ULAND Token

ULAND is an ERC-20 token that is native to the Universel Protocol.

What is the ULAND token used for?

ULAND is the governance token and recapitalization source of the Universel Protocol.

ULAND as a governance token

As a governance token, ULAND is used by its holders to vote on a number of different things. Voting is used to execute changes to parameters inside of the Universel Protocol like Stability Fees, the DSR, Debt Ceilings, and many others. Voting is also used to make decisions on the non-technical aspects of the protocol like asset priority lists, governance processes, role mandates, and even electing individuals to fill specific roles. To learn more about governance in the Universel Protocol visit the Governance FAQ.

ULAND as a recapitalization source

The token also acts as a source of recapitalization when the Universel Protocol runs at a deficit. The possibility of ULAND token supply Dilution gives holders a strong incentive to govern the system well. Inversely, the destruction of ULAND through the auctioning of UUSD from the system’s excess surplus further incentivizes holders to govern the system well.

What responsibilities do ULAND holders have?

The primary responsibility of ULAND holders is to ensure the stability of the UUSD Peg and the overall health of the Universel Protocol. It is also in ULAND holders’ interest to focus on improving and growing the Universel Protocol by building out the governance processes and infrastructure that enable the effective management of the system. This includes, but is not limited to, establishing risk assessment standards for onboarding new Collateral and Vault types, ratifying role mandates and electing appropriate parties, establishing standards around vote types, and much more.

Another important responsibility for ULAND holders is to communicate publicly about their views on the various issues that Universel governance is addressing at any given time. Participating seriously in forum discussions and voicing opinions, and the reasoning behind them, is important because of the public and decentralized nature of the protocol and its governance.

What voting rights do ULAND holders have?

ULAND holders have the ability to enact technical changes to the Universel Protocol itself and also to ratify decisions on-chain about non-technical matters. Whether that be a change to the system parameters, or a decision to accept a new governing philosophy, ULAND voters have ultimate control.

Can ULAND be used as a collateral type?

Although ULAND could technically be implemented as a collateral type, there are reasons why it would be inadvisable to do so.

ULAND is designed to function as a recapitalization source for the protocol. This means that ULAND acts as a Collateral of last resort to absorb losses beyond the expected losses from Collateral locked in Vaults. If ULAND is being used as a Collateral of first resort i.e. as a collateral type locked in Vaults, then it would take away from its effectiveness as a Collateral of last resort.

A negative feedback loop would occur in a scenario when a falling ULAND price would trigger the liquidation of ULAND-collateralized Vaults, further causing downward pressure on ULAND price. While downward price pressure in a liquidation is a risk applicable to any collateral type, the systemic risk with ULAND is potentially greater because falling ULAND price directly reduces the amount of value available to recapitalize all collateral types across the Universel Protocol. Downward spirals in ULAND price also make the Universel Protocol more vulnerable to governance attacks, wherein the cost of buying enough ULAND to vote for changes favorable to an attacker becomes more affordable. Furthermore, if both systemic bad debt and ULAND-Vault liquidations were to happen at the same time, then they would become self-reinforcing, increasing the risk of a severe collapse of the value of ULAND and reducing its effectiveness as a Collateral of last resort.

Finally, there is the argument about circular financing. It stands to reason that the value of ULAND may be correlated to the total amount of UUSD in circulation. Additional UUSD generated from ULAND-Vaults would create a positive feedback loop for the price of ULAND, allowing even more UUSD to be generated from those Vaults. This behavior adds systemic risk.

Will ULAND token Dilution be able to cover all UUSD if the value of their backing Collateral goes to zero?

The event of a Collateral asset losing all value is considered a Black Swan, which is defined as unprecedented, unexpected, and catastrophic. This makes it very difficult to predict the likelihood and severity of existential threats to the system. There is no guarantee that ULAND Dilution will always be sufficient.

ULAND Dilution can recapitalize the system to a certain limit. The severity of the situation is important to consider. If the severity of the situation is high enough, then it may be viable for ULAND holders to execute an Emergency Shutdown which would result in UUSD being a pro-rata claim on the Universel Protocols Collateral portfolio.

There is no time limit on when redemption needs to be done. It is important that all community members beware of phishing attacks happening in relation to this upgrade process. Never link to any “new official communication” regarding ways to redeem ULAND, as these could likely be phishing scams.

What happens to ULAND in the event of an Emergency Shutdown?

The system would need to be redeployed. The redeployed version of the Universel Protocol still requires ULAND for voting the same as it did before.

Emergency Shutdown is not necessarily indicative of an ULAND Dilution event. ULAND Dilution occurs when the system is running a deficit and needs to be recapitalized. If the system is going through Emergency Shutdown, the price feeds and state of the system will be frozen at a particular moment in time. ULAND Dilution might occur in the moments preceding that if the Emergency Shutdown is due to a severe market failure that would cause many Vaults to default.

There are no guarantees whatsoever relating to the future value of ULAND, in particular, if Emergency Shutdown happens. Additionally, ULAND holders are not responsible if UUSD holders take a haircut during Emergency Shutdown.

The total number of ULAND in existence can fluctuate based on how the system runs. For instance, the total supply of ULAND can increase if the system is running a deficit and needs to dilute ULAND as a recapitalization source. If the system is governed well, the total amount of ULAND will decrease as ULAND is destroyed in exchange for excess UUSD from the system’s surplus.