FAQ
Understanding USDN and Its Differences
What Are the Benefits of Holding the USDN token Compared to a Traditional Stablecoin?
The USDN token is designed as a decentralized synthetic dollar, meaning it does not rely on physical dollar reserves like traditional stablecoins. It offers potential yields through funding rates and underlying asset rewards (such as the wstETH APR), making it attractive for users looking to generate yield while maintaining an exposure to a token that gravitates around the value of 1 dollar.
How Do wUSDN and sUSDN Differ From USDN?
wUSDN
wUSDN (Wrapped USDN): Its value gradually increases over time, similar to how wstETH appreciates relative to ETH. In contrast, holding USDN token results in an increasing balance of USDN tokens over time. In short, wUSDN grows in value, whereas USDN token increases in quantity.
This token is particularly useful for protocols and platforms that do not support USDN’s rebase mechanism, ensuring seamless integration without balance fluctuations.sUSDN
sUSDN
sUSDN (Seed USDN): A transitional token designed to kickstart USDN’s TVL before its official launch. Initially, sUSDN is backed by sUSDe (Ethena’s staked USDe), but over time, the backing will gradually shift from sUSDe to pure USDN token.
The value transition happens seamlessly: if you hold $10,000 worth of sUSDN backed by sUSDe, you will receive the same $10,000 worth of sUSDN backed by USDN token once the transition is complete—regardless of price fluctuations between the tokens.
Users can redeem sUSDN at any time for sUSDe during the transition phase, and later for USDN token once the conversion is finalized.
Longer lock periods are beneficial, as they allow USDN token to be gradually minted and replace sUSDe in a smooth and controlled manner
Is USDN the Next Luna Token?!?
No, USDN is fundamentally different from LUNA/UST. LUNA collapsed due to a circular dependency, where UST relied on LUNA for value, and LUNA’s value depended on UST demand. This created an unsustainable loop that collapsed when confidence broke.
The USDN token, on the other hand, is backed by real, appreciating assets (wstETH) and generates yield from funding rates paid by traders and staking rewards from wstETH, not artificial incentives.
Additionally, USDN is fully decentralized and transparent—anyone can verify the collateral and protocol mechanics on-chain. There is no dependency on minting new tokens to maintain its value.
The USDN token is not another LUNA. It is a sustainable, collateral-backed synthetic dollar with a clear and transparent yield model.
Core Mechanics and Functionality
How Does the USDN Rebase Work?
The Rebase mechanism allows the USDN token to capture the protocol’s yield while maintaining its value close to $1.
How the Rebase Works
When the protocol generates yield, USDN’s price gradually increases.
If USDN reaches $1.005, a rebase is triggered, increasing the total supply to bring the price back to $1.0047.
Each holder receives a proportional increase in their USDN balance, reflecting their share of the protocol’s yield
No Debase Mechanism
USDN holders will never see their balance decrease automatically.
If USDN’s price drops below $1, it signals a temporary protocol imbalance. In this case:
Long traders receive incentives (via funding rates) to open new positions.
USDN holders are incentivized to redeem, naturally restoring balance.
These mechanisms ensure that the protocol rebalances quickly without significant price drops.
Rebases Are Not Fixed or Linear
Rebases do not occur at set intervals or in fixed steps. Each rebase is influenced by current market conditions and protocol performance.
Displayed APYs are long-term estimates—they should not be applied to short-term USDN holdings, as individual rebases fluctuate based on market dynamics
Where Does the Yield Come From?
The USDN token generates yield from two main sources:
Funding Rates from Traders – Traders who open long positions on the protocol’s perpetual pay periodic fees (funding rates) to maintain their positions. These fees are collected and distributed to USDN holders.
Yield from Staked Ethereum (wstETH) – USDN is backed by wstETH, which accrues staking rewards over time. As the value of wstETH increases, the collateral backing USDN grows, contributing to yield.
These mechanisms ensure that the USDN token can generate returns while operating within a decentralized and transparent protocol. For more details, please refer to the Yields section.
At What Interval Is the Yield Paid?
When a rebase is triggered, it adjusts the price back near $1 by syncing the balance ratios. So, if 1 USDN is worth $1.005 before the rebase, it becomes 1.005 USDN worth $1 after the adjustment (simplified).
Do I Need to Mint USDN token to Benefit From the USDN Yield?
No, as long as you hold USDN tokens in your wallet, you will receive yield automatically through the rebase mechanism—regardless of whether your USDN tokens come from minting or the secondary market.
Usage and Protocol Interactions
Shall I Mint or Swap USDN?
The choice between minting and swapping USDN token depends on your priorities:
Swapping works like a standard liquidity pool. It doesn’t require a security deposit, and there is no SDEX fee, but large swaps may result in price slippage.
Minting increases the total USDN supply. It requires a 0.15 ETH security deposit (refunded) and incurs an SDEX fee, but it generally offers lower slippage, making it more efficient for large amounts.
For smaller amounts, swapping is often more convenient. For larger amounts, minting may be the better option.
Why Do I See Different USDN Values?
The USDN token price displayed on SmarDex.io always reflects the real market price.
If you see a different price elsewhere, it means arbitrage has not yet occurred. This is a normal market behavior and will typically correct over time as traders take advantage of price differences.
Will USDN Be Available on Other Chains?
The USDN token can only be minted and redeemed on Ethereum. However, wUSDN (wrapped USDN) will be available on other chains.
Can I Validate Multiple Pending Actions Simultaneously on the USDN Protocol?
The USDN Protocol processes one action at a time, requiring each initiated action to be validated before starting another. This ensures orderly and conflict-free transactions.
Trading and Position Management
What Should I Know Before Opening a Long on the Perpetual?
A minimum amount of wstETH is required to open a long position. For details, see the Minimum Position Size section.
Funding rates fluctuate—you may earn yield if the rate turns negative or pay fees if it remains positive.
In rare cases, closing a long position may be temporarily restricted. Be aware of this possibility—however, when this happens, funding rates become negative, meaning you earn yield instead of paying fees.
Liquidation risks apply—monitor your collateral and liquidation price carefully.
High gas fees on Ethereum make perpetual longs more suitable for long-term exposure rather than active trading.
Why can't I Mint or Redeem USDN token?
Mint USDN
If you can’t mint USDN, it’s due to a protocol imbalance between the vault side and the long side. To restore balance, more USDN must be redeemed, or more long positions need to be opened.
Additionally, make sure you have 0.15 ETH in your wallet as a security deposit (refunded after the transaction), which is required for interacting with the protocol.
Redeem USDN
If you can't redeem USDN, it’s due to a protocol imbalance between the vault side and the long side. To restore balance, more USDN needs to be minted, or long positions need to be closed.
Additionally, make sure you have 0.15 ETH in your wallet as a security deposit (refunded after the transaction), which is required for interacting with the protocol
Why Can'Why Can't I Open or Close a Long Position on the Perpetual?
Open a Long
If you can’t open a long position (or use the highest leverage), it’s due to a protocol imbalance between the vault side and the long side. To restore balance, more USDN must be minted, or existing long positions need to be closed.
You may also lack the minimum required funds:
0.15 ETH security deposit (refunded after the transaction)
At least 0.65 wstETH to open a long
For details, see the Minimum Position Size section.
Close a Long
If you are unable to open a long position, it is due to a protocol imbalance between the vault side and the long side. To restore balance, more long positions need to be opened, or more USDN needs to be redeemed.
Additionally, make sure you have 0.15 ETH in your wallet as a security deposit (refunded after the transaction), which is required for interacting with the protocol.
⚠ What if I’m stuck in a Long position?
Don’t panic – the dip accumulator helps rebalance the protocol. While liquidation without the ability to close your position is theoretically possible, the dip accumulator significantly reduces this risk, making it extremely rare.
Blocked longs benefit from high funding rates → As long as you’re not liquidated, you keep earning lucrative funding rate rewards until closing is available again.
What If I Am Affected by Protocol Restrictions?
The protocol may temporarily restrict certain actions to maintain balance. While this may seem concerning, it actually benefits affected users:
If you can’t redeem USDN: The funding rate increases, significantly boosting USDN yield. Holding USDN during this period earns high returns.
If your long position is locked: The funding rate turns negative, meaning longs earn yield instead of paying fees.
What about liquidation risks if I can't close my Long?
The dip accumulator helps rebalance the protocol and facilitates the unlocking of longs. While liquidation without the ability to close is possible, it is extremely rare due to built-in protections.
Reminder: USDN’s long ETH perpetual is designed for long-term exposure, not frequent short-term trading.
What Is the Difference Between Collateral and Trading Exposure in the USDN Protocol?
Collateral: The real portion of a long trader’s position, meaning the part that the user can withdraw.
Trading Exposure: The synthetic portion of the exposure resulting from leverage. It increases potential gains or losses but cannot be directly withdrawn by the trader.
Together, these two components form the total exposure.
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