What is Unit Protocol and why does it matter? : altcoin

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Decentralized finance (DeFi) plays an increasingly important role in the Ethereum ecosystem with the adoption of classic financial operations such as borrowing, lending, and various derivative issuance, as well as instruments with stable value(stablecoins) creation. DeFi is in the early stages of existence, and the overall efficiency and variety of decentralized services are low compared to the fiat financial world.

However, the programmable and decentralized nature of such services provides the potential for massive growth in the coming years. Decentralized financial services have different purposes and functionality, but their token economic models are mostly weak(such as simple governance token economic models) and do not allow long-term value capture. The majority of their token value is based on speculation without sustainable organic drivers.

Stablecoins are an important driver in DeFi adoption and development. The rise of stablecoins can be explained by the long downtrend in the market. During the time crypto assets holders were looking for the ability to keep the value of their crypto without touching fiat currencies and later simplify their ability to move the value back from stability to volatile coins.

Centralized stablecoin platforms contain a risk of censorship, reducing their long-term viability. Some services also face problems related to questionable asset management practices and the possibility of off-chain assets being frozen or taken by governments. More “compliant” centralized services can blacklist addresses and freeze accounts, increasing transaction censorship risk.

The Unit protocol allows users to obtain liquidity from a large variety of decentralized assets. The protocol increases borrowing efficiency by expanding the number of crypto assets available for collateralization, and asset holders can use the value contained in a diverse set of token hold- ings to mint the stablecoin $USDP. The liquidation mechanism stabilizes the entire system and provides economic incentives to liquidity providers.

A stable borrowing rate with no issuance fees increases user confidence. An organic token economic model connects the growth of the protocol to token value flows. A flexible approach to oracles gives users the option to select their preferred data provider. These solutions can significantly increase the capacity of a borrowing protocol and provide higher utility for users.

In one sentence, Unit Protocol is a decentralized protocol that allows you to mint stablecoin $USDP using a variety of tokens as collateral. There are several tokens used in system:
USDP – Stablecoin
DUCK – Governance token
COL – Old token, COL > DUCK migration

$USDP

USDP address: 0x1456688345527bE1f37E9e627DA0837D6f08C925

USDP is a decentralized stablecoin currently live on the Ethereum network. The Unit Protocol incentivizes users to increase or decrease the USDP token supply based on supply and demand and ensures its value stays pegged to 1 USD.
The token contract conforms to the ERC20 token standard which allows wallets, exchanges, and other applications to easily integrate with minimal effort. Non-standard functions of USDP token are described below.The Unit protocol allows users to obtain liquidity from a large variety of decentralized assets. The protocol increases borrowing efficiency by expanding the number of crypto assets available for collateralization, and asset holders can use the value contained in a diverse set of token hold- ings to mint the stablecoin $USDP. The liquidation mechanism stabilizes the entire system and provides economic incentives to liquidity providers.

A stable borrowing rate with no issuance fees increases user confidence. An organic token economic model connects the growth of the protocol to token value flows. A flexible approach to oracles gives users the option to select their preferred data provider. These solutions can significantly increase the capacity of a borrowing protocol and provide higher utility for users.

In one sentence, Unit Protocol is a decentralized protocol that allows you to mint stablecoin $USDP using a variety of tokens as collateral. There are several tokens used in system: USDP – Stablecoin DUCK – Governance token COL – Old token, COL > DUCK migration

In Unit protocol, every USDP is fully backed by provided collateral. If the debt/collateral ratio exceeds a Liquidation Ratio(LR) for a Collateralized Debt Position(CDP), it will be subject to liquidation. Anyone can trigger liquidation by sending a trigger transaction. There are liquidation bots that consistently monitor CDPs and trigger liquidations if the stated condition is met.

After a CDP is triggered for liquidation, a Dutch auction starts for underlying collateral with a linear decrease in price. (the price decremental step can be different for various assets, but for the most amount of assets it is ~0.09% decrease per block).

Every participant can buyout the part of the collateral for the current price by paying the USDP debt for a liquidated CDP. USDP debt is equal to borrowed USDP amount plus the liquidation fee in % from this amount.
After collateral realization, the remaining part is returned to the borrower’s address. His USDP debt is burned, and the liquidation fee is sent to the governance pool address for fee distribution.

DUCK

DUCK address: 0x92e187a03b6cd19cb6af293ba17f2745fd2357d5

The DUCK token is the governance token and core token of the Unit Protocol economy.
Unit protocol collects stability fees when users repay their USDP and liquidation fees if CDPs were liquidated. The governance pool plays a significant role in Unit Protocol decision-making system and add stability to the system, so it is essential to incentivize DUCK stakers and help them be involved in the voting process.

Unit protocol needs price data for system contracts to know the current price of provided collaterals. It is necessary to count borrowing parameters and manage collateralized debt positions (CDPs) in the protocol.

We use Keep3r oracle as the primary oracle to receive our collaterals’ price in ETH and Chainlink oracle to receive ETH price. Keep3r provides time-weighted Uniswap && Sushiswap price feed with a specific time period.

Additionally to the solution, in reserve, we have our oracle solution – Keydonix(also based on uniswap price feed), as well as Chainlink oracle for token prices.

Unit Protocol & Component

During the Unit protocol development, we faced difficulty finding a reliable, flexible protocol for stablecoin swap without interface censorship.

Many swap protocols implement governance to make decisions about pools creating or listing new tokens. It is a reasonable approach if adding a new element to the system would influence of reliability of the whole protocol, but under the condition that each pool is separated element censorship approach may be a huge limitation for protocol growth.
For example, Uniswap is very convenient because anyone can list any token, and the default interface will work without any governance process or listings censorship.

But Uniswap, due to its bonding curve, is not suitable for a similar peg assets swap because of high slippage and there is no protocol flexibility to make adjustments to the default model.

Component aims to provide flexible pool settings suitable for any token project, freedom of pools creation, and fair community protocol governance token distribution.
The Component governance token will be distributed retrospectively to the liquidity providers of core pools after a 1-3 month period.

You can track potential distribution rewards in real-time via https://distribution.component.finance/.

Rewards for an address are proportional to the amount of liquidity provided to Component farming pools relative to the total provided liquidity for every block.
As an example, if a user provides 100 USD liquidity and for the block total amount of liquidity is equal to 10,000 USD, then he will receive 1% of total rewards for the block, if for the next block total liquidity increased to 20,000 USD, he will get 0.5% of total rewards for the next block.

There are no certain conditions set so far about the whole structure of distribution, and information about distribution parameters will be announced later. The reward period started from the 27th Jan 2021.

Website: docs.unit.xyz

Coingecko: https://www.coingecko.com/en/coins/unit-protocol-duck



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