System Overview
Understanding the USDFC Stablecoin Protocol Architecture
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Understanding the USDFC Stablecoin Protocol Architecture
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The USDFC Stablecoin Protocol is a decentralized system that enables users to mint a USD-pegged stablecoin (USDFC) by depositing Filecoin (FIL) as collateral. The protocol maintains stability through a series of interconnected mechanisms that ensure USDFC maintains its 1:1 peg to the US Dollar.
The protocol operates through several key components that work together to maintain stability, manage collateral, and ensure the proper functioning of the system:
Trove System: Individual vaults where users deposit FIL collateral and mint USDFC
Stability Pool: A reserve of USDFC that absorbs liquidations of under-collateralized Troves
Redemption Mechanism: Allows USDFC holders to exchange their tokens for FIL at face value
Recovery Mode: A special state that activates when the system's overall collateral ratio falls below 150%
Price Oracle: Provides accurate FIL/USD price data to determine collateral values
Minimum Collateral Ratio (MCR)
Minimum required ratio of collateral to debt
110%
Recovery Mode Threshold
TCR level that triggers Recovery Mode
150%
Liquidation Reserve
USDFC reserved for potential liquidation gas costs
20 USDFC
Minimum Borrow Amount
Minimum USDFC that can be borrowed
180 USDFC
Base Rate
Variable component of minting and redemption fees
0% to 4.5%
What happens if the price of FIL drops significantly? If FIL price drops, Troves with lower collateral ratios may become eligible for liquidation. The protocol prioritizes liquidating the riskiest Troves first to maintain system solvency.
How does the protocol maintain the USDFC peg? The redemption mechanism allows USDFC holders to exchange their tokens for FIL at face value, creating arbitrage opportunities that help maintain the peg.
What is the difference between Normal Mode and Recovery Mode? In Normal Mode, Troves require a minimum 110% collateral ratio. In Recovery Mode, stricter rules apply, including higher liquidation thresholds and restrictions on borrowing.
