless.

There is no value for anyone to even participant. Really think about it. What is solved by that process? It’s not providing any more safety, transact-ability, stability, or really anything in comparison to just the p assets on the incognito chain. There is no reason for anyone to participate and not have liquidity when they need it.

It’s not worthless if you can buy assets with it. And i’m not saying change the amount if it’s doing it’s intended function, like being a StableCoin. I’m only saying change the cost of Incognito’s Stablecoin if the StableCoin that your buying with get’s devalued for some reason.

The StableCoin does not need a 100% backing to be stable if what it’s worth on the markets is equivalent to 1$. What it solves is the fact that it’s being decentralized, and it mitigates risk of foul play.

That worth can only be deprived from the available vault value in comparison to the supply. I can say all I want that my 1 awesome buck is worth 1USD but if it can’t ALWAY be exchanged for 1USD then it is not worth it.

DAI is stable because of a complicated collateral system which backs each $1 DAI with $1.5 worth of ETH. The value is directly correspondened with the amount of ETH in the DAI contract.

If you change a cost of an asset you can’t really say that it is stable. That price needs to come from somewhere. Stable coins are not a product but a kind of money. People only trust and accept certain currencies because they believe the value source that either stays the same or appreciates in value. Nobody is going to accept a currency that when they accept it will largely depreciate in value or can’t be transacted again. It’s like if I walked up to a food stand and tried to transact 2 awesome bucks for a hotdog. Chances are the food stand owner will not accept awesome bucks because it’s not something that is usable elsewhere.

1 Like

If the price of the Incognito StableCoin is above 1$,
then there is arbitrage opportunity

People can exchange by putting USDC, USDT, or DAI into the vault, in return they get minted Incognito StableCoin.
They can then take this Incognito StableCoin and sell it in the pDex for profit, bringing the price back down to 1$

If the price of the Incognito StableCoin is below 1$,
then there is arbitrage opportunity and the Vault opens

People can exchange the Incognito Stablecoin for USDC, USDT, or DAI from the vault.
This will make people buy the Incognito StableCoin from the market with PRV, bringing the price back up to 1$

If for some reason, the Price of USDC is not = 1$,
If for some reason, the Price of USDT is not = 1$,
If for some reason, the Price of DAI is not = 1$,
Then the rate to convert to Incognito Stablecoin, by means of vault, changes.

The price of Incognito StableCoin stays at 1$, regardless of price devaluation in the Vault, as long as it always has enough to bring the AMM’s back to 1$.
The StableCoin stays stable not on backing, but by the market. And it is valuable because you can always trade it on the pDex for PRV, which means any crypto.

As the vault gets bigger, that means over time, the liquidity pools for the Incognito StableCoin get bigger, there is less of a need to open up the vault all the time.

The money in the vault is being used to provide one sided liquidity anyways, so it’s technically not a “backing”, the earnings are used to increase the liquidity in the Incognito StableCoin.

If market price is always 1$, and is incetivized to always be 1$, then it is in fact a StableCoin.

1 Like

In general the concept sounds interesting. But I do not understand why we should create a stable coin? Isn’t the basic idea behind Incognito to turn every coin into a privacy coin? In this case if people need a private stable coin, they can just shield USDT, DAI etc. and start using it privately instantly.


The ways AMM work is by a ratio of value between two pairs in a pool. You buy a portion of the pool by exchanging the value of one asset to another asset from the pool. The pool provides the liquidity to do the exchange.

If you allow people to sell an asset for many other assets you can’t use an AMM. You are creating a completely different system. You are creating
a porportioned pool index with a consistent minting system. The way new stable coins are made is by people exchanging their other stable coins for this stable coin. However as I explained above this will lead to the index’s value to always be near the lowest asset value in the index. People will exchange their low valued USDT to a larger amount of USDC via the stable coin. That will in turn reduce the value of the stable coin to match USDT being the lowest value asset of the index.

You then go and think people are going to buy a stable coin with PRV and that somehow will make the value increase because if more people buy the price must go up which is 100% not the case. The value of an asset is yes based upon what the market can buy it as, however you can’t take away the fundamentals behind an asset price. If 1 stable coin can only be exchanged to 1 USDT then the price of the stable coin is going to be the price of 1 USDT.

You can’t earn funds on a vault. They are there to be liquid. This is cryptocurrency not banks. Fractional reserve systems cannot work because they devalue the underlining asset.

1 Like

Yes, you are correct, but there is concern with relying on centralized authority’s. For example USDC blacklists address’s based on government commands. If for example Incognito’s address’s got blacklisted, that’s a problem.

Yes there is really no usage for it when you compare the usability to pDAi pUSDC and pUSDT. It would however be cool if incognito’s team did in fact do what DAI does but with the PRV token. That way you keep it in chain and lock up more PRV.

1 Like

If you make the exchange rates equal this is not a problem.
For example:
1.0000001 DAI
1.0000002 USDT
As long as they are the same value in USD it shouldn’t be a problem and, its the same going in the vault, and coming out. It would be variable rates depending on price. This is dynamic with the market price.

The AMM functions normally, its PRV <-> Incognito StableCoin.
If the price is wrong, then users adjust the price with either opening the Vault to exchange there, or by allowing trade in’s to the vault. The AMM are doing it’s normal duty. Because of what’s going on with the vault, selling or buying pressure will change the price on the AMM.

The vault being opened or closed just helps regulate the AMM, it creates opportunity to allow people to adjust the price through trades via arbitrage opportunity.

I’m not interested in backing the value of the coin. I’m interested in securing it’s value at 1$.

I really might be completely misunderstanding you but I really don’t see how that is possible. These assets are not 100% equal to each other. USDT and USDC are generally fine but when you throw in DAI to the mix it becomes much worse.

If you allow people to trade in they will get the highest value token. Which means the stable coin’s price will always go to the less valued token in the index.

I get that you want to go through the AMM. But to do that you need equal and large enough pools of liquidity to make the trades with minimal slippage. Nobody is going to transact to it if the slippage is at 2.5%, even more so on a stable coin currency which won’t appreciate that much in value.

A token’s value can’t be secured without backing. The backing is specifically in the vault systems. The value of it simply isn’t what you show to the user but the true underlining value of the vaults in comparison to the supply of the asset. USD’s price is volatile too. Having a kind of feedback loop system only works when you have a significantly large amount of liquidity that people can always get out what they put in. In the case of your vault systems if I put in DAI and someone goes and takes the DAI I put in well I can’t get my DAI out but what they put in.

1 Like

I’m saying make the trade in values equal.
Yes 1 DAI, 1 USDC, 1 USDT are all different prices.
but if the amount required to mint 1 Incognito StableCoin is equivalent across all these coins in USD, then that problem is solved.
For Exsample to mint 1 Incognito StableCoin, you can send to the vault:
1 USDC ( = 1 USD) or
1 USDT ( = 1 USD) or
0.99 DAI ( = 1 USD)
This would be variable depending on the fluctuations.
Fluctuations would happen in the vault though. Which is why it can’t be 100% backed. Sometimes it will be more, sometimes it will be less. It also depends what gets taken out when the vault opens.

You are correct in saying we need a big liquidity pool. That is always the problem. The vault would help with consistent growth, but you would need your normal everyday people to add liquidity too.

The way to get your DAI out would be to sell your Incognito StableCoin for PRV and buy DAI. But yes this requires a big liquidity pool. If the price of the Incognito StableCoin is lower then 1$, and the vault is open, then yes, you can only take out whatever is in there. But your value shouldn’t be lost, because you take out exactly 1$ worth of value from whatever coin. Based on rates mentioned above. It’s also not to bad, because this gives you opportunity to make profit.

What about creating NFTs used as a basket for different, already available, stable coins? If you make those NFTs composed by the same amount of coins (so same value), they can be trades in a fungible way, like a new stablecoin.
But, I don’t know if Incognito has NFTs available or if the team will implement native NFT inside its network in the future. I know some other privacy networks are moving also in this direction.

So theoretically, you create a privacy NFT with multi-coin wallets inside (eg. 0.5 pDAI and 0.5 pUSDC, just an example). If there will be stablecoins pegged to EUR and other world currencies, you can also make a hybrid privacy international stablecoin.
Then you exchange these NFTs, that will have a stable value. If the demand increase, the system will create new NFTs (the liquidity will be the one of the source stablecoins). The opposite way, the system can also burn NFTs, returning the stablecoins in the inside.

1 Like

Hey @Revolve @MrAwesome thanks for kick starting this discussion.

I think if we have ability to create a private and untraceable stable coin we definitely should do it.

From the tech perspective, Incognito’s native stable coin can be designed in a similar way as DAI and be backed by colletorals (PRV, pBTC, pXMR, pDAI, etc).

The same time we shouldn’t limit ourselves with existed solutions only. We are not here to follow these designs we Have everything we need to create innovations.

Let’s keep brainstorming on how the money of the future will look like? Which problems of stable coin haven’t been solved yet?)

Hey @Horus87 regarding NFT. We do not have a dedicated template for this purpose. But if you use the current mint template and set up supply at ”1”, technically speaking you will create none-fungible coin.

If NFT it is something you are interested in, please kick start the NFT thread and let’s collect ideas on how to make Incognito NFT friendly :wink:


It should be called USD-Privacy or USD-Private and use USDP for its ticker.