Minting $LUSD

The creation of $LUSD, Lunara’s synthetic dollar, is a streamlined and efficient process that leverages Solana’s high-performance blockchain to deliver a stablecoin pegged to the USD. This minting mechanism is designed to ensure a 1:1 backing ratio with deposited assets while maintaining stability through delta-neutral hedging. Below is a detailed explanation of how $LUSD is minted within the Lunara protocol.

Asset Deposit: Users begin by depositing supported crypto assets—such as SOL, BTC, or ETH—into Lunara’s Solana-based smart contracts. These assets serve as the backing collateral for $LUSD. For example, a user might deposit 1 SOL when its market value is $100. The process is open to all users, with two access paths: permissionless minting via automated market maker (AMM) pools (e.g., Raydium) for retail participants, or direct minting for KYC-approved counterparties like market makers.
Atomic Hedging Transaction: Upon receiving the deposit, Lunara executes an atomic transaction that simultaneously mints $LUSD and hedges the backing asset. Using Solana’s ultra-low latency and high throughput (over 65,000 TPS), the protocol instantly opens a short perpetual futures position on a centralized exchange (e.g., Binance or Serum) equal to the deposited value. For a $100 SOL deposit, Lunara opens a $100 SOL short perpetual. This ensures the portfolio remains delta-neutral—meaning the net exposure to SOL’s price movements is zero—locking in the USD value at the point of minting.
$LUSD Issuance: With the hedge in place, the protocol mints $LUSD at a 1:1 ratio to the deposited USD value. In the example above, depositing 1 SOL worth $100 results in the issuance of 100 $LUSD tokens. The minting process incurs minimal costs thanks to Solana’s near-zero gas fees (typically fractions of a cent), with any slippage or execution fees transparently embedded in the transaction. Lunara does not profit from minting, ensuring the process is user-centric and cost-efficient.
Backing Asset Management: The deposited assets (e.g., 1 SOL) are not held on the exchange where the hedge is placed. Instead, they are secured in institutional-grade Off-Exchange Settlement (OES) solutions, such as those provided by partners like Copper. These assets remain onchain and are only delegated to exchanges for funding payments or profit/loss settlement, reducing counterparty risk while maintaining full transparency and control.
Outcome: The result is a freshly minted $LUSD token that reflects the exact USD value of the deposited asset, stabilized by the delta-neutral hedge. For instance, if SOL’s price later drops to $50, the $50 loss in the spot asset is offset by a $50 gain in the short perpetual, keeping the portfolio’s value at $100—and thus each $LUSD at $1. This process allows users to convert volatile crypto holdings into a stable, usable dollar asset seamlessly, with no overcollateralization required.

The minting of $LUSD exemplifies Lunara’s commitment to capital efficiency and stability, harnessing Solana’s speed and the deep liquidity of perpetual futures markets (over $65 billion in open interest) to create a scalable synthetic dollar. Whether accessed through AMM pools or direct channels, this mechanism ensures $LUSD is accessible, secure, and ready for integration across DeFi ecosystems.

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Minting $LUSD

Asset Deposit: Users begin by depositing supported crypto assets—such as SOL, BTC, or ETH—into Lunara’s Solana-based smart contracts. These assets serve as the backing collateral for $LUSD. For example, a user might deposit 1 SOL when its market value is $100. The process is open to all users, with two access paths: permissionless minting via automated market maker (AMM) pools (e.g., Raydium) for retail participants, or direct minting for KYC-approved counterparties like market makers.
Atomic Hedging Transaction: Upon receiving the deposit, Lunara executes an atomic transaction that simultaneously mints $LUSD and hedges the backing asset. Using Solana’s ultra-low latency and high throughput (over 65,000 TPS), the protocol instantly opens a short perpetual futures position on a centralized exchange (e.g., Binance or Serum) equal to the deposited value. For a $100 SOL deposit, Lunara opens a $100 SOL short perpetual. This ensures the portfolio remains delta-neutral—meaning the net exposure to SOL’s price movements is zero—locking in the USD value at the point of minting.
$LUSD Issuance: With the hedge in place, the protocol mints $LUSD at a 1:1 ratio to the deposited USD value. In the example above, depositing 1 SOL worth $100 results in the issuance of 100 $LUSD tokens. The minting process incurs minimal costs thanks to Solana’s near-zero gas fees (typically fractions of a cent), with any slippage or execution fees transparently embedded in the transaction. Lunara does not profit from minting, ensuring the process is user-centric and cost-efficient.
Backing Asset Management: The deposited assets (e.g., 1 SOL) are not held on the exchange where the hedge is placed. Instead, they are secured in institutional-grade Off-Exchange Settlement (OES) solutions, such as those provided by partners like Copper. These assets remain onchain and are only delegated to exchanges for funding payments or profit/loss settlement, reducing counterparty risk while maintaining full transparency and control.
Outcome: The result is a freshly minted $LUSD token that reflects the exact USD value of the deposited asset, stabilized by the delta-neutral hedge. For instance, if SOL’s price later drops to $50, the $50 loss in the spot asset is offset by a $50 gain in the short perpetual, keeping the portfolio’s value at $100—and thus each $LUSD at $1. This process allows users to convert volatile crypto holdings into a stable, usable dollar asset seamlessly, with no overcollateralization required.

PreviousIntroduction NextPeg Stability with Delta-Neutral Hedging

Last updated 8 days ago