> For the complete documentation index, see [llms.txt](https://oracle-free-dollar.gitbook.io/ofd/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://oracle-free-dollar.gitbook.io/ofd/overview/why-how-what.md).

# Why, How, What?

Why, how, what - this page delivers a brief overview of the intention behind OFD.

#### Why OFD?

Most stablecoins depend on centralized oracles to function. These oracles introduce critical vulnerabilities: they can be manipulated, censored, or become unavailable. Worse, they often act as the single point of failure in otherwise decentralized systems.

Oracle Free Dollar (OFD) takes a different path. It is built on the belief that price stability can be achieved without external price feeds. By replacing oracles with transparent governance, market-based enforcement, and overcollateralization, OFD creates a more resilient and censorship-resistant alternative.

#### How does it work?

Users mint OFD by locking up collateral in smart contract positions. Each position defines its own liquidation price. If the market believes a position is undercollateralized relative to that price, anyone can initiate a challenge. Successful challenges trigger a liquidation auction to cover the outstanding debt.

The protocol is governed by OFDPS holders (Oracle Free Dollar Pool Shares). They:

* Provide reserve capital
* Earn system fees
* Vote and veto risky proposals

Collateral types and system rules are managed through this governance process without relying on external data.

#### What is OFD?

OFD is a decentralized, overcollateralized stablecoin deployed on Binance Smart Chain. It is designed to maintain a soft peg to the US dollar without oracles.

Key properties:

* Minted through user-created or cloned positions
* Backed by configurable on-chain collateral
* Stabilized via liquidation and challenge mechanisms
* Governed by veto power and system parameters set by OFDPS holders

OFD is intended to be a stable, trust-minimized unit of account for users, builders, and investors seeking a truly decentralized alternative to oracle-dependent stablecoins.