USDR — Rain Dollar 💵

A solvency-capped liquidity stablecoin for decentralized prediction markets. USDR lets Rain underwrite true portfolio-level risk instead of phantom per-leg capital, bounded by one inviolable, code-level invariant: the protocol's maximum possible loss can never exceed its stable reserve — proven in real time at every block.

Overview

Order-book prediction markets suffer a structural inefficiency: the capital required to quote a market is far larger than a market maker's actual maximum loss. Quoting a 2% outcome on a CLOB can demand posting up to 50× the taker's stake — up to 100× for deep tail outcomes — even though, across a mutually exclusive market, the losses of every other outcome more than fund the one that resolves true.

USDR closes that gap. It is a single, fungible, on-chain stablecoin, backed by a diversified collateral basket, that lets the protocol and its market makers underwrite net portfolio risk while remaining provably solvent. AMMs using the LMSR cost function are already bounded-loss by construction; order books are not. USDR brings that same bounded-loss guarantee to the order book — and shared, capital-efficient liquidity to both.

The problem — capital required vs. maximum loss

Consider a CLOB market on "Will Norway win the World Cup?" trading at 2%. To let someone take a $1,000,000 position, a liquidity provider must post roughly 50× — $50,000,000 — to back that single leg. But that is an illusion of risk. "Who wins the World Cup?" is mutually exclusive: exactly one outcome resolves true, and every other position loses. If Norway wins, the provider pays the Norway backers but collects the far larger losses from everyone who backed the other nations. Netted across the whole market, the maximum possible loss is dramatically smaller than the gross capital each leg appears to demand.

This is a protocol-design solution, not a balance-sheet one. The question is never "how many billions does the treasury hold?" It is "how do we let liquidity providers underwrite true net risk instead of phantom gross risk — transparently, and without ever becoming insolvent?"

The solvency invariant — core of the system

The protocol enforces, in code, at every block:

Stress-MaxLoss(t)  ≤  Stable Reserve(t)

MaxLoss(t) is NET, not gross. It is the maximum the protocol can lose as a market maker, computed deterministically as the true worst-case net delta across all outcomes — the outcome that, if it resolves true, costs the most after netting every other outcome's loss against it. A market maker never posts collateral against each leg in isolation (that would recreate the 50×–100× waste); it backs only the netted worst case.

Because the floor relies only on the exogenous stable reserve (USDT/USDC) and never on RAIN's mark, even RAIN collapsing to zero cannot make the protocol insolvent toward traders. The system simply refuses to extend depth that would breach the floor.

The Settlement Escrow

The stable reserve is split. A main reserve holds the stable assets; from it, the protocol moves exactly Stress-MaxLoss(t) into an on-chain Settlement Escrow inside the protocol contract, topped up dynamically as exposure changes. The escrow is accessible only to traders, and only for settlement of winning positions.

Stable Reserve(t) = USDT + USDC          (exogenous, stable, multi-wallet)
Settlement Escrow = Stress-MaxLoss(t)    (traders' winnings only)
Free slack        = Reserve − MaxLoss    (all other redemption, first-come)

This makes the trader guarantee real without recreating per-leg over-collateralization: the protocol pre-commits stable funds equal to its net worst-case, so a winning trade is always payable in USDT — regardless of what collateral the losing counterparty posted. Merely holding USDR, or having minted it against RAIN, grants no access to the escrow.

Two guarantees, kept distinct

USDR is a solvency-capped settlement token with a guaranteed trader tier — not a universal-1:1-redemption stablecoin. It remains a single fungible token; the escrow-vs-slack split is protocol-internal reserve accounting, not a second token.

Issuance — one token, a collateral basket

Anyone can mint USDR by depositing collateral. USDR is a single fungible token regardless of which collateral created it. Volatile-collateral positions are over-collateralized CDPs with liquidation.

Each collateral type has a liquidity-derived debt ceiling — a hard, code-enforced cap on how much USDR may be minted against it, sized to that asset's real market liquidity, with hysteresis so a temporary dip does not strand existing positions. No actor — including the Foundation or an attacker holding admin keys — can mint beyond the ceiling. There is no admin-mint.

The absorption waterfall — bad-debt handling

If a collateral price crashes faster than liquidation can clear, loss is absorbed in strict order — bounded and non-reflexive:

Protocol economics

Why USDR is not Terra / LUNA

Stress scenarios — the invariant holds through crises

Parameters — launch defaults

Core (invariant, ceilings, liquidation logic) is immutable with emergency-pause only; risk parameters are timelock-governed.

Roadmap