Protocol Design
As shown in the chart below, Elena protocol includes the following core units: USE Stablecoin, Oasis Vault, PCV, USE Pools, Staking, Incentive, ELENA Governance Token, and DAO.
USE Stablecoin USE Token is an ERC20 Token with unlimited supply, adjusted by the market demand. USE as a stablecoin can be used in different use cases, i.e. exchange, store value, synthetic assets, lending, yield aggregators, etc.
Oasis Vault Oasis Vault is the core module of Elena protocol, anyone can mint or redeem USE fixed at 1 DAI per USE. There is room for arbitrage due to the movement in the price of USE/DAI on Uniswap. i.e. When USE/DAI price is 0.9, you can purchase USE in Uniswap, and redeem it in the vault. Or if USE/DAI is trading at 1.1, you can mint USE with 1 DAI and sell it in Uniswap.
Mint Vault can mint USE depends on the current collateral ratio. I.e. if the current collateral ratio is 99%, investors will need to provide 0.99 DAI and $0.01 worth of ELENA (assuming the price of ELENA is $10, then investors need to provide 0.001 ELENA), to mint 1 USE.
Redeem Investors can redeem USE from the vault. If the current collateral ratio is 99%, after redemption, investors will get 0.99 DAI and $0.01 worth of ELENA(assuming the price of ELENA is $10, then investors will get 0.001 ELENA).
Please note that redemption will be closed if the reserve ratio falls below the threshold. When this happens, the investors can only sell their position of USE on Uniswap. When there is enough reserve, the redemption function will be available again. Through the activate/deactivate redemption function, the system is more stable and better protected from unexpected events.
Collateral Ratio Collateral Ratio means when minting, the percentage of DAI required. The ratio will be adjusted periodically. When USE/DAI is greater than 1, means that there is more demand for USE in the market and investors have faith in the project. The collateral ratio will be adjusted to a lower number. In contrast, if USE/DAI is less than 1, meaning that there is less demand in the market, the collateral ratio will be adjusted higher.
At Genesis, the collateral ratio is set to 100%, meaning that to mint 1 USE, you will need to deposit 1 DAI to the vault. In the fractional period, the collateral ratio will be moving in between 100%, and 0%. If we reach uncollateral period, the collateral ratio will be 0%.
Reserve Ratio When USE/DAI is trading above or below 1, the vault will still mint or redeem at 1, there are opportunities for arbitrage, when doing so, the price is pushed back to 1. When the price is below 1, the result of arbitrage is the reduction of the reserve. We define reserve ratio as:
vaultReserve: the number of DAI in the vault. swapPoolReserve: the value of liquidity pool, i.e. the number of DAI in USE/DAI pool in Uniswap
The reserve ratio is an indicator of whether the protocol can survive in a massive dump. If the ratio is too small, meaning it is under-reserved. In most cases, the protocol should have enough reserve, as mentioned above, there is a policy to stop redemption when the reserve is too low, as well as other designs to protect USE peg to 1 DAI in the long term.
USE Pools There are two pools on Uniswap, USE/DAI, and USE/ELENA. We will support more tokens in the vault and will have different pools on Uniswap. In order to incentivize investors providing liquidity, we will be running a liquidity mining program for USE/DAI. USE/ELENA’s liquidity will be provided and controlled by PCV, ensure the pool has better liquidity and reduced slippage.
PCV The price control system of the Elena protocol has two parts: Oasis Vault, and USE/ELENA liquidity pool. The vault aims to ensure the pegging system works in the long term. USE/ELENA is controlled by PCV, the goal of PCV is to maintain a highly stable, deep liquidity stablecoin system, which benefits investors in the long term.
Price Oracle We will use Uniswap TWAP Oracle Price to determine the current price of USE and ELENA.
Eco-system Vault As Elena protocol is a 100% fair launch project, there was no VC, or pre-sale to raise capital for the expansion of the project, everything was self-funded by the founders. We have set up an eco-system vault for further development of ELENA.
The vault will allocate an additional 1.5% ELENA to the vault when minting and redeeming. As well as 20% on the profit generated to liquidity providers. Please note that the allocation will not be minted directly, it will only happen when a payment is needed. This is the maximum percentage that can be minted, the actual number to be minted can be smaller than the maximum planned.
The fund from the vault will be used in the following areas: 1. Marketing 2. Advisors 3. Developers' Salary 4. Airdrop 5. Strategic Partners
Last updated
