Coinversation: The first synthetic asset protocol on Polkadot
Coinversation Protocol is a synthetic asset issuance protocol and decentralised contract trading exchange based on the Polkadot contract chain. It uses the token CTO issued by Coinversation Protocol and Polkadot(DOT) as collateral, and synthesizes any cryptocurrencies or stocks, bonds, gold and any other off-chain assets through smart contracts and oracles. Users can forge a certain synthetic asset by collateralizing CTO or DOT, such as U.S. dollars, and automatically have a long position in the asset. Users can also convert minted assets into other assets through the trading platform, so as to realize the purpose of shorting the asset and longing other assets. The assets minted by all the users correspond to the liabilities of the entire system, and the proportion of each user’s liabilities has been determined at the time of forging, so that their respective profits can be calculated. Because such a collateral pool model does not require a counterparty, it perfectly solves the problems of liquidity and transaction depth in decentralised exchange(DEX).
The main functional modules of the entire system include: forging synthetic assets(MintC), DEX, collateral pools, fee pools, oracles, and liquidity mining.
1. The user deposits CTO or DOT to mint the system’s default stable currency cUSD. The mortgage ratio of CTO is 800% (provisional), and the mortgage ratio of DOT is 500% (provisional). That means CTO worth $800 or DOT worth $500 can mint for $100 CUSD. The user’s staking ratio should be as high as possible. When the DOT price drops, the staking ratio may be lower than 800%. At this time, the user should replenish DOT or return (destroy) a part of CUSD. The system stipulates that users who are greater than or equal to the specified mortgage ratio will get the dividend of the transaction fee in the fee pool as an incentive.
2. cUSD is a type of synthetic asset and the standard currency of the entire system. All debts will convert into cUSD for calculation. cUSD is also a stable currency, and its value in the system always define as $1. cUSD can convert into other synthetic assets in a decentralized contract exchange, such as cryptocurrencies such as cBTC, cETH, cDOT, foreign exchange such as the Euro, Japanese Yen, and RMB, and even gold and various stocks. It also supports buying long and short selling. All of these assets are synthesized by the system. They are not real assets. Their conversion rate is determined by the external real price provided by the oracle. This conversion process does not require a counterparty, and users can always convert all of their CUSD into any synthetic assets supported by the system.
3. The respective debt ratios of all users in the system are determined when staking the CTO or DOT to mint CUSD, and it has nothing to do with the price of other synthetic assets after conversion. The debt ratio will change only when the user mints or destroys CUSD. The debt pool is the sum of all user debts. The changes in asset prices will change the debt. Through a constant debt ratio, we can calculate the profit of each user.
4. When the decentralized contract exchange performs synthetic asset conversion (ie. transaction), users need to pay a 0.3% (provisional) handling fee, and these handling fees enter the system fee pool. The fee pool distributes dividends to users who meet the specified staking ratio in the entire system every two weeks (provisional). The dividend ratio is determined according to the debt ratio. New users need to hold debts for more than a certain number of days or accumulate use them for more than a certain number of days (to be determined) to be eligible for the fee pool dividend.
5. The prices or conversion exchange rates of all synthetic assets in the system are provided by the oracle reading external exchange data, and future planning can introduce decentralized oracles.
Realize a decentralized virtual asset issuance platform and contract trading platform, which can replace the perpetual/future contract functions of major centralized exchanges in the long term. even issue any type of assets on the agreement, in the traditional financial market To have a role to play.
Centralized contract exchanges have exposed more and more problems, and the entire industry needs a solution for decentralized contract exchanges. The project’s decentralized contract trading program has the characteristics of general DEX openness, transparency, anti-censorship, and no KYC. It is also because there is no counterparty in the project, it perfectly solves the problems of general DEX transaction depth and liquidity. We believe that the prospect of this project is very broad and it is a real DEX solution.
Coinversation Protocol was founded by a Ph.D. team in economics in the United States. It also has a technology development and operation team in China, with members from Alibaba, Ant Financial, Peking University, and other first-line technology companies and universities.