Introducing: "Priceless" Synthetic Asset Tokens

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Ethereum enthusiasts (ID: ethfans)

• Ethereum enthusiasts (ID: ethfans)

• , Author: UMA, Translator & Proofreader: Min Min & A Jian, reproduced by Odaily with authorization.

• We are going to use a new DeFi contract design, which has the following characteristics:

Priceless - No on-chain price feed mechanism!

Multi-sponsor (Multi-sponsor) - risk concentration!

Synthetic token - ERC 20 token that can track everything

Minimize the use of oracles as much as possible

We believe the biggest problem facing DeFi right now is the oracle. Some recent events have fully exposed the problem of oracles: bZx flash loan attack, SNX oracle front-running, Maker’s Black Thursday. We believe that DeFi will become safer after the use of oracles is reduced as much as possible. We call this "priceless" contract design.

According to the design of the "no price" contract, its mechanism will encourage the counterparty to reasonably control the size of its collateral without relying on any on-chain price push mechanism. These mechanisms include a liquidation and dispute process that provides incentives to counterparties that identify substandard position collateral. All positions are considered solvent (i.e., collateralized) unless liquidated. The oracle is only used when liquidation is disputed - after our process is designed, this should rarely happen.

This design pattern can be compared to a traditional legal contract. Suppose Alice and Bob draft a contract under US law, and neither intends to end up in a court battle. If both Alice and Bob believe that the other has complied with the terms of the contract, they will never use the court system. "Priceless" contracts have been designed with similar principles, repositioning "oracles" as a kind of court system: oracles should be viewed as a fallback for issues that cannot be handled by the contract's native mechanisms. dispute.

"Priceless" Synthetic Asset Tokens

Synthetic asset tokens are tokens backed by collateral. The value of such tokens fluctuates with their reference index. The value of synthetic asset tokens is created and backed by assets locked into smart contracts. An example of a synthetic asset token is USStocks, an ERC 20 token launched last year whose value follows the movement of the S&P 500 index.

In this design, liquidators can liquidate positions based on their own off-chain observations of a reference index for that token. The collateral ratio of positions that have not been liquidated is considered to be in compliance.

Disputes force liquidators to be honest, rewarding them for discovering invalid liquidations. The only time an oracle is needed is if the liquidation is contentious. If the price returned by the oracle shows that the disputer is right, the liquidator will be punished, and his fine will be used as a reward for the disputer. Conversely, if the disputant is wrong, his deposit is forfeited and rewarded to the liquidator.

The role of this incentive mechanism is to minimize the use of oracle machines while ensuring that the guarantee rate of the entire system is up to standard.

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- Decision tree when liquidating positions. For more technical details see this article -

• Create your own priceless synthetic asset tokens

• We have open-sourced the code for the priceless synthetic token, published a tutorial on how to deploy the contract, and written a detailed technical note.

• Currently, you can follow tutorials to deploy your own tokens on the testnet to track anything, for example:

• Real-world assets (e.g., U.S. dollars, national currencies, gold, oil, and the S&P 500)

• Cross-chain cryptographic currency assets

Bitcoin/Altcoin Market Cap Share

The total amount of collateral locked in a DeFi project (e.g., Uniswap or Compound)