SURF (Smart Utility Recapitalization Feature) is a new token designed to improve the mechanics of recapitalizing USDN reserves.

WAVES reserves back the existing supply of USDN stablecoin. Every WAVES token transferred into the smart contract in exchange for USDN is held as collateral to back USDN. The Backing Ratio (BR) is the value of the WAVES on the contract vs. the value of the USDN supply. Three variables affect the BR: The amount of issued USDN, the market price of WAVES, and the amount of WAVES on the smart contract.

For example, if the value of the reserves is insufficient to cover the entire value of the stablecoin exactly by one-half, then BR is 50%. On the other hand, if the capitalization of reserves is higher than supply by 50%, then BR is 150%.

SURF token will help achieve BR equilibrium and provide additional incentives for the community and investors.

Long story short:
* SURF becomes available for purchase when BR is lower than 100%
* The price of SURF will be equivalent to the BR, i.e., 50% BR = SURF $0.50 USDN
* Staked SURF gives passive income and other benefit
* When BR goes higher than 115%, the staked SURF gets automatically converted to USDN at a 1:1 rate

Why use SURF, and how to earn the most on it?

SURF becomes available for purchase (issue via smart contract) by locking USDN or WAVES on the smart contract only when BR (Backing Ratio) is <100%.

The locked WAVES is added to the existing reserves to provide additional capitalization for USDN reserves and increase BR. The locked USDN is burned, which reduces the total USDN circulating supply and also increases BR.

Purchasing SURF for USDN is slightly more profitable than purchasing for WAVES, while purchasing for WAVES has more impact on the BR value. The following formulas are used for calculating the SURF price.

When purchasing for USDN:

when purchasing for WAVES:

where:

R (reserve) — is the amount of WAVES reserves backing USDN supply

S (supply) — is the total USDN circulating supply

price — is the price of WAVES in USDN

The price of SURF issued via smart contract depends on the current BR and the amount you want to purchase, so the more you purchase, the higher the average SURF price gets.
The best time to purchase SURF is when BR is low.

Example

Let’s assume that the WAVES price is ~5.6 USDN, while BR is as low as 17%, meaning that the contract price of SURF is 0.17 USDN. The amount of WAVES in reserves is 22,071,844 with total 727,068,652 USDN supply. (in this example, due to relatively small numbers, let’s neglect the price impact, meaning that the more SURF you buy, the higher the BR and the average SURF purchase price gets).

If you spend $10,000 in WAVES to purchase SURF, you will get ~58,820 SURF and increase the current BR by 0.00137%
If you spend $10,000 in USDN to purchase SURF, you will get ~58,822 SURF and increase the current BR by 0.00023%

Stake your SURF to get all the benefits of holding gNSBT (you will get 1 gNSBT per 300* SURF) and more:

• Get the ability to swap WAVES↔USDN. Your daily Max Swap Amount depends on your gNSBT share. Use the swap feature to earn an extra profit on arbitrage if the price of USDN on exchanges goes lower than $1.
• Get regular rewards based on your gNSBT share and daily swap fees (Protocol Fees). Claim your rewards at any time.
• Get voting power to influence decisions regarding the Neutrino protocol. For security reasons, SURF stakers get voting power with a delay of 20,160 blocks ( ~2 weeks).
• Get profit when BR is >115%, and your staked SURF gets automatically converted to USDN at 1:1.

* Later on this value will be regulated by means of community voting.

How does the automatic conversion work?

1) When BR reaches 115% the automatic conversion of SURF to USDN is triggered.

2) The system decreases BR by 10% to issue additional USDN to repay SURF holders, so that BR goes down to 105%.

where:
R (reserve) — is the amount of WAVES reserves backing USDN supply
S (supply) — is the total USDN circulating supply
price — WAVES price in USDN

The newly issued USDN amount is stored on the contract (until it gets claimed) to repay all SURF holders by converting a percentage (p%) of their staked SURF to USDN. The repayment percentage is based on the total issued SURF and the amount of additionally issued USDN.

3) Users who stake their SURF get the p% percentage of their staked SURF amount converted to USDN automatically.

where:
supplySURF — is the total SURF circulating supply

4) Users who’s SURF is not staked during the automatic conversion will still be able to get their USDN by staking SURF, because the contract issues USDN for all users that have SURF, not only for stakers. However, the only way to get SURF converted is to stake it.

5) The resulting converted amount remains on the contract, so that users can claim it at any time. All the converted SURFs are burned.

6) When the staked SURF amount is decreased due to conversion, then gNSBT amount also gets decreased.

7) SURF stakers can calculate how much USDN they will get during conversion cycle by the following formula:

where:
SSA — is your staked SURF amount

8) There is a high probability that converting all the SURFs will take several auto conversion cycles. The process repeats every time BR hits 115% until the entire SURF supply is converted to USDN.

SURF vs. NSBT. Which one is better?

Right now, most NSBT supply is locked in long-term staking. As of writing this article, over 96% of the total NSBT supply has been minted, and over 88% is staked. As a result, it’s difficult to purchase NSBT. Plus, the smart contract price keeps going up due to the Moon Factor mechanics.

Meanwhile, NSBT stakers keep making daily profits and use swaps for arbitrage and other purposes.

Investing in SURF is an easy way for the Neutrino community and new investors to support the Neutrino protocol and get the same benefits as NSBT stakers. On top of that, the new product also provides a great return on investment (ROI) when BR improves. Purchasing SURF at a very low BR may give even more profit than NSBT stakers can get for the same amount spent.

Example

Let’s assume that BR is as low as 20%; this means that the contract price of SURF is 0.20 USDN. (in this example, due to relatively small numbers, let’s neglect the price impact, meaning that the more SURF you buy, the higher the BR and the average SURF purchase price gets).

You spend 10,000 USDN to purchase 50,000 SURF, then stake it and receive 166.6 gNSBT and all the related benefits.

If you spend the same amount of 10,000 USDN to buy NSBT (by the current market price=19 USDN), you will receive 526 NSBT, which would get you 526 gNSBT if you stake it.

Keep in mind that in the future the Moon Factor mechanics can essentially increase NSBT price. Also, if WAVES price grows, then NSBT price will grow exponentially. On the other hand, SURF price grows linearly.

When BR exceeds 115%, your 50,000 SURF will be eventually automatically converted to 50,000 USDN so that you will make x5 of your original investment. There is a possibility but no guarantee that at such BR, the price of NSBT will become x5. Most likely not until BR is high enough to pay back all SURF stakers.

* APR of SURF and NSBT tokens is based on collected protocol fees, so the reference value depends on the amounts and frequency of WAVES↔USDN swaps and the duration of the token existence.

**The reference values are calculated based on 29 July 2022: BR=20%, SURF price 0.20 USDN, NSBT price 19 USDN.

Conclusion

The example above shows that NSBT and SURF tokens are very similar, but none of the two is an explicit leader. Taking into account the return on investment (when BR gets high), SURF token purchased at low BR may provide even more profit than NSBT. SURF token potential profits are easy to calculate and understand; plus, it comes with all the benefits of having gNSBT with no ustaking fee. SURF token adds a unique and formidable asset to the tokenomics of Neutrino, providing additional possibility for the Neutrino community and new investors to influence the protocol development. SURF token will contribute to the stability and security incentives of the system and establish Neutrino as the strongest algorithmic stable asset protocol.

Purchase SURF to make your profit and support the ecosystem!