Deposit Collateral and Mint vUSD
Last updated
Last updated
Vine Money's protocol for minting its stablecoin, vUSD, involves a process similar to that of other Collateralized Debt Position (CDP) stablecoin protocols, adapted to its unique ecosystem. Taking inspiration from previous innovations in the space, this section outlines the steps and mechanisms for depositing collateral and minting vUSD on Vine.
Opening a Vault: Users begin by opening a vault on the Vine platform. A vault is essentially a smart contract that holds the user’s collateral – initially ROSE – and tracks the corresponding debt in vUSD.
Vault Characteristics: Each vault is tied to a user's wallet address, and each address can maintain one vault per collateral type. Within the vault, two balances are maintained – the collateral balance (in ROSE) and the vUSD debt balance.
Vault Collateral Ratio: The collateral ratio is a critical metric. It is the ratio of the USD value of the collateral to the vUSD debt. This ratio fluctuates with the market value of the collateral and can be adjusted by the user by adding or removing collateral or changing the debt amount.
Default Minimum Collateral Ratio: A default minimum collateral ratio of 150% is set for vUSD positions. There is the option to adjust the minimum collateral ration via DAO governance in order to adapt to evolving market conditions and the needs of the protocol and its users.
Collateral Deposit and vUSD Issuance: To mint vUSD, users deposit ROSE into their vault. The amount of vUSD they can mint depends on the value of the deposited ROSE and the required collateralization ratio.
Minimum Debt and Collateralization Ratio: A minimum debt amount is set to open a vault, ensuring that the system remains economically viable. The minimum collateralization ratio is 150%, and ensures over-collateralization, safeguarding the system’s stability.
Borrowing Fees: Minting vUSD incurs a minting fee and a borrowing interest fee, calculated as percentages of the minted vUSD amount. These fees are added to the user’s debt in the vault. Fees are set by the protocol, adjusting dynamically to optimize the protocol and maintain peg stability.
Loan Duration: The protocol does not enforce a repayment schedule. The user can maintain the vault as long as the collateralization ratio is above the minimum requirement. It is the responsibility of the user to monitor and manage their own debt positions.
Adjustments: Users can alter their vault's balances by adding more collateral to enhance the collateral ratio or by repaying a portion of their vUSD debt.
Maintaining a Safe Collateral Ration: To avoid the risk of liquidations, maintaining a minimum collateral ratio of 180% is recommended.
Closing the Vault: A vault can be closed by the user at any time, provided they fully repay their vUSD debt. Upon closing, the collateral minus any outstanding fees is returned to the user.