The market of Blockchain and cryptocurrencies has grown a lot since its invention. While we slowly move towards the world of decentralization, it is believed that the value of crypto coins to fiat will appreciate along the time. TAU has a community that believes in cryptocurrency and its long-time value, and proving the belief requires real actions.
The invention of Bitcoin has given a new decentralization approach to the world. By building a Decentralised Finance (De-Fi) system on Blockchain, we now can operate a fully automatic financial system with full public clarity without the need for third-party interference. Everything starts from two inventions: Stable Coin and Smart contract. USD Anchored Stable Coin allows people to connect real-world fiat onto Blockchain, and Smart Contract provides a transparent and fair uncensored way to execute transactions.
In this paper, we introduce a decentralised financial system to allow Crypto believers and potential investors who are looking for a safer crypto investment opportunity to bet on the future growth of ETH.
2. The Long Crypto Protocol
Long Crypto is a protocol based on Ethereum Blockchain that establishes a money market, where users invest USDC into the protocol and receive a maximum annual return rate of 99%.
Unlike an exchange or Peer-to-peer platform, where a user’s assets are matched and lent to another user. Long Crypto bets on the future growth of ETH prices, with the key beliefs of Value of Cryptocurrencies to Fiat, will appreciate in the future. Thus, whenever an investor puts in USDC, a portion of the USDC will be used to purchase ETH from exchanges and hold until further notices from DAO community. The investment of USDC will interact directly with the protocol, providing an automatic, transparent and publicly-inspectable ledger, with a record of all transactions and historical interest rates. In the long run, major Cryptocurrencies will achieve a higher growth than the total repayable annual interest rate. The surplus amount will be shared equally among DAO community members.
2.1 Utilization Default Rate
At the beginning of the Long Crypto protocol, 70% of the USDC invested will be used to purchase ETH from exchanges, and the remaining 30% will be kept in the withdrawal pool for future withdrawal. This is the Utilization Default Rate (UDR).
The DAO community has the voting rights to vote for UDR re-adjustment, to cope with the changes of the financial market. A high UDR is more likely to result in having high investment risks, as the withdrawal pool is more likely to be emptied due to insufficient USDC.
2.2 Utilization Rate Model
Interest Rate is automatically defined by the remaining USDC in withdrawal pool and the total withdrawal request value.
Utilization Rate starts from UDR, and will slowly increase as investors withdraw their invested USDC from the protocol. When U hits 100%, it indicates that the USDC withdrawal pool is currently empty and requires new USDC investments to ensure the success of future USDC withdrawal.
U, the Utilization Rate is defined as
In most scenario, Utilization Rate ≥ UDR. However, due to re-adjustment of UDR by the DAO community, U may be smaller than UDR. When U < UDR, the surplus amount of USDC will be allocated to purchase ETH, and re-adjust the ratio to U = UDR.
2.3 Interest Rate Model
Being different from other Peer to Peer financial products where individuals are required to negotiate over terms and rates, Long Crypto’s Interest Rate is automatically defined by the protocol and has a positive correlation with the Utilization Rate. It will update on a block to block basis, where the Interest Rate is actively re-defined whenever ETH Blockchain forms a new block.
IR, the interest rate is defined as
With a market reference from Compound Finance, Long Crypto’s IR will range from CF’s USDC Supply Rate to a maximum of 99%. As both protocols are built on Ethereum Blockchain, Long Crypto can easily collect CF’s USDC supply rate without the need of off-chain oracle.
2.3.1 Liquidity Incentive Structure
Long Crypto protocol does not guarantee USDC liquidity; investors will not be able to withdraw USDC from the protocol when Utilization Rate reaches 100%. To encourage risk-takers from making new USDC investments into the protocol, Interest Rate will rise to 99% when U = 100%. A high return investment opportunity will attract more investors in investing into the protocol, and bring in USDC for previous investors to withdraw. This scenario will most likely happen when the prices of ETH fall, where investors afraid that Long Crypto does not have the available liquidity to cover the repayable Interest Rate. However, we believe that there will always be risk-takers who are willing to compromise for the 99% Interest Rate.
2.4 Conversion of USDC and ETH
The purchase of ETH with USDC is done via Uni-Swap protocol, a DeFi project built on Ethereum Blockchain that allows ERC20 tokens decentralized trading. Long Crypto will instantly trigger a USDC/ETH offer in Uni-Swap when a USDC investment comes in. However, to achieve a higher cost-effectiveness on Uni-Swap gas payments, investments that are smaller than 250 USDC will not be converted into ETH. The invested USDC will stay in a temporary Purchase Pool until Long Crypto receives the next investment. The protocol will re-trigger USDC/ETH offer when Purchase Pool reaches 250 USDC.
DAO community has the voting rights to vote for the change of Purchase Pool USDC requirement.
2.5 Collateral Rate Model
The Collateral Rate is defined as
This rate indicates the protocol’s current investment status, the higher the rate, the healthier Long Crypto becomes. When Collateral Rate reaches 300%, 1/2 of the Total Crypto Asset will be automatically taken out from the asset pool, and distributed among USDC investors and DAO community members (based on TAU holdings) at an 8:2 ratio, and 1% of the total shared profit will be allocated to Long Crypto reserve pool. This allows both USDC investors and DAO community members to benefit when prices of ETH rises, and to prevent ETH prices from dropping significantly after a bull market.
Apart from changing the 8:2 distribution ratio, DAO community has the voting rights to vote for the change of profit-sharing triggering rate and the percentage of profit-sharing bonus. Long Crypto is designed to ensure USDC investors profit before DAO, as USDC investors bear a higher risk compared to DAO community members.
2.6 Community Vote Clearance
This is an action vote initiated by the DAO community that will instantly sell off all Crypto Asset holdings to USDC via Uni-Swap. All USDC will return to investors’ addresses, and only the remaining profits will be shared equally among DAO community members. This happens when DAO community believes that the price of ETH is most likely to fall in the future. Long Crypto protocol will still function normally after the clearance, and investors will need to re-allocate their USDC investments to regain their annual Interest Rate. Community Vote Clearance can only be initiated when Collateral Rate > 100%.
2.7 DAO community and TAUcoin
Long Crypto is a Tokenized Network managed by its own DAO (Decentralized Autonomous Organization). Any TAUcoin holding addresses can participate in Long Crypto’s voting decision, to help DAO in defining figures and services.
The TAU token allows holders to vote to perform the following actions:
· Defining Utilization Default Rate: Re-define the percentage of USDC used to purchase ETH, this will have a direct effect on the risk level, and the possible Interest Rate range for investors.
· Modify The USDC/ETH Conversion Requirement: Change the amount of USDC required to trigger USDC/ETH Uni-swap offer.
· Modify Profit Sharing Bonus: Change the percentage of profit-sharing to all DAO community members.
· Modify Profit-Sharing Triggering Rate: Change the Triggering Rate of Collateral Rate.
· Trigger Community Vote Clearance: TAU voters are able to instantly trigger a clearance of all Crypto Asset Holdings if enough TAU holders believe it is necessary.
Any profit generated on Long Crypto will be shared equally among DAO community members, based on the percentage of TAUcoin holdings per address.
2.8 Primary Use Cases
Comparing to purchasing ETH directly via the high price fluctuation rate cryptocurrencies market, Long Crypto provides an alternative for investors who wish to have a safer option in investing cryptocurrencies. The protocol secures the USDC investments at the invested price, which means investors do not need to worry about losing the investment value even when the price of ETH falls, with compensation of losing 20% profit and potential liquidity. After supplying USDC into the Long Crypto protocol, investor will no-longer require to take any actions, including managing their asset, fulfilling loan request or take speculative risks.
2.9 Full Transparency
Being different from the old and tradition FinTech (Financial Technology), De-Fi is everything about building an open-source software, where all participants with an internet connection can easily and transparently access to all data, regardless on geographic limitation. Establishing Long Crypto De-Fi project on Ethereum Blockchain enables us to provide a full transparency financial service to the public. From mathematical formulae to market-level information, all information that might have an impact on the delivered service is open-sourced and can be easily accessed via block explorer.
Finance Services should not be built on a centralized server, where one party has full control over the black box.
· Long Crypto creates an open-sourced financial technology to Long ETH.
· Investors supply USDC into the protocol and receive a fluctuating IR without trusting a central party.
· The Interest Rate is defined by the percentage of USDC remaining in withdrawal pool. The more investors withdraw their USDC, the higher IR is.
· Everyone will profit when the value of ETH rises.
Long Crypto is open for discussion at https://taucointalk.org/index.php?topic=1717.0, especially on the topic of:
- The effectiveness of Long Crypto’s Model
- Potential realization difficulties
- The structure of the Decentralised Autonomous Organization
- Figures being set on this article
Compound.Finance whitepaper https://compound.finance/documents/Compound.Whitepaper.pdf