🏗️System Overview

Understanding the USDFC Stablecoin Protocol Architecture

Overview

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.

How It Works

The protocol operates through several key components that work together to maintain stability, manage collateral, and ensure the proper functioning of the system:

1. Trove System: Individual vaults where users deposit FIL collateral and mint USDFC

2. Stability Pool: A reserve of USDFC that absorbs liquidations of under-collateralized Troves

3. Redemption Mechanism: Allows USDFC holders to exchange their tokens for FIL at face value

4. Recovery Mode: A special state that activates when the system's overall collateral ratio falls below 150%

5. Price Oracle: Provides accurate FIL/USD price data to determine collateral values

System Architecture

Normal Mode

USDFC Protocol Architecture in Normal Mode

Recovery Mode

USDFC Protocol Architecture in Recovery Mode

Key Parameters

Parameter	Description	Default Value
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%

Common Questions

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.

Learn more in the FAQs section

Related Topics

• The Trove System

• Mint & Borrow

• Liquidation

• Redemption

• Recovery Mode