How Does Utopia Metaverse Work?
Everything you need to know about Utopia Metaverse.
Each user in the Utopia ecosystem can play one or more of the following roles, and each role has different financial and systematic incentives.
In the Utopia universe, users who deposit collateral assets and generate Ustablecoins are called producers, and they can get UC rewards and reinvest income.
Protectors can obtain liquidation income by providing Ustablecoins to Moat Pool, which is called protectors, and can obtain UC rewards and collateral asset liquidation fees.
In the Utopia universe, interactors who use Ustablecoins to participate in various applications in the universe, including but not limited to games, decentralized lending, NFT markets, and other economic activities, called Utopian, can obtain Ustablecoin revenue.
In the Utopia universe, adventurers can obtain high returns by providing liquidity to UC LP / Ustablecoin LP / NFT LP, etc., including UC rewards, collateral asset liquidation fees, and application income.
Governance token holders can obtain voting rights for governance proposals by exchanging UC. Those who hold UC, called voters, can obtain UC rewards, collateral asset liquidation fees, stability fee income, and application income.
Utopia's System Architecture Diagram
After users deposit Ustablecoins into the contract, they can participate in all economic activities in the universe, including but not limited to games, decentralized exchange, decentralized lending, NFT markets and other economic activities.
Governance contracts have unique functions, such as time locks, up to 10 times acceleration incentives, etc. Time locks are divided into short-term locks and long-term locks. Short-term locks can perform rapid protocol upgrades, and long-term locks can perform governance upgrades. This ensures contracts can quickly adapt to changing market conditions and upgrade the core parts of the agreement over time.
- Adding new applications and setting application parameters.
- Adding or removing collateral assets.
- Adding or removing the types of Ustablecoins that can be generated.
- Adjusting the weight of the asset pool.
- Modulating stimulus factors.
- Adjusting the penalty ratio.
- Adjusting the distribution ratio of transaction fees.
- Adjusting the stability fees factor.
- Adjusting the reinvestment ratio.
- Adjusting the proportion of reinvested income.
- Adjusting price oracle sensitivity factor.
Users deposit collateral assets, such as ETH, ETH-USDT LP and set them as collateral status, and can obtain Ustablecoins with a collateral rate of no more than 110%; when they need to withdraw collateral assets, users need to repay 100% of Ustablecoins plus a stability fee, Then the vault is closed.
After users deposit Ustablecoins into the contract, Ustablecoins in the Moat pool will be used to repay the debt during the on-chain liquidation, and the collateral assets obtained from the liquidation will be distributed to the provider of Ustablecoins in proportion.
Using third-party oracle services, such as Chainlink, etc., in order to protect the oracles in the system from being controlled by attackers, Utopia adds the oracle sensitivity factor as a global variable to control the maximum price change received by the system.
If the sensitivity factor is "5% in 10 minutes", then the price change in 10 minutes cannot exceed 5%, and a 15% change takes 30 minutes. This restriction can ensure sufficient time for global clearing.
When users redeem, the redemption process is as follows, whether the Moat pool has enough balance; if not, enter the liquidation mechanism; after the liquidation is completed, the following process will continue.
If there is enough balance, the Moat pool receives Ustablecoins + stability fee, the collateral assets in the Moat pool (that is, the liquidation assets captured before) are returned 1:1 to the user, and the stability fee will be deposited into Reserve.
The formula for calculating the stability fee is as follows:
when Collateral Rate <= kink
when Stable Rate = Base Rate + Collateral Rate * Multiplier
when Collateral Rate > kink
when Stable Rate = Base Rate + Collateral Rate * multiplier + (Collateral Rate - kink) * Multiplier
The Utopia protocol has a four-layer real-time settlement mechanism, allowing its users to liquidate the treasury at any time when the value of the treasury is lower than the collateral rate.
Moat Pool repays the treasury debt and obtains liquidated assets plus 70% of the liquidation fee; the remaining 30% goes to reserves.
Reserve liquidation reserves are an important part of the Utopia Agreement. Its main function is to conduct liquidation for extreme events. When the first-level liquidation certificate is insufficient to repay the debt, the reserve assets will be used to purchase the corresponding collateral assets and redeem users.
Third-party liquidation is also an important part of the Utopia agreement. Third-party liquidator obtains liquidation assets and liquidation fees by repaying debts to ensure the stability of the agreement.
Global clearing Although global clearing is an extremely unlikely event, it is built into the protocol for security purposes. In this case, the generation is suspended, the UC is minted by the system, and then sold to bidders of Ustablecoins.
The target price of Ustablecoins has two important functions:
- 1.Used to calculate the collateral debt ratio of the collateral debt warehouse.
- 2.Determine the value of collateral assets that Ustablecoins holders will receive at the time of liquidation.
The Utopia protocol charges a stability fee to ensure the robustness of the protocol. It uses an algorithm to automatically anchor the target price. When the market is unstable, if the transaction price of 1 UUSD is lower than 1 US dollar, it will encourage holders or arbitrageurs Make a purchase and get the price difference; if the transaction price of 1 UUSD is higher than 1 US dollar, it will encourage the holder or arbitrageur to sell and get the price difference.
In order to maximize the profitability of the agreement, Utopia has added a reinvestment mechanism. The proportion of reinvestment is limited to the reinvestment strategy. The contract can be integrated, which saves gas. Assets within the reinvestment ratio can be deployed to other income-generating assets. Agreements, such as loans, automatic market making, etc., can be developed, tested, and proposed by anyone who can integrate into Utopia's strategic contract is approved and launched by the DAO governance mechanism. The goal is to minimize risks and to maximize returns. Part of the reinvestment income is returned to the user, and part is used to repurchase and destroy the UC.