No … You Can't Collateralize the Memecoin You Just Made

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By Connor
Estimated reading: 2mins
Why You Can't Collateralize a Memecoin

No … You can’t collateralize the memecoin you just made.

The Liquid Loans protocol only accepts PLS as collateral.

And for good reason.

High Liquidity

Every stablecoin is only as good as its collateral.

This is why the majority of stablecoins are backed by USD, the most liquid currency in the world. 

In the case of USDL, it is backed by PLS, the most liquid coin on PulseChain.

Therefore, in order for USDL to be strong, every coin which is redeemed for PLS, needs to be able to be sold for redemption value.

For example, if a user has 10M USDL, they can redeem that for 10M USD worth of PLS within the Liquid Loans protocol. 

However, if they cannot sell that 10M USD worth of PLS on the market without eating high slippage, then the original USDL was not actually redeemable.

That’s why USDL is backed by PLS, and not some memecoin with low liquidity which was created yesterday.

Security for USDL

USDL is a premier, decentralized stablecoin on PulseChain.

It is so strong because of the reliability of the collateral which backs it.

As the native coin of the chain, PLS not only has the most liquidity as discussed above, but it is also the least likely asset on the chain to fail.

If USDL could be backed by any memecoin, then inevitably some of them would be rugpulls.

This would undermine the strength and reliability of USDL, and could leave it open to becoming fractionally reserved.

The Bottom Line

Sorry to ruin the party, but USDL can only be minted from PLS.

USDL is designed to become a robust and decentralized native stablecoin on PulseChain.

Therefore, it must be backed only by the strongest and most reliable coin on all of PulseChain.

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Disclaimer:Please note that nothing on this website constitutes financial advice. Whilst every effort has been made to ensure that the information provided on this website is accurate, individuals must not rely on this information to make a financial or investment decision. Before making any decision, we strongly recommend you consult a qualified professional who should take into account your specific investment objectives, financial situation and individual needs.

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Connor is a US-based digital marketer and writer. He has a diverse military and academic background, but developed a passion over the years for blockchain and DeFi because of their potential to provide censorship resistance and financial freedom. Connor is dedicated to educating and inspiring others in the space, and is an active member and investor in the Ethereum, Hex, and PulseChain communities.

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