Details of ZULU Finance: Provide the liquidity for your neglected assets

Introduction

ZULU is a protocol that lets users put various assets as collateral to generate zlUSD.

The collateral can be categorized into several types:

• Mainstream tokens, such as BTC, ETH, etc;
• Receipt tokens that are used as proof of ownership and accumulate interest. Tokens such as LP token from DEXs, interests bearing tokens, etc;
• Tokens from neglected but valuable projects.

With the zlUSD,

• Users can deposit into a Stability Pool;
• Users can provide the zlUSD and do the stablecoin liquidity mining;
• Users can add leverage to their own collateral.

For the future, our goal is to utilize blockchain and stable coin technology to promote financial inclusion in Southeast Asia.

Why should you invest in ZULU

When compared to existing Stablecoin protocols, ZULU has several advantages:

1. ZULU has a very low collateral ratio keeping higher capital efficiency. Because ZULU borrows the liquidation mechanism from Liquity, it can make the liquidation process very quick. The mechanism has been proven during the recent sudden crash of ETH.
2. Users can use a variety of assets as collateral, such as BTC, ETH, and many of the main assets; famous protocol assets; LP token; interest-bearing assets, etc. This way ZULU reaches a wider audience than single collateral protocols.
3. The fee to use ZULU service is very low. Especially for leverage traders as they can enjoy the much lower fee to add leverage with ZULU protocol.
4. Users with different risk tolerance will find the proper service.

ZULU Protocol

Overview

Figure 1. ZULU finance architecture

The core Zulu system consists of several smart contracts including BorrowerOperations, LiquidatorOperations, RedeemerOperations, StabilityPool, and TroveManager. The four main contracts — BorrowerOperations, LiquidatorOperations, RedeemerOperations, StabilityPool — hold the user-facing public functions, together they control Trove state updates and movements of collaterals and zlUSD tokens around the system.

Core Features

Multi Collateral

Various assets can be used as collateral in ZULU protocol. The main goal is to provide liquidity to those holders who didn’t want to sell their collateral assets.

Compared to single collateral, multiple collaterals needs the community to choose the right asset very carefully. But we will have more gain compared to the risk. The usage of multiple collaterals reduces the fluctuation risks when compared to a single asset. Moreover, bringing more assets will also bring more community members to make the protocol even better.

To add and/or delete collateral will be a decision made by the community. Only at the very beginning, the collateral will be chosen by the initial team because of the risk.

Generate Stablecoin

Users can add collateral to generate the stable coin zlUSD. In the future, ZULU will support more stable coins that will be indexed to different countries' currencies.

To generate stablecoin, users need to keep their collateral ratio within a safe range or it may be liquidated. This may occur in order to assure the value of the collateral is greater than the value of the stablecoin generated. ZULU protocol will charge a borrowing fee or annual fee or both. Different collaterals will have different fee structures depending on the community.

Stability Pool & Redistribution

The core logic for stablecoins backed by crypto assets is that the value of the collateral needs to be greater than the value of the stablecoins generated. The Stability Pool is the first line of defense in maintaining system solvency. It achieves that by acting as the source of liquidity to repay debt from liquidated accounts.

Thanks to the Liquidity Protocol, we adopt the stability pool and redistribution mechanism to do the liquidation. This will help to make the liquidation very quick, making the collateral ratio very low. And this will help to make the best use of the capital.

When an account is liquidated, an amount of zlUSD corresponding to the remaining debt of the account is burned from the Stability Pool’s balance to repay its debt. In exchange, the entire collateral from the account is transferred to the Stability Pool.

The Stability Pool is funded by users transferring zlUSD into it (called Stability Providers). Over time Stability Providers lose a pro-rata share of their zlUSD deposits while gaining a pro-rata share of the liquidated collateral. However, because accounts are likely to be liquidated at just below 110% collateral ratios, it is expected that Stability Providers will receive a greater dollar value of collateral relative to the debt they pay off.

Stability Providers will make liquidation gains and receive early adopter rewards in form of ZUL tokens.

The protocol has a safeguard in case the Stability Pool is empty. It is a secondary mechanism called redistribution. The protocol will redistribute the debt and collateral from a liquidated account to all other existing accounts. The redistribution of debt and collateral is done in proportion to the recipient account’s collateral amount.

Liquidity Mining

To reward the early adopters who provide the liquidity, ZULU will distribute the ZUL token to them.

The rewarded pairs will be decided by the community according to the importance of the protocol in different periods.

Stake

Stake ZUL to earn the fee generated in the protocol. The distribution will be decided by the core team at the beginning and will be decided by the community in the future.

Moreover, Stake ZUL adopts a boosting mechanism. The boosting time is correlated to the lock time. The longer lock time will get higher boost times. For example, there is a coefficient called Weekly Boosting Time, which is decided by the community. If the Weekly Boost Time is 0.02, the initial ZUL is 100. If you stake without any lock time, the reward will be calculated based on the staking amount of 100. But if you lock for 10 weeks, you will get (1 + 0.02*10)*100 = 120 ZUL staked.

And the protocol may give more additional rewards to the ZUL stakes.

More

Besides these features, the core team has listed more features on the waiting list such as governance, shortcut features for adding leverage, and so on.

Tokenomics

Besides the stablecoin, ZUL is the governing token. Currently, it has 2 main features:

1. ZUL will capture the fee generated by the protocol and earn other kinds of dividends from the protocol;
2. Join the governance of the protocol, such as adding new collaterals, setting configurations, etc.

In the future, it will be the member ticket of off-chain participants. If the participants want to be the service operator, they need to have enough ZUL and stake them in the protocol.

The issuance of ZUL to participants is what allows for the bootstrapping of the system by incentivizing early adopters, as well as providing the long-term health of the protocol. For those reasons, ZULU’s distribution is heavily weighted towards the community.

At Genesis, we plan to distribute ++1,000,000,000(one billion) $ZUL tokens, we will buy back and burn the ZUL tokens with the fees generated by the protocol. And in the long term, the ZUL circulation is deflationary, and the distribution is as follows:

60% (600,000,000 ZUL) as Direct Incentives to the Community

• Collateral Incentives, we will incentivize those who provide their assets as collateral.
• Stability Incentives, are awarded to Stability Pool depositors.
• Liquidity Mining Incentives, we will incentivize those who provide liquidity for different tokens.
• Community Incentives, we will reward those community members who make contributions to the protocol, such as KOLs who widely spread the protocol, developers who make cool stuff, etc.

All the Incentive plans will be redesigned weekly based on the latest situation. And the allocation will be linearly distributed every second to prevent the formation of early whales.

17% (170,000,000 ZUL) as Treasury fund

• Used to pay for the development, marketing, and all other operational purposes if needed.
• The plan will be reviewed and decided by the community.

10%(100,000,000 ZUL) to Team and Advisors

• This is reserved for current and future team members that build ZULU continuously and the advisors that lent their expertise to ZULU’s success.
• The ZULU on this category is subjected to a 90 days lockup, and for team members, it is subjected to a minimum 90 days engagement, with 1/4th of the award vesting immediately afterward and 1/360th every subsequent day.

13%(130,000,000 ZUL) to the Investors

• These are reserved for the investors who supported ZULU’s pre-launch development.
• The $ZUL on this category is subjected to a 90 days lockup, with 1/4th of the award vesting immediately afterward and 1/360th every subsequent day.