Introduction to Elena protocol

We are introducing Elena Protocol and USE Stablecoin. The goal of USE is to peg to 1 USD. In the Genesis period, we will use DAI as collateral, 1 USE is 100% backed by 1 DAI. We are inspired by many outstanding algorithmic stablecoin projects, i.e. FEI, FRAX, FLOAT, and UST. With the combination of the best elements from those projects, we have created Elena protocol.

FRAX

We will be using the core structure from FRAX, in the genesis period, 100% of USE is minted from DAI. In order to encourage liquidity providers in the early stage, providing and staking USE/DAI LP will receive ELENA, and this is the only method to obtain ELENA. Due to 1 USE is backed by 1 DAI in the early stage, the liquidity mining has close to 0 Impermanent Loss. After the genesis, the collateral ratio will be lowered and ELENA will play an important role to back USE’s peg.

UST (LUNA)

At the moment, FRAX’s collateral rate is at around 85% to 90%. In an ideal situation, it should reach 0%, meaning that 100% of FRAX is minted by FXS. In this model, it is close to UST, as UST is 100% minted and redeemed from LUNA, which is the ultimate goal of USE.

FEI

The core structure of Elena protocol is inspired by FRAX, as the stability of FRAX is verified by the market. However, the collateral ratio of FRAX is not as good as it originally planned, as we can see it stayed at the range of 85%-90% for some time now. The main reason is that the volatility risk has been transferred to FXS, while FXS’s price at the moment is 100% decided by the market. There are many factors that are uncertain, including the volatility of the whole crypto market, as well as the emotion of the investors, this will still be impacted by the “bad weather”. Protocol Controlled Value (PCV) introduced by FEI, is a “visible hand” when the market is acting extremely, instead of exposure to 100% market risk, it is a more reasonable and better protocol to protect the whole system. This will achieve the goal to maximize the value and size of ELENA, for the investors, there is less worried about impairment loss by providing liquidity to USE/DAI. Compare with FRAX, 100% of the reward will be provided to USE/DAI liquidity pool, and ELENA’s liquidity is controlled by PCV. This makes Elena protocol potentially the highest APY in stablecoin mining.

FLOAT

We have implemented the “Oasis Vault” inspired by the design of Float Protocol. When USE is greater than 1 DAI, there are opportunities for arbitrage, the DAI used for minting USE will be saved in the Oasis Vault. This helps the efficiency of PCV, whereas having a direct impact on the liquidity of ELENA. In theory, the bigger the vault, the more stable the system, the better the liquidity of ELENA. When there is enough liquidity of ELENA, Oasis Vault + PCV will lower the collateral ratio, towards its ultimate goal, 0% collateral ratio.

In the future roadmap of Elena protocol, we will release a few products which use USE as stablecoin. Including synthetic assets, which creating more use cases for USE.

USE holders benefit from the mechanisms designed to create a high-fidelity peg and liquid exchange.