# AuUSD ## What is AuUSD? ### The Philosophy **AuUSD solves a fundamental problem for gold holders:** how do you access liquidity without selling your assets? Traditionally, if you own gold and need cash, you have two options: sell your gold or take out a loan against it through a bank. Both options have drawbacks. Selling means you lose your gold exposure and potential future value appreciation. Bank loans come with credit checks, paperwork, and often high interest rates. AuUSD offers a third way. It lets you unlock the value of your gold tokens without giving up ownership. Think of it like a self-service loan where your gold tokens are the collateral, but everything happens automatically through smart contracts with no banks, no credit checks, and transparent terms. ### The Concept AuUSD is a stablecoin designed to maintain a 1:1 value with the US dollar. Unlike other stablecoins that might be backed by reserves in a bank account, AuUSD is backed by your gold tokens locked in a [smart contract vault](https://auresources.gitbook.io/help-center/auresources-ecosystem/defi/vault). When you deposit your [Future Gold Tokens](https://auresources.gitbook.io/help-center/auresources-ecosystem/tokens/future-gold-tokens) (such as PGFs) or [AuSG tokens](https://auresources.gitbook.io/help-center/auresources-ecosystem/tokens/ausg-spot-gold-token) as collateral, you can borrow AuUSD against them, giving you immediate liquidity while still maintaining ownership of your underlying gold. ## How AuUSD Works ### The Borrowing Process {% stepper %} {% step %} #### **Create your vault** Navigate to the [borrow section of the AuResources dApp](https://dapp.auresources.io/borrow) and create a new vault. Each vault operates independently and can receive different collaterals. {% endstep %} {% step %} #### **Deposit Collateral** Deposit eligible tokens (e.g, PGF or AuSG) into your vault smart contract. {% endstep %} {% step %} #### **Borrow AuUSD** Based on the value of your collateral, you can borrow AuUSD at a specific loan-to-value (LTV) ratio. {% hint style="info" %} For example, if your collateral is worth $1,000 and the LTV is 70%, you can borrow up to $700 in AuUSD. {% endhint %} {% endstep %} {% step %} #### **Use Your AuUSD** Once borrowed, you can trade your AuUSD for USDC in the [liquidity pool](https://auresources.gitbook.io/help-center/auresources-ecosystem/defi/liquidity-pool), use it within the AuResources ecosystem, or hold it for future use. {% endstep %} {% step %} #### **Repay and Reclaim** When you're ready, repay the borrowed AuUSD plus accrued interest, and your collateral is unlocked and can be withdrawn. {% endstep %} {% endstepper %} ### Interest and Fees Borrowed AuUSD accrues interest at a rate of 0.1% annually, which is significantly lower than traditional lending options. This interest accumulates over time and must be paid back along with the principal amount when you repay your loan. ## How AuUSD Maintains Its Value ### The Peg Mechanism AuUSD maintains its 1:1 peg to the US dollar through over-collateralization and market mechanisms: #### **Over-collateralization** You can only borrow a percentage of your collateral's value. If your gold tokens are worth $1,000, you might only be able to borrow $700 in AuUSD. This buffer protects the system from price volatility. #### **Liquidation Mechanism** If the value of your collateral drops significantly or your debt grows (through interest), your vault can be liquidated to maintain the system's health. This ensures AuUSD always has sufficient backing. #### **Liquidity Pool** The AuUSD/USDC liquidity pool allows users to trade between the two stablecoins, helping maintain the peg through market forces. ## What Can You Do With AuUSD? Once you've borrowed AuUSD, you have several options: #### **Trade for USDC** Swap your AuUSD for USDC in the liquidity pool, giving you access to a widely accepted stablecoin you can use across DeFi platforms or cash out to fiat. #### **Maintain Liquidity** Keep AuUSD in your wallet as a liquid asset while your gold tokens continue to hold value. #### **Use in DeFi** As the ecosystem expands, AuUSD may be accepted in other DeFi protocols and applications. #### **Strategic Positioning** Hold AuUSD when you anticipate gold prices dropping, then repay your debt with cheaper dollars later. ## Technical Details ### Smart Contract Architecture The AuUSD system operates through several interconnected smart contracts: [**Vault Contract**](https://auresources.gitbook.io/help-center/auresources-ecosystem/defi/vault): Holds your collateral tokens and tracks your debt position. Each user have independant vault, and each vault operates independently with its own collateral and debt tracking. **AuUSD Token Contract**: An ERC-20 token deployed on Polygon PoS that represents the stablecoin itself. The contract can only mint new AuUSD when users borrow and burn it when users repay. **Price Oracle**: Uses Chainlink price feeds to track the real-time value of collateral tokens (based on gold spot prices) and calculate vault health ratios. **Liquidation Engine**: An autonomous system that allows any user to liquidate unhealthy vaults and receive a reward for doing so. ### Vault Health and Liquidation Your vault has a "health factor" calculated as: ``` Health Factor = (Collateral Value) / (Debt + Accrued Interest) ``` When this ratio falls below the liquidation threshold (specific to each token type), your vault becomes eligible for liquidation. **Liquidation Process**: 1. Any user can call the liquidation function on an unhealthy vault 2. The liquidator repays the debt (in AuUSD) 3. The collateral is seized and sold 4. A liquidation penalty (malus) is applied to the collateral 5. The liquidator receives the collateral plus the penalty 6. Any remaining collateral (if debt was partial) returns to the vault owner **Example**: * Your collateral: 100 AuSG tokens worth $10,000 * Your debt: $7,000 AuUSD * Gold price drops 20% * New collateral value: $8,000 * Health factor: 8,000 / 7,000 = 1.14 * If liquidation threshold is 1.2, your vault can be liquidated #### LTV Ratios by Token Type Different tokens have different loan-to-value ratios based on their risk profile: **PGF Tokens (Future Gold Tokens)**: Lower LTV because the gold hasn't been mined yet. Risk of production delays or issues means you can borrow less against these tokens. **AuSG Tokens (Spot Gold Tokens)**: Higher LTV because these represent gold that's already refined and stored in vaults. Lower risk means you can borrow more. LTV ratios may also vary by maturity date. Tokens with nearer maturity dates typically have higher LTVs than those with distant maturity dates. ### Interest Accrual Interest on borrowed AuUSD compounds continuously using the formula: ``` Debt = Principal × e^(rate × time) ``` At 0.1% annual rate: * Borrow $10,000 AuUSD * After 1 year: $10,010 owed * After 2 years: $10,020.01 owed Interest is calculated per second based on blockchain timestamps. ### Contracts Addresses
ContractNetworkAddress
AuUSDPolygon PoS0xEB3669C7324B3cb1622a0A37391F5d3B8efffBc3
### Contracts Sources Source code can be found on our [public Github Repository](https://github.com/auresources/contracts/blob/main/src/tokens/AUUSD_TOKEN.sol). ## Key Takeaways {% hint style="info" %} AuUSD unlocks liquidity from your gold tokens without requiring you to sell them. It's a collateral-backed stablecoin with transparent, automated operations through smart contracts. With a low 0.1% interest rate and the ability to trade for USDC, it provides flexible access to capital while you maintain ownership of your gold. The technical implementation ensures security through over-collateralization and automated liquidation, while the decentralized nature means no credit checks or intermediaries. However, you must actively manage your vault health to avoid liquidation, especially during volatile markets. Two simple ways to get AuUSD exist: borrow against your gold tokens for leverage, or swap USDC directly in the liquidity pool for quick access. Choose the method that fits your needs and risk tolerance. {% endhint %}