Learn about AC's new product StableCredit in one article: a deposit and loan agreement based on a mortgage-type stable currency design

Editor's Note: This article comes fromUncertain thinking, author: Xia Ke Zhang, published with authorization.

Editor's Note: This article comes fromUncertain thinking, author: Xia Ke Zhang, published with authorization.

As early as August, AC proposed the concept of StableCredit, I wrote in the article

YFI's Sea of ​​Stars

There was a brief introduction in , and this time AC issued a document, explaining that the idea that has been brewing for more than 4 months will be officially implemented.

To put it simply, StableCredit is a deposit, loan and AMM comprehensive application protocol based on a mortgage-type stable currency design. The idea is borrowed from ARCx, and everything is mortgaged to issue bonds.

The user mortgages a house worth 1 million to YFI, and YFI gives the user a stablecoin loan of 1 million. This stablecoin loan line can be used to lend out other assets, such as a car. At the same time, the agreement will distribute profits to users based on the house's investment income (LP). When the value of the house rises, the loan amount in the user's hand can also float upwards.

basic concept

This model is very similar to Uniswap+Maker. Using the current scenario as an analogy, the user deposits ETH into Uniswap for market making, and while earning income, Uniswap will also give you a sum of money for you to spend. Isn't this cool?

• The following will further interpret AC's article:

• basic concept

• At the beginning of the AC article, several basic concepts are introduced, including:

• Collateralized stable currency (tokenized debt), typical representative of Maker's DAI

• Lending agreement, typical representatives Aave, Compound

Automated Market Maker (AMM), typical representatives Uniswap, Sushi

Unilateral AMM, typical representatives: DoDo, CoFiX

Utilization rate, which can be understood as mortgage rate or liquidation line, is the core data of lending agreements

Here we can talk about the utilization rate separately. When the utilization rate of AC expenditure is 0%, borrowing 1 DAI is 1 DAI, and there is no premium. When the utilization rate is 90%, the cost of borrowing 1DAI is greater than 1DAI, that is, borrowing 1DAI may actually get 0.98DAI, and there is a premium.

This phenomenon can be explained very clearly with AMM. When DAI and debt are added to the 50:50 AMM pool at a ratio of 1:1, the more demand for debt, the higher the transaction slippage, which also explains the existence of the premium.

Stablecoin credit

• StableCredit is a protocol that combines tokenized debt stablecoins, lending, AMMs, and unilateral AMMs to create a fully decentralized lending protocol.

• Users can provide any asset and create tokenized credit called StableCredit USD (EUR, JPY, etc. can also be supported).

• The specific creation process is as follows:

• Provide a certain amount of USDC

• Call the USDC price oracle to determine the dollar value of 1 USDC

• The protocol mints StableCredit USD of the corresponding USD value

Provide USDC and StableCredit USD to AMM at a ratio of 50:50

The protocol calculates system utilization up to 75%

Utilization of offered USDC (or 75% maximum) in StableCredit USD

At this time, the StableCredit USD obtained by the user is "loan credit". It can be used to borrow against other assets collateralized through the AMM. So if another user offers LINK as collateral, you can borrow LINK by "selling" the lending credit. When you want to repay the debt, you can "sell" LINK back to exchange for StableCredit USD, pay off the debt, and then receive your USDC.

actual case

Here are a few specific examples to illustrate this process:

User A provides 1000DAI for borrowing:

1. Deposit 1000DAI into the StableCredit protocol

2. The system calls the oracle to query the DAI value of 1020 USD

3. The system casts 1020 USD

4. The system adds 1000DAI and 1020USD of user A to AMM

5. The system calculates the utilization rate (dynamically changes according to the global mortgage situation), with a maximum of 75%

6. The system provides user A with 75% of the loan credit, that is, 1020*0.75=765 StableCredit USD

At this time, user A provided 1000DAI and got 765 StableCredit USD.

User B provides 2 ETH for borrowing:

1. Deposit 2ETH into the StableCredit protocol

2. The system calls the oracle to query the value of ETH 1400USD

3. The system casts 1400 USD

4. The system adds 2ETH and 1400USD of user B to AMM

5. The system calculates the utilization rate (dynamically changes according to the global mortgage situation), with a maximum of 75%

6. The system provides user B with 75% of the loan credit, that is, 1400*0.75=1050 StableCredit USD

• DAI:StableCredit USD

• ETH:StableCredit USD

• YFI:StableCredit USD

• WBTC:StableCredit USD

• At this time, user B provided 2ETH and got 1050 StableCredit USD.

Similarly, user C provided 1 WBTC and got 26,000 StableCredit USD; user D provided 1 YFI and got 23,000 StableCredit USD, etc...

At this time, there are multiple lending AMM pools in the system:

Mortgage asset pools added by various other users

User A wants to lend 1 ETH, so he provides 525 StableCredit USD to AMM and gets 1 ETH. The user wants to lend 500 DAI, and he provides 510 StableCredit USD to the AMM to get 500 DAI.

When they want to redeem the principal, they need to repay the corresponding loan assets to withdraw the principal from the LP. When the principal is withdrawn, the system will burn the corresponding amount of StableCredit USD. For example, when user A redeems 1000DAI, the system will call the oracle price at this time. Assuming that the price is still 1020USD at this time, the protocol will burn the corresponding amount of StableCredit USD to ensure the balance of the entire loan asset.

The process of redeeming and burning StableCredit USD is not mentioned in the AC article, it is my personal guess and judgment. The main basis is the design of EMN at that time, which also minted credits and destroyed credits. Unfortunately, it was exploited by hackers at that time and the project did not continue.

Advantages of StableCredit

The design of StableCredit makes full use of the characteristics of tokenized debt, lending, and AMM, and has many advantages over the existence of AMM and lending agreements alone:

First of all, the loan interest rate of the system is actually automatically balanced according to demand. Users who have more demand for loan assets will pay higher interest when repaying. The principle is that more assets are required, and more assets are sold in AMM. Users will pay more StableCredit USD when repaying loans to purchase corresponding assets.

StableCredit USD is similar to Uniswap's ETH, and is the intermediary of all AMM pool transactions, which allows lending credit to enjoy transaction fees, and indirectly enables asset providers to charge interest. That is, the premiums such as transaction fees and transaction slippage paid by borrowing users are indirectly provided to token providers.

If the user only provides tokens without lending, the loan premium of the entire system will always be accumulated, and the deposit income will be realized.

This method also achieves a very beautiful maximum utilization rate of loans. Lending agreements like AAVE will be liquidated once the user's mortgage rate reaches the red line. StableCredit's model basically has no risk of being liquidated, only relative overall system risk, that is, utilization rate.

for example:

User A deposits 1000DAI and gets 765 StableCredit USD. Afterwards, he used it all to lend ETH. According to the previous case, it was calculated that 765/700=1.09 ETH could be borrowed (due to actual slippage, etc., the amount will be biased)

Assuming that after one month, the price of ETH rises to 1000, and the user repays 1.09 ETH, he will get 1.09*1000=1090 StableCredit USD. At this time, the user repays 765 StableCredit USD and can redeem 1000DAI.

Some of the above content is purely my personal guess based on some scattered information. The specific operation mode of StableCredit will be verified in detail after the system is officially launched.

write at the end

But it is not difficult to imagine that such a design can definitely release more purchasing power and absorb more liquidity.

first level title

write at the end

I also said in the previous article that the design of StableCredit is a very critical part of YFI's entire battleship. It provides an interface for the entire financial empire to absorb liquidity, and may eventually develop into a liquidity black hole.