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Security and Risks in UGLYCASH Rewards

Updated over a week ago

Where Does the APY Come From?

Income Participation Program for eUSD

  • UGLYCASH has joined the revenue-sharing program for Fintechs launched by Reserve Protocol.
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  • By holding users' funds in eUSD, UGLYCASH receives a share of the revenue generated by the platform.
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  • As more users trust their funds with the app, our eUSD holdings grow, increasing our revenue.

Yield Generated by DeFi Protocols

  1. eUSD is backed by lending positions on platforms like Compound and Aave.
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  2. Here’s how these platforms work:
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    1. Lenders deposit stablecoins into smart contracts.
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    2. Borrowers deposit crypto assets as collateral (e.g., ETH).
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    3. Borrowers can borrow up to a percentage of their collateral (e.g., 80% of the deposited value).
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    4. If the collateral value decreases, the system automatically sells it to protect the funds.
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    5. Borrowers pay interest that varies based on loan demand.
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    6. Currently, Compound manages $2.9 billion in collateral and Aave holds $34 billion in liquidity.
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    7. In these lending markets, borrowers are typically crypto traders looking to borrow capital against some of the cryptocurrencies they already hold to make further trades. They can take significant risks and lose money. However, since their collateral is always available and the lending platforms can automatically sell for stablecoins whenever the collateral starts to decline in value, we believe the risk to lenders (and therefore to eUSD) is low.

UGLYCASH uses the revenue generated from both sources to fund the rewards program, sharing these benefits with our users as part of the rewards program — all while keeping your funds 100% backed, without using a fractional reserve system.

More of a visual learner? We got you covered, just go to the UGLYCASH Transparency Web, and press play! 📹

What Sets Us Apart from Other Services?

You may have heard of past issues with crypto apps that generated yield, like Celsius or Terra/Luna.

The key difference here is that Celsius was taking users' stablecoins and secretly trading them in various risky assets or lending them out.

In contrast, we only hold eUSD, and the utilization of the underlying capital of eUSD is always 100% transparent.

Celsius lost money by investing users' funds in Terra/Luna through the UST stablecoin, which was an unstable economic experiment that the Reserve team flagged as irresponsible years before it collapsed. eUSD does not use any of these types of experimental (algorithmic) stablecoins.

What Are the Main Risks?

We believe the main risks for eUSD holders are:

  1. The risk of eUSD or lending protocol smart contracts being hacked, which is mitigated through extensive code audits.
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  2. The scenario where lenders' collateral drops in value faster than the lending smart contracts can sell it.

    • However, this risk is substantially mitigated by the additional overcollateralization of eUSD by RSR token holders, which you can inspect at any time.

To learn more about the risks and how we mitigate them, visit UGLYCASH Transparency Web.

Remember, while UGLYCASH offers exciting opportunities, it’s essential to consider your personal financial situation and goals when making decisions about your money.

If you have further questions about the UGLYCASH rewards program, reach out to your Advisor 🫂

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