Inverse Finance (INV), a three-year-old stablecoin project, has recently gained significant attention by dominating the crypto-backed stablecoin market within the Base ecosystem. But how did a project once deemed "dead" due to hacks and bad debt rise so strongly?

1. Inverse Finance’s Product Suite

Core Offerings

• DOLA: A USD-pegged stablecoin backed by fully recoverable debt.
• INV: The native governance token of Inverse Finance, offering value accrual mechanisms that make it an "investable" token.

Products

1. FiRM: A fixed-interest rate lending platform.
2. DBR (DOLA Borrowing Right): A new DeFi primitive offering the right to borrow 1 DOLA for a year. DBR is an ERC-20 token, freely tradable on DEXs like Uniswap.
3. sDOLA: Yield-bearing version of DOLA.
4. sINV: Yield-bearing version of INV.

2. Why Is Inverse Finance Gaining Attention?

DOLA's Liquidity

• Dominance in the Base Ecosystem:
  • DOLA is the most liquid stablecoin on Aerodrome Finance.
  • TVL of the DOLA-USDC pair reached $50M.

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Source: Inverse Finance

ve-Token Strategy

Inverse Finance utilizes a treasury of veTokens worth millions of dollars, primarily veAERO, to direct emissions from veAMMs to DOLA-related pools (e.g., DOLA-USDC).
This boosts yield, attracts liquidity, and solidifies DOLA’s position across ecosystems.

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Source: Inverse Finance

By building robust liquidity for DOLA, the project has accelerated the adoption of FiRM and started generating millions in annual revenue from FiRM and the DOLA Fed.

3. Challenges: Debt and Future Development

Inverse Finance faced challenges due to four exploits, resulting in $12M in bad debt. Despite this, the project deployed measures to reduce debt, which impacted both the price and market capitalization of INV.

• Current Market Cap: $20M–$25M.
• Fully Unlocked Token Supply.

Roadmap for Debt Clearance

• Founder Nour predicts the bad debt will be cleared within 1-2 years (by late 2025) instead of the previously forecasted 18 years.
• Post-Clearance Benefits:
  • Improved trust in DOLA.
  • Reduced operational costs.
  • Enhanced DAO resources:
    • Millions in veTokens.
    • Hundreds of millions in DOLA liquidity.
    • Annual revenue from FiRM and DOLA Fed.

4. Upcoming Stablecoin Launch: USD2

What Is USD2?

A yield-bearing stablecoin fully backed by staked ETH, designed to complement DOLA.

• Target Audience:
  • USD2: For users seeking stability and consistent returns.
  • DOLA: For users needing over-collateralized stablecoin with fixed borrowing rates.

Unique Features

• Fully backed by staked ETH.
• Automated interest rate controllers.
• Flexible repayment mechanisms.
• Loss-sharing capabilities for resilience.

USD2 is set to launch in early 2025, coinciding with FiRM V2. The token will be fully owned by Inverse DAO, with its future dictated by the INV community.

DAO Support for USD2

• Liquidity Pools: DOLA-USD2 Fed.
• AMM Incentives: Partner AMM rewards.
• Stabilizer Support: USD2 backed by DOLA Stabilizer.
• Collateralization: USD2 used as collateral on FiRM.

5. Inverse Finance’s Market Position

Inverse Finance’s revival is driven by a calculated strategy utilizing Base ecosystem growth and the ve-Token flywheel.

• Strong liquidity for DOLA builds confidence.
• Upcoming USD2 aims to broaden stablecoin market share, addressing gaps left by competitors.

Source: Inverse Finance

With these measures, Inverse Finance positions itself as a key player in the stablecoin space, combining innovation and resilience.

6. Conclusion: Should You Invest?

Strengths

• Dominance of DOLA in Base’s stablecoin market.
• Robust product suite with diverse revenue streams.
• Future potential from USD2 launch and debt clearance.

Challenges

• History of exploits and resulting debt.
• Competitive stablecoin landscape.

Recommendation

• Short-Term: Monitor progress on debt clearance and FiRM adoption.
• Long-Term: Consider accumulating INV if debt clearance aligns with roadmap and USD2 gains adoption.

Disclaimer

This content is for informational purposes only and does not constitute financial or investment advice. Always do your own research and consult a financial advisor before investing.

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