$IRON: The first Partial-Collateralized stablecoin on Binance Smart Chain
Stablecoin — a digital asset that is pegged to fiat currency — is considered the most important cornerstone in DeFi. Stablecoins provide an excellent method to park money during trading or to use as a base currency. The most prominent use case of stablecoins is stability and how it helps cryptocurrency users, especially traders, hedge against volatility.
There are several types of stablecoins, including fiat-backed, crypto-collateralized, and algorithmically stabilized stablecoins. While fiat-backed stablecoins are not 100% decentralized, crypto-collateralized stablecoins like DAI have issues of over-collateralization. On the other hand, purely algorithmic protocols such as Basis, ESD, DSD and others provide a very noble solution to establish stablecoins with no backed assets. The issue with purely algorithmic protocols is their inability to efficiently react to volatility, which results in many of these “algo-stables” ending up in a dead zone and away from the $1 peg.
Inspired by FRAX’s design of a unique fractional-algorithmic stablecoin on Ethereum, today we want to introduce $IRON — the first partial-collateralized stablecoin on Binance Smart Chain.
The $IRON protocol launch is scheduled for Saturday, 6th March at 11AM UTC.
Farming will start 2 hours later at approximately 1PM UTC (block heigh countdown). We are excited to announce that we have chosen Value DeFi to launch liquidity mining of the IRON coin using their vFarm technology on Binance Smart Chain.
$IRON and $SIL Tokens
The IRON protocol will have 2 tokens: IRON and SIL.
SIL — Iron Share — is the algorithmic token that accrues seigniorage revenue and excess collateral value.
IRON is a stablecoin pegged around $1, partially backed by collateral like BUSD, USDT and partially backed algorithmically by SIL. The ratio of collateralized and algorithmic, so-called Collateral Ratio (CR), depends on the market price of IRON.
The ratio of collateralized and algorithmic assets will depend on the market price of IRON. If IRON > $1, meaning the market’s demand for IRON is high, the system can de-collateralize by decreasing the CR. If IRON <$1, the market’s demand for IRON decreases, the system will gradually increase the CR back to 100%.
Inspired by the design of FRAX, a partial-collateralized token that is proved to be truly pegged to $1, we have thought of a lot of ideas where we can further extend the design concept. However, we want to start with a few basic improvements first. Further down the road, with feedback from community, our team will start to introduce more innovative ideas on top of the original core design.
At launch, improvements that we made include:
- Using Dual Collateral Ratios: Instead of using only one Collateral Ratio for both the Minting and Redemption process in the original design, we will use 2 different ratios: Target Collateral Ratio and Effective Collateral Ratio. Target Collateral Ratio will be used in the Minting formula while Effective Collateral Ratio will be used in the Redemption formula. Please read our docs to find more details.
- Self-Rebalancing: with a partial-collateralized stablecoin design, there will be scenarios where the system is over-collateralized or under-collateralized. The original design from FRAX team handles these situations by providing users with two functions:
Recollatearlize. While the purpose of distributing excess collateral or refill the required collateral was achieved, we believe it is not an effective and fair solution. Since the amount of excess collateral or the amount of “missing” collateral is limited, the features will be always on a first-come-first-serve basis. Someone can easily go in first and buyback or recollateralize the whole amount.
To address the issue, we have built a
Rebalancefunction to automatically use excess collateral to buyback shares (SIL) from DEX and locked them up; Or to sell those locked SIL tokens to DEX to recover the deficit amount of collateral assets. Further in the future, we can even do more complex strategies with our locked collateral assets, thanks to the reasonable gas price of Binance Smart Chain.
$SIL Tokenomics and Liquidity Mining
The total supply of SIL tokens is
80,000,000 = 80%will be distributed to the Community via a liquidity mining program in the duration of 36 months. For more details about the liquidity mining program and farming pools, please follow the link here.
20,000,000 = 20%will be reserved for the development (marketing, audits, dev reward, community engagements and other expenses) and released gradually over a period of 12 months.
As already mentioned at the beginning of the article, the protocol launch is scheduled for Saturday, 6th March at 11am UTC. Farming will start 2 hours later at 1pm UTC (block heigh countdown) using vFarm, the one-click farming technology solution of Value DeFi on Binance Smart Chain. SIL tokens will be directly rewarded to users who add liquidity to vSwap liquidity pools. Each incentivized pair will have its own emission rate and the total of all SIL rewards across all pairs will be
28,000,000 SIL over 12 months. The details of reward distribution for incentive pairs are:
- SIL-IRON [40%] : 11,200,000 SIL for 12-month.
- SIL-BNB [30%] : 8,400,000 SIL for 12-month.
- IRON-BUSD [30%]: 8,400,000 SIL for 12-month
The project launch will be conducted in 3 phases.
Phase 1: Boostrapping — Full-collateralization (3 days)
- All contracts Operator address will be transferred to Timelock before starting Phase 1
- Timelock contract delay will be set to 12-hours.
- All changes to the contracts will be announced via Telegram group at least 12-hours in advanced.
- Target Collateral Ratio & Effective Collateral Ratio will be fixed at 100% for the first 3 days.
- Charts and statistics will not be available due to lacking of historical data.
Phase 2: Fractional (30 days)
- Allow Target Collateral Ratio & Effective Collateral Ratio to be adjusted according to the market demands.
- Timelock contract delay will be increased to 24-hours
- All changes to the contract will be announced via Telegram group at least 24-hours in advance.
- Charts and statistics will be enabled.
Phase 3: DAO
- Timelock contract Delay will be increased to 48-hours
- All changes to be made to the IRON protocol will be decided by Community votings
Further in the future, by community voting, the team/community can develop a Governance contract tracking votes and the Timelock admin will be transferred to the Governance contract.