DOLA

DOLA is Inverse Finance's native decentralized stablecoin, pegged 1:1 to the US dollar. Unlike stablecoins backed by bank deposits or maintained through algorithmic supply mechanics, DOLA is created exclusively through overcollateralized borrowing on FiRM and direct reserve swaps through the Peg Stability Module. Every DOLA in circulation is backed by collateral — either locked by a borrower in a FiRM market or offset by reserve assets held in the PSM.

Type

Decentralized stablecoin

Peg

1:1 USD

Primary issuance

FiRM overcollateralized borrowing

Secondary issuance

Peg Stability Module (USDS ↔ DOLA)

Chains

Ethereum mainnet + L2s

Mainnet Contract

0x865377367054516e17014ccded1e7d814edc9ce4

How DOLA Is Created

DOLA comes into existence through two mechanisms. The primary channel is borrowing on FiRM: the FiRM Fed pre-mints DOLA into each market in anticipation of borrowing demand, up to governance-approved limits. When a user deposits eligible collateral and draws a loan, they borrow from that pre-minted pool. Two governance parameters control how much DOLA can enter circulation through each market — a supply ceiling that caps total exposure, and a 24-hour rolling daily borrow limit that controls the flow rate. Borrowed DOLA is backed by the collateral held in the borrower's Personal Collateral Escrow until the loan is repaid and the DOLA is burned. FiRM's overcollateralization requirements and liquidation mechanics ensure outstanding loans remain backed as market conditions shift.

The secondary channel is the Peg Stability Module (PSM). The PSM accepts USDS at a 1:1 exchange rate and mints an equivalent amount of DOLA, providing a direct on-ramp from one of DeFi's most liquid stablecoins. Buying DOLA through the PSM (minting) is free; selling DOLA back (redeeming) carries a 20 basis point fee. USDS reserves held in the PSM are not idle — they are deposited into sUSDS, Sky's yield-bearing USDS vault, generating revenue for the DAO treasury while sitting in reserve. The PSM is sized as a backstop and liquidation-support mechanism rather than a primary supply source, reflecting its role in peg defense during stress events.

A note on DOLA's backing: DOLA's supply is highly concentrated in FiRM's overcollateralized lending — this concentration is intentional. FiRM's fixed-rate model with conservative collateral factors and robust liquidation infrastructure provides the strongest backing for DOLA. The protocol has deliberately moved away from AMM-based supply toward lending-backed DOLA, which offers clearer backing and better capital efficiency.

Feds: How DOLA Reaches the Market

DOLA supply is managed by Feds — specialized smart contracts authorized by governance to mint new DOLA (expansion) or burn it (contraction). The Fed Chair multisig executes supply adjustments within governance-approved ceilings, allowing the protocol to respond to market conditions quickly while remaining accountable through full on-chain transparency.

The DAO currently operates three active Feds: the FiRM Fed, which provides the vast majority of all circulating DOLA through FiRM's lending markets; the PSM Fed, which powers the Peg Stability Module; and the Frontier Fed, a legacy contract from the deprecated Frontier protocol that is gradually winding down as its bad debt is repaid.

See also: DOLA Feds for a full breakdown of how each Fed operates, the history of AMM Feds, and how to monitor Fed activity in real time.