Standard Protocol is Polkadot’s pioneering protocol in accepting the collateralized Rebasable Stablecoin (CRS) for synthetic assets.
1. Issues of Algorithm in Current Stable Coins
Stable Coin is focused on stability compared to fiat without interoperability
The current algorithm stable coins focus only on maintaining automatic price stability. Although they provide some interoperability between tokens with their initial distribution via yield farming, there is no way for them to interact in sustainable financial operations.
The current oracles are centralized and do not have a decentralized ecosystem to reward them
There is currently no reward system for oracle vendors and solutions are controlled by validators or companies themselves. Joining the Dex exchange has disadvantages compared to the Cex including: the introduction of unfavorable spread data, and fast swaps.
Therefore, in order to provide aggregated and balanced data, oracle providers must be rewarded in a decentralized way. The Standard Protocol solves it by providing phased rewards and position reductions that are equivalent to an IQR (Interquartile Range Rule).
Auctions are difficult to track and focus on
Liquidation auctions are difficult to track and participate in, and therefore only experienced traders can benefit from them. A more decentralized approach to liquidation of positions should be considered for this. Auction orders contain large amounts of collateral, which can lead to tyranny (who holds large amounts of collateral).
2. How the Stand Protocol solves the problem
The issue rate of the MTR (inverse with the mortgage rate) is fully controlled by the administrator within the epsilon range; However, when the MTR price breaks out of the epsilon range, the activity will be suspended urgently and no further MTRs will be issued for the remainder of the period.
Starting from the next period, the system will charge and adjust the MTR issue rate to stabilize the MTR price to USD until the MTR price recovers to 3 quarters of the epsilon range.
If the MTR is higher than the USD, more MTR will be generated from the mortgage over the next period. If the MTR price is lower than the USD, there will be less MTR from the mortgage over the next period.
Total supply of MTR is adjusted according to the above ratio
Ampleforth (AMPL) uses an elastic supply to re-base its total supply. Standard restores its stablecoin supply from time to time and overuse it to mint stablecoin, Meter (MTR).
Standard (STND) automatically rebases collateralized stablecoins, in the way of an algorithmic reserve bank with decentralized governance for STND holders. By rebasing each period, the total supply of the stablecoin Meter (MTR) and the amount that can be issued is adjusted to the Meter (MTR) to the value of USD.
Meter Supply (MTR) is measured in each rebase and adjusted with intermediate prices from oracles
Decentralized Oracle ecosystem
Oracle customers from a variety of sources (e.g. Binance, Coinbase, HydraDX) can provide aggregated price information so that prices cannot be manipulated by a single entity.
Standard Protocol builds an oracle module to share block rewards with oracle providers. Substrate allows developers to divide block rewards among other network participants at all times.
The block reward for Oracle vendors maintains an 8: 2 ratio between validators and vendors for a period of time. The total block reward for each period is 10% (controlled by the administrator) of the total STND produced during the period.
Oracle vendors are selected using the phragmen algorithm. Selected oracle providers have no fees. Blocks can only have the maximum number of oracle transactions recorded. This is to prevent too many oracle transactions from taking over a block.
Oracles is used to create synthetic assets from the stablecoin Meter (MTR). The Standard Protocol treats oracles like validators to operate across a wide range of the DeFi ecosystem.
Effective liquidity in the market
Instead of holding an auction to liquidate collateral, the Deposit Standard Protocol liquidated the collateral into the AMM pair so Meter holders (MTRs) could buy the liquidated digital assets. other reason.
The standard protocol uses an integrated AMM module to provide liquidation in a more efficient way in the market, where liquidated assets are used to execute arbitrage transactions.
Standard Protocol rewards stakeholders that find loans that have expired by giving them a percentage (10% or more) of collateral.
The remainder will be routed to Standard Protocol’s integrated DEX to provide arbitrage trading opportunities for stakeholders using the exchange.
Basic price stability
By being algorithmically stable through rebasing, Standard Protocol provides cash that can act as a base price. For speculating on digital assets, Meter can be used to estimate the value of that asset at a price pegged in USD.
Ecosystems can interact
Standard Protocol is a collateralized, re-fundable rebasable stablecoin (CRS) protocol that works on different blockchains as a form of smart contract within each network.
Together, the Standard Protocol ecosystem for interoperability represents a blockchain hub.
Standard Protocol will be able to share price information with other chains or fiat assets without charging due to its self-maintained oracle reward ecosystem.
Use Vaults standards to leverage collateral
To help better understand Standard Protocol, I will take the example Ngoc – a personality girl who owns electronic money. Like MakerDAO’s Vault, Standard creates an MTR by leveraging all the accepted collateral called Standard Vaults.
One of the main ways Vault owners can use Meter (MTR) is to purchase additional collateral, usually DOT. If the DOT price increases, the Vault owner makes a profit.
She can also borrow from Vault as a form of decentralized leverage. Since Standard Vaults requires a 150% minimum mortgage, the maximum leverage available is 3 times, regardless of transaction fees or slippage.
Ngoc sends 15 DOTs, worth $ 1,500, into her Vault. She generates 1,000 Meter (MTR) of it (maximum possible with a 150% mortgage), and then uses the generated Meter (MTR) to buy 10 DOTs, which she sends back into her Vault me. Ngoc can now generate an additional 667 Meter (MTR) compared with the $ 1,000 of DOT collateral.
Buying $ 667 DOT allows her to generate an additional 444 Meter (MTR). Repeating this process provides an additional 296 Meter (MTR), then 198 Meter (MTR), 131 Meter (MTR), 88 Meter (MTR), and 59 Meter (MTR).
In the end, a total of 3,000 Meters (MTR) can be generated compared to the original 15 DOTs, allowing Gems to leverage 200% of her initial stake.
The risk of DOT depreciation also increases. If Ngoc does not keep her Vault fully collateralized, it could be liquidated.
Send Meter (MTR)
In addition to refinancing a Standard Vault with a generated Meter (MTR), tokens can also be used for purchases. One option is to use Meter (MTR) to buy other cryptocurrencies on the Meter market (MTR), which are cheaper than the prices available from HydraDX.
In addition, you can hold, earn, spend, donate, loan and trade Meter (MTR). Community will grow as teams build projects that use Meter (MTR).
Support for the Economy of the Meter (MTR)
Meter (MTR) will become the incubator for solutions to problems, from financial services to charities and its ambitions to become the most used cryptocurrency in the Polkadot ecosystem.
By interacting with the various products and services built into Meter (MTR), users can manage and trade their crypto assets, and develop and expand the Standard ecosystem. .
Simply by spending Meter (MTR), users are adding liquidity to the token, growing the Meter economy (MTR) globally, and improving the Meter’s configuration (MTR), and many advantages of It compared to conventional alternatives:
Decentralized: Meter (MTR) can be peer-to-peer by anyone, anywhere in the world without third-party intervention.
Accessibility: Anyone with an internet connection can access Meter (MTR) through various wallet solutions within the Polkadot ecosystem, including Mathwallet, Speckle.
Speed: Transactions typically take only a few seconds on the PoS network.
Low cost: The transfer fee is usually just a few cents.
How to use Standard Protocol
In the case of Pump market
Standard issued its MTR stablecoin from collateral, typically the DOT. This allows leveraged trading to make a profit with one’s existing assets. Additionally, holders of MTR can generate aggregate assets out of oracles, such as virtual stocks, commodities, etc.
In the case of Dump market
MTR holders can still make a profit by buying other digital assets from liquidation. These assets can be bought with MTR and sold on exchanges
Why is the digital asset coming from Meter cheaper than other exchanges?
Since liquidation from expired vaults will be routed to the market, Meter holders (MTRs) can buy other digital assets at a discount.
Standard protocol is a crosschain application protocol that aims to be an important currency for each blockchain ecosystem. Standard protocols that will be applied to a blockchain include: Exchange integration, Oracle support for pricing, and support for smart contracts.
Stage 1. Deployment
Standard protocol will be initially implemented in smart contracts in the following platforms: Parity ink, Cosmwasm (new smart contract platform built for cosmos ecosystem), EVM (Solidity, Vyper).
An integrated interface will be provided starting with the EVM implementation.
Stage 2. Connection
Standard protocol will be implemented for parsed or chained chains based on Cosmos SDK, all of which support IBC. Each implementation of the Standard protocol will be able to transfer assets or receive value from other blockchains in a decentralized manner.
Stage 3. Unification
Managing each implementation with different tokens can confuse STND holders. To prevent this, the Standard protocol builds separate operational blockchains for each inter-chain ecosystem to provide unified governance.
Smart contracts are limited in the way that one has to perform a transaction in order to administer it. A dedicated governance blockchain will process proposals and voting in an automated and fair manner.
Mechanism of Standard Protocol
The standard protocol protects its price during both contractionary and expansionary phases, with the process of payment of payment, through stabilization fees and rebasing a steady total supply of money every eight hours.
The standard protocol gets a stable fee as a profit by creating a stable coin MTR.
The stability fee is determined by the governance as a percentage and the amount of MTR required to close the vault is calculated by the number of previous periods.
After opening a position, it is calculated using a simple interest formula. Assuming the steady rate of fees is R, the number of past periods is N and G is the amount of the generated MTR.
A period = 24 hours in a substrate node with an interval of 6 seconds in block completion. Standard uses the same amount of time to define the period.
Similar to Ampleforth’s elastic supply, the stablecoin’s total supply is adjusted when the price falls out of the epsilon range, about 1% of $ 1.
Expansionary & Contractionary
In economics, the Expansionary Policy is done by pumping money into the economy to stimulate investment in business and consumer spending. The pumping can be through government spending or by lowering the lending interest rate.
Expansionary in Standard Protocol, makes sense in case the price increase of the MTR exceeds 1 USD, the vault will transfer the new MTR to the vault account. After that, the vault will have an additional mortgage MTR for distribution to the community.
In economics, a Contractionary policy is a monetary measure that causes government spending to deficit or expand in the monetary ratio of the central bank.
Contractionary in Standard Protocol, which makes sense in cases where the MTR price falls below 1 USD (or DAI), the community is encouraged to repay the loan from the vault due to the relatively cheaper MTR price. Vault corrects this situation by reducing the supply of reserves in the Vault account to maintain a peg of $ 1. If the Vault is unable to reduce its reserve supply, the Vault module will declare emergency shutdown to generate an MTR.
The Standard Protocol is implemented using Parity Substrate and has 9 runtime modules built using the pallets available in the Open Runtime Module Library (ORML).
Token module is a registered place to store asset information about Standard Protoco and other chains. Derived from ORML’s XCM token, the Standard Protocol’s token module manages assets that come in and out through Cross-Chain Message Passing (XCML) over parachains. Assets are managed with a unique identifier.
The Market module in the Standard Protocol manages pairs for an automated market maker (AMM) between each collateral and its stablecoin Meter (MTR). Derived from Uniswap V2 contracts, the AMM module supports transactions within the Standard Protocol’s ecosystem.
The module allows MTR holders to buy other digital assets or provide liquidity to earn fees on every exchange in the market.
The Vault module takes other digital assets as collateral and generates an MTR. The MTR holder may create synthetic assets at the price provided by the providers by oracle providers.
The Staking module uses an NPoS (Nominated Proof of Stake) mechanism to select validators and reward them commensurate with their actions in each period.
The staking module comes with other modules, including discovering authority over the authority keys of the candidates per block.
Oracle module is a price and election feed information module, this module stores prices from external data with content IDs from Token module in the form of keys. Oracle Vendors are elected at all times with the amount of stake from the user.
Oracle vendors provide pricing information and are periodically rewarded on each block reward. Prices are stored in state and oracle providers are reviewed from time to time.
If they create anomalies, they’ll be slashed. The total reward for each oracle provider in each era is recorded by the Reward module and the ratings can claim their rewards by claiming them.
The Farm module modeled after the existing Solidity contracts is used for yield farming projects in Ethereum. It distributes rewards proportionally based on the amount of staked and the time that has elapsed.
The farm module will be used to reward liquidity providers, who will provide liquidity to each asset pair including the MTR and some other assets.
The Reward module manages the annual inflation rate through administration and stores the total rewards for network participants from time to time. With STND’s initial annual inflation rate of 5%, the reward is distributed to oracle and validator at a ratio of 2: 8.
Other network participants (e.g. liquidity providers) can be added via on-chain run-time upgrades.
Democracy module manages the governance problem in order to operate the Standard Protocol. The module has access to all root methods for each runtime module and holders can suggest changes in the network. Voting rules follow the same rules outlined in the Polkadot wiki.
The Treasury module manages the proceeds from fees or slashes in the Standard Protocol. This module is used to fund protocol developers, monthly payments for operators and teams, stable fee management or bonuses for community members.
Tokens in the Standard Protocol ecosystem
Meter (MTR) is a stablecoin synthesized by the vault protocol. By rebasing the total supply of the stablecoin at the oracle price provided by the oracle customers, the supply of the stablecoin is adjusted so that the value remains at $ 1.
Holders can use MTR as a medium of exchange, to buy other assets and farm tokens in the Standard Protocol ecosystem by providing liquidity. The supply of the MTR is expanded and combined accordingly to maintain the exchange rate.
Liter (LTR) is a liquidity provider token representing a portion of the AMM module.
Similar to LP tokens in Uniswap, LTR can be burned in AMM to receive deposited assets. LTR can also be used for liquidity mining.
There are also the following tokens: Standard (STND), Standard Tokenomics, STND Token Distribution.
Through this article, we hope to help you understand the Standard Protocol ecosystem abbreviated as STND. We will also update other articles about this ecosystem, stay tuned for updates from us.