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Algorithmic, Exogenous Stablecoin

An algorithmic stablecoin pegged to the value of the US Dollar.

Overview

This system comprises two contracts:

  1. StableCoin (STC)
  2. DepositorCoin (DPC)

The StableCoin minters pay only the amount of STC they mint. Over-collateralization is maintained by liquidity providers who deposit without intending to mint StableCoin.

How It Works

Incentives for Liquidity Providers

  1. DepositorCoin (DPC): Liquidity providers receive DPC tokens equivalent to the USD value of their provided liquidity.
  2. Leverage Trading Mechanism:
    • Example:
      • ETH Price: $1,000/ETH
      • Minting Scenario:
        • Person A mints 500 STC by depositing $500 worth of ETH (0.5 ETH).
        • Person B provides liquidity by depositing $1,000 worth of ETH (1 ETH) and receives 1,000 DPC.
        • Total ETH in Pool: 1.5 ETH ($1,500).

Scenarios

  • Scenario A: ETH Price Decreases ($500/ETH)

    • Total ETH in Pool = 1.5 ETH = $750
    • Total DPC Supply = 1,000 DPC
    • Total DPC Value = $750 - $500 (STC liabilities) = $250
    • DPC Price: $0.25/DPC

  • Scenario B: ETH Price Increases ($1,500/ETH)

    • Total ETH in Pool = 1.5 ETH = $2,250
    • Total DPC Supply = 1,000 DPC
    • Total DPC Value = $2,250 - $500 (STC liabilities) = $1,750
    • DPC Price: $1.75/DPC

Underwater Contract

If the collateral falls below the value of minted StableCoins:

  1. Contract Freeze: The StableCoin contract is frozen.
  2. DPC Devaluation: DepositorCoins are deemed worthless.
  3. Re-Collateralization:
    • New liquidity providers must deposit a sufficient amount to over-collateralize and restore the pool's health.
    • Incentives: Exclusive liquidity provision rights for a specified duration.

Key Benefits

  • Algorithmic control ensures a stable peg to the US Dollar.
  • DepositorCoin holders benefit from a leverage-based profit mechanism.
  • Strong incentives for re-collateralization to maintain system stability.

Disclaimer

This system is experimental and carries risks, especially during periods of high volatility. Please exercise caution and conduct thorough research before participating.