By Christopher Erckert

iUSD Stablecoin Explained: Indigo Protocol's CDP Stablecoin

Quick answer: iUSD is a synthetic stablecoin minted through Collateralized Debt Positions (CDPs) on Indigo Protocol, Cardano's synthetic asset platform. Users lock ADA as collateral to mint iUSD, and iUSD's price target tracks the median value of USDC, TUSD, and USDT, so a single stablecoin depeg doesn't break iUSD's own peg. Dotare's endowment holds iUSD on Liqwid as its CDP-based stablecoin position, sized to reflect its higher risk tier.

What is iUSD

iUSD is Cardano's first fault-tolerant, fully collateralized native stablecoin, released in November 2022 as part of Indigo Protocol v1. Indigo is a CDP-based DeFi protocol built to bring capital-efficient synthetic assets to Cardano, and iUSD is its flagship synthetic dollar.

Rather than being backed by off-chain fiat reserves or a single reference stablecoin, iUSD's price target is pegged to the median value of USDC, TUSD, and USDT. That three-asset median design means iUSD can maintain its own peg even if one of those three reference stablecoins depegs, since the median simply shifts to reflect the two coins still holding value.

How iUSD is minted

Users mint iUSD by opening a CDP and depositing ADA as collateral. The Indigo DAO governs the Minimum Collateralization Ratio for iUSD and all Indigo synthetic assets (iAssets), voting to raise or lower it as conditions warrant. Undercollateralized positions are subject to liquidation, which is the mechanism that keeps the system solvent.

iUSD can also simply be bought on a Cardano DEX like any other native asset, without going through the minting process directly.

CDP Liquid Staking: iUSD's standout feature

One of iUSD's more distinctive design choices is that ADA locked as CDP collateral continues to earn native staking rewards through normal stake pool delegation. This is sometimes called CDP Liquid Staking. It means collateral backing iUSD isn't dead capital: it keeps generating ADA rewards even while locked in the CDP, which is a meaningfully different capital efficiency profile than collateral locked in most lending protocols.

Where iUSD lives in Cardano DeFi

iUSD trades as a native Cardano asset across DEXs and is used as a supply and borrow asset in Cardano lending markets, including Liqwid Finance.

##Risks to understand iUSD's risk profile is CDP risk: the collateral is ADA, a volatile asset, and a sharp enough drop in ADA's price can push individual CDPs toward liquidation before the position holder can react. The three-stablecoin median peg design provides real resilience against single-stablecoin depeg events, but iUSD still ultimately depends on Indigo's smart contracts and the DAO's parameter choices functioning correctly under stress. This combination, volatile collateral plus a newer, more complex mechanism than a simple overcollateralized design, is why iUSD sits in a higher risk tier than DJED in Dotare's framework.

How Dotare uses iUSD

iUSD is classified as Tier 3 in Dotare's internal risk framework, the highest-risk stablecoin tier in the portfolio, reflecting its CDP structure and ADA-collateral dependency relative to fiat-backed USDM and USDA (Tier 1) and overcollateralized DJED (Tier 2).

That tiering doesn't mean iUSD is excluded. It means position size is smaller and monitored more closely, consistent with how an endowment-style portfolio takes measured risk at the margins in exchange for diversification and yield, without letting any single higher-risk position threaten the endowment's principal or the beneficiary distributions it funds.

FAQ

What backs iUSD? iUSD is backed by ADA locked in Collateralized Debt Positions on Indigo Protocol, not by fiat reserves.

What is iUSD pegged to? iUSD's price target tracks the median value of USDC, TUSD, and USDT, which protects its peg if any single one of those three stablecoins depegs.

Does locking ADA in a CDP mean losing staking rewards? No. Indigo's CDP Liquid Staking design lets ADA collateral continue earning native staking rewards while it backs an iUSD position.

Who sets iUSD's collateralization requirements? The Indigo DAO governs the Minimum Collateralization Ratio for iUSD and Indigo's other synthetic assets.

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Dotare's endowment holds iUSD as part of a diversified stablecoin strategy built to fund global UBI forever. Become a Benefactor and put your ADA to work, or read how the full endowment strategy fits together.