IRON Stablecoin v2 Design
TL;DR:
- Stablecoin launch scheduled for August
- Over-collateralized and soft-pegged
- Strong integration with IronSwap and IronLend
- A portion of collateral must be in ICE token
- Decentralized governance module for important parameters voting
- Details will be discussed in our Governance channel on Discord and Docs
- The compensation topic will come in our very next article. This article is already very packed and long 😳 Please follow our compensation thread on Discord and read the pinned messages for a tldr
Design Outline
1️⃣ INTEGRATION with IRONLEND and IRONSWAP
IRON can be minted (or borrowed) based on the user’s collateral balance (or borrow limit) deposited on IronLend. Vice versa, to release the collateral assets on IronLend, IRON must be first redeemed (or repaid). IronLend assets, collateral factors and other details can be found in our docs.
Being over-collateralized, IRON effectively removes bank-run risks resulting from price risk (such as loss of $1 peg) and ensures FULL redeemability.
▶ Implication 1: IRON can and will always be treated at face value of $1 when minting or redeeming.
▶ Implication 2: This allows us to extend the current IronSwap 3pool (USDC+USDT+DAI) into 4pool (IRON+USDC+USDT+DAI) safely.
Such cross-integration of IRON with our products gives our stablecoin the privilege for immediate use cases at launch, and benefits and enhances the Iron Finance ecosystem for the long-term.
2️⃣ INTEGRATION with ICE TOKEN
ICE as collateral will be required when users want to mint IRON. The required ratio of ICE collateral to mint IRON is at 10%. This is the minimum required amount of ICE in the borrowing limit that needs to be locked up in order to mint IRON. Sidenote, once listed on IronLend, the initial collateral factor for ICE will be set at 20%. This leads to 2 conclusions:
▶ users are able to choose the mix of assets on IronLend they want to use for IRON collateral, but
▶ at least 10% of IRON collateral must always include ICE token
3️⃣ IRON MINTING EXAMPLE
a) User has a borrowing limit of $10,000 (i.e., the user deposited a basket of assets (BTC, ETH, MATIC, USDC, USDT) on IronLend which allow him to borrow $10k. OF course, when he deposits more, his limit increases)
b) Required ratio of ICE collateral is 10% (this is the minimum required amount of ICE in the borrowing limit in order to mint IRON. Sidenote, once listed on IronLend, ICE collateral factor will be initially set at 20%)
c) User has deposited $2,000 worth of ICE as collateral on IronLend
▶ In this example, the borrow limit portion which is contributed by ICE equals to $2,000 (collateral) x 20% (collateral factor)= 400 USD
▶ Therefore, with the ICE collateral contribution of $400 and at ICE collateral ratio of 10%, the user can mint a maximum amount of 4,000 IRON (=$400/0.10)
4️⃣ PRICE STABILITY
Over-collateralisation is the main stability parameter. Others will include:
▶ IronSwap integration (aforementioned 4pool): deposit LP token in existing stablefarm to earn ICE rewards, and
▶ IRON Saving (single-staking product): Deposit IRON > earn ICE. Governance will control the target interest rate of IRON Saving, which will help to control the amount of IRON in the market.
Additional Design Considerations
1️⃣ GOVERNANCE will MAINTAIN PARAMETERS
We are already preparing a substantial upgrade to our Governance module that will enable BlueICE holders (=Governance) to vote and decide on important parameters, not only for IRON stablecoin but other ecosystem products as well.
2️⃣ IRON SUPPLY CAP
IRON will have a supply cap that will prevent IRON supply to overinflate and prevent unnecessary supply volatility, at least in the initial weeks. The supply cap will be controlled by Governance.
3️⃣ ICE COLLATERAL RATIO and COLLATERAL FACTOR
After we set the initial parameters for IRON, they will be controlled, tweaked and maintained by Governance once the module is live.
4️⃣ IRONLEND GENERAL LIQUIDATION
As is the case with IronLend already now, users will only be liquidated if their Borrow Limits go over 100% of collateral (in other words, the collateral becomes worth less than the borrowed amount).
5️⃣ ICE COLLATERAL and LIQUIDATION
Users will NOT be liquidated if their ICE collateral value is lower than the required value.
Users will NOT be able to withdraw or disable ICE collateral if and when ICE collateral value is lower than the required value.
Final Thoughts: V2 vs V1 Design
PROS:
▶ Over-collateralization: Always fully-backed
▶ More decentralized: Not depending on a single centralized-stablecoin like USDC or USDT
▶ The Governance role is aimed at decentralized decisionmaking
CONS:
▶ Over-collateralization: Less capital efficiency
▶ The price stability mechanism of IRON v2 is weaker than IRON v1 since it’s a soft-pegged stablecoin.
Website: https://iron.finance/
Twitter: https://twitter.com/IronFinance
Discord: https://discord.gg/RtA37hgGrK
Docs: https://docs.iron.finance/
Telegram Ann: https://t.me/IronFinanceAnn
