OrcaDAO
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Technical Overview
How does this work?
AVAI Stablecoin
The AVAI stablecoin is a fully crypto collateral-backed stablecoin that is currently pegged at $1.00 to the US dollar. Through Orca Banks, collateral can be deposited, such as AVAX, into a vault which can then be borrowed against for AVAI. AVAI can then be used for a multitude of use cases, such as to trade for other crypto, or to stay within the OrcaDAO for yield farming.
Orca Banks
An Orca Bank allows a user to access the protocol by creating a personal Vault that allows for accepted collaterals to be leveraged. Once a user creates a Vault in an Orca Bank, users can deposit and withdraw collateral from their wallets (such as Metamask), as well as borrow and pay back loans. All currently accepted collateral can be found under Collateral Options.
An end user can only borrow up to a certain amount, however, based on the USD value of their collateral. A minimum collateral percentage is implemented, with a default value of 150% for AVAX, 125% for wETH, and 100% for USDC, meaning a user must have at least 100% collateral backing their loan. As an example, a user can borrow 100 AVAI, worth $100 USD, if they have $150 USD worth of collateral deposited.
To ensure accurate prices of the collateral, for all base assets a Chainlink oracle price feed is used as a source. For interest bearing or yield assets we use the Chainlink oracle price feed, multiplied by the ratio to the base assets.
There is a fee for paying back the token of 0.75%, allowing a vehicle for revenue for the project. This is mandatory to ensure the accuracy of vaults as prices can change quickly and the vaults need to remain efficient at all times.
Liquidation
As the price of the collateral deposited into a user’s vault is variable, there is a mechanism in place that allows for partial liquidation of a vault if it falls below the minimum collateral percentage. When a vault can be liquidated, a liquidator – currently set to be the community – will pay back 50% of the vault’s debt withdrawing from the vault an equivalent amount (in USD) of collateral as well as a reward as compensation for liquidating the vault. The default compensation is 10% of the paid down debt. It is paid using the liquidator's AVAI.
For example with an AVAX vault, if a user has borrowed their maximum leveraged 100 AVAI and their deposited collateral falls below an equivalent worth of $150 USD, a liquidator can pay 50 AVAI, receiving $50 USD worth of AVAX, as well as a $5 USD of AVAX as reward for liquidating. The vault is still owned by the original owner, but with only $95 USD worth of AVAX deposited in it with a debt of 50 AVAI.
Thus, the liquidator will be up net 10% while the Vault owner will be down net 3.5%, assuming the AVAX returns back to it's original price. There is a fee for paying back the token of 0.75% through the liquidator, allowing a vehicle for revenue for the project.
USD Peg
Vaults
AVAI is pegged to USD via backing of collateral and insurance that it will always be backed by >100% of collateral. If, on the open market AVAI price lowers below the USD peg it incentivizes people to pay back AVAI; burning it, lowering supply, and thus increasing the AVAI price back to stability. Likewise, if the price increases above the USD peg, users are incentivized to deposit collateral and mint AVAI, thus increasing supply and decreasing AVAI price. However, in similar protocols, this was found to not be always enough. Thus, we are also introducing an arbitrage opportunity to ensure stability.
USD Exchange
Another mechanism that will be employed to ensure stability of the AVAI token to the USD peg will be a simple USD swap. This USD swap contract will allow a user to swap AVAI for a USD backed token, such as USDC. There will be a fee on each swap of 0.75%, meaning that 1 AVAI can be swapped for 0.9925 USDC, and 1 USDC can be swapped for 0.9925 AVAI.
This incentivizes stability, as, for example, if AVAI goes above $1 USD by greater than 0.75% on the open market, users can deposit USDC into the USD swap, getting 0.9925 AVAI per 1 USDC depositing, then selling that AVAI on the open market for profit due to the price difference. This lower price on the open market via selling mechanisms as well as via increased supply of AVAI. Likewise, if AVAI is below $1 USD by 0.75%, then users can buy AVAI from the open market, and redeem it for USDC token at a profit. This will increase price on the open market via buying mechanisms as well as decreased supply of AVAI.
Governance
There will be a governance token, ORCA, which will be a ERC20 token. Over time, avai.finance will transition into a DAO, which will be controlled via the ORCA token. The ORCA token will be distributed via community incentives such as yield farms, as well as through other community incentives that will be decided post-launch. ORCA token holders will be the beneficiaries of revenue generation raised through the AVAI transactions discussed above. This will be conducted via an escrow-type deposit, similar to industry standards.
Last modified 5mo ago
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