π¦Minting
Minting Operations in Satoshi Protocol
The Satoshi Protocol provides users to access liquidity by depositing collateral, enabling them to borrow up to 90.91% of the collateral's value in satUSD stablecoins (Loan-to-Value, LTV = 90.91%). This ensures that a Minimum Collateral Ratio (MCR) of 110% is maintained. Users are granted the flexibility to repay their debt, mint additional satUSD, or withdraw some of their collateral, provided they consistently uphold the MCR. To ensure the stability of the system, the protocol enforces a minimum debt requirement of 12 satUSD.
Minting Costs
When users mint satUSD by depositing their collateral, the Satoshi Protocol imposes a minting fee and a fixed annual interest fee.
Additionally, an reserve of 2 satUSD is set aside for gas compensation, which is added to the total debt. This reserve is intended to cover potential costs associated with the liquidation process. If the Position remains unliquidated, this 2 satUSD gas fee reserve is returned to the user upon closing it. Conversely, if the Position undergoes liquidation, the reserved 2 satUSD is awarded to the liquidator as compensation for the gas fees incurred during the liquidation process.
While the annual interest fee is fixed, the one-time minting fee is calculated as "base rate + 0.5%" and is applied to the total amount of satUSD minted.
The current base rate is determined by previous base rate and the quantity of satUSD redeemed as a proportion of the total stablecoin supply. This dynamic fee structure has a minimum of 0.5% and a maximum cap of 5%, ensuring flexibility based on market conditions.
where denotes the amount of redeemed satUSD, signifies the current supply of satUSD.
Over time, the base rate experiences decay due to a decay factor applied with every satUSD redemption and issuance before calculating the resulting fee. The decay follows the form:
Where Ξ΄
represents an hourly decay factor (0.944 in our case), and βt
denotes the time elapsed in hours since the last redemption or loan issuance. The decay factor Ξ΄
is selected to ensure a 12-hour half-life for the base rate.
Example: If the base rate is set at 0.5% and a user deposits BTC worth $2,000 to mint 2,000 satUSD, they will incur a 0.5% one-time minting fee, amounting to 10 satUSD, and an additional 2 satUSD for gas compensation. Consequently, while the user receives 2,000 satUSD, their total debt is 2,012 satUSD. To fully close the Position and retrieve their BTC collateral, the users must settle this 2,012 satUSD debt.
Restrictions During Recovery Mode
Minting operations within the Satoshi Protocol are subject to specific limitations when the system enters Recovery Mode. These restrictions are implemented to protect users from potential liquidation risks that may arise due to fluctuations in the collateral price. To mitigate these risks, users are advised to maintain a buffer between their current collateral ratio and the Minimum Collateral Ratio (MCR). In Recovery Mode, even Positions with higher collateral ratios (up to 150%) may be subject to liquidation. Consequently, users aiming to minimize risk should ensure their Positions are sufficiently over-collateralized, when the protocol is approaching Recovery Mode. This strategy decreases the likelihood of liquidation and reduces the potential impact of large redemptions on their positions.
Borrow Interest Rate
The Borrow Interest Rate in the Satoshi Protocol is free now when BTC is used as collateral. This interest accrues over time on the outstanding debt, serving as a crucial revenue stream for the protocol. For future collateral types, different interest rates will be applied.
Detailed Interest Amount Calculation
Interest accrues on the minted satUSD for all users within the protocol. The accumulation of interest is triggered by any interaction with the smart contracts, ensuring that the debt value remains up-to-date with the accrued interest over time.
Example of Interest Accrual
Alice mints 10,000 satUSD against her BTC collateral.
The annual interest rate is fixed, which translates to about debt amount times per second.
If there is no interaction with the smart contract for 100 seconds, interest continues to accrue on Alice's minted amount during this period.
Upon a subsequent interaction with the protocol (e.g., Bob mints some satUSD), Alice's debt would reflect the accrued interest over those 100 seconds.
Using the specific per second interest rate
The additional interest accrued over 100 seconds on Alice's initial minting of 10,000 satUSD would be satUSD.
Aliceβs updated debt would be satUSD after 100 seconds of accrued interest. For the next updated debt calculation, it would based on this amount of 10,000.0001427 satUSD.
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