What makes Vader unique?
The token used by the protocol is called a VADER token, which is burned to obtain the stablecoin. Liquidity pools use either USDV and VADER as settlement assets. Both offer zero slippage conversion. The usual way of VADER is that there is a daily issuance rate of it that funds liquidity incentives, a protocol interest rate, permanent protection against losses, and a float to facilitate protocol lending. The VADER protocol coins synthetic assets from liquidity pool shares that are entitled to an interest rate.
The mechanism also plays a role in collateralizing loans used in exchange for paying an interest rate that is added to the pools to increase yield.
Before we get into the actual introduction, let’s understand some of the terms discussed here.
- Stablecoin: This is a cryptocurrency that attempts to tie its market value to an external reference, such as the US dollar, or to the price of a commodity, such as gold.
- Synthetic asset: This is a mixture of assets that have the same value as another asset.
- Liquidity: This is the way in which an asset or security can be converted into ready cash without affecting its market price.
- Protocol: a system that governs a matter. It can be financial, governmental or diplomatic occasions.
- Liquidity pool: A collection of funds tied up in a smart contract.
The solution to the noble problem of stablecoins and synthetic assets is to understand liquidity while feeling the correct buying power of assets at all times.
The use of incentives can ensure maximum adoption of the system and rapid bootstrapping of capital. Existing stablecoin and synthetic asset designs are inadequate because they use oracles that are not liquidity sensitive. As a result, they are vulnerable to manipulation and do not properly incentivize liquidity producers. This makes them not natively interest-bearing.
Hence comes VADER, a new form of liquidity protocol that attempts to be self-serving by using its liquidity and asset purchasing power knowledge to support the creation of a collateralized stablecoin. The protocol also uses liquidity units as collateral for synthetic assets. This means that it will always have guaranteed redemption liquidity.
With a fair and transparent incentive strategy, Vader maximizes the depth of liquidity pools and the acceptance of synthetic assets. To ensure safe and sustainable debt creation, it uses a liquidity-based fee to increase the capital efficiency of the system.
Features of the VADAR protocol
- It uses a collateralized stablecoin settlement asset.
- It burns VADER to mint USDV.
- Impermanent Loss protection for Liquidity Providers in the pools
- It has continuous liquidity pool incentives.
- VADER mints interest-bearing synthetic assets from pool liquidity
- It issues debt against USDV, VADER or Synthetic Assets.
- Vader coin is obtained from burning Vether tokens.
Meanwhile, the Vader protocol has two types of pools that are abstracted for the user. They include:
- Anchor pools: These use VADER as a settlement asset and allow the system to sense the anchor price, which is the median of the prices of the anchor pools.
- The asset pools: these use USDV as the underlying asset that drives liquidity and demand for the stablecoin.
The anchor pools (VADER:Stablecoin) are linked to the asset pools (USDV: Asset) via 0-slippage swaps between USDV VADER.
Here are the additional features of VADER to ERC20:
- VETH (1000:1) is fired to mint VADER.
- USDV is fired to mint VADER, which follows the inverse anchor price.
- A daily issue rate of VADER is sent to the USDV contract.
Here are the extraction functions from USDV to ERC20:
- VADER is fired to mint USDV in line with the anchor price.
- USDV receives VADER from the VADER contract, a portion of which it burns into USDV, and then makes available for drawdown by USDV stakers.
The remainder is sent to Router Contract to be used by its reserve.
Other contracts include:
- VADER ROUTER and POOLS contract
- VADER FACTORY and SYNTHS contract
- VADER VAULT contract
- VADER UTILS contract
- VADER DAO Contract.
Use of VADER Token
The VADER token is used in three ways
- Shared settlement: the VADER token is used as a shared settlement value in anchor pools. This allows the system to capture the purchasing power of a group of stablecoins that transmits the “anchor” price in USD.
- Coinage: The protocol allows anyone to burn VADER to mint USDV at a ratio of 1:1, the anchor price.
- Collateral: The protocol also allows anyone to lock VADER as collateral for borrowing.
Unique features of the Vader protocol
Now we have come to the main topic of discussion, what makes the Vader token different from other cryptocurrencies. The answer is quite simple. It is the protocol that was made to produce the token that sets it apart from others. The unique features of the protocol. They include:
Let us now turn to the liquidity incentives associated with this protocol: Dividends are paid to liquidity pools (LPs). Each time a swap occurs, the incentives are synchronized over time into the pool balances.
LPs realize a return as well as slip-based fees that offset any Impermanent Loss. The LP should always be realized after a certain period of time.
Impermanent loss hedging
As soon as a user makes a deposit, the value is recorded. When it is time for a withdrawal, the withdrawal value is calculated.
So there is protection if it is less than the deposit value, as the member gets paid the shortfall from the reserve, as the protection issued increases linearly from 0 to 100% for 100 days.
The Protocol’s liquidity pools use either VADER or USDV as a common settlement asset, enabling the system to price each pool accurately, taking into account the purchasing power of its assets.
This avoids frictions that force users to hold a particular asset. The volatile loss feature is useful because all VADER liquidity pools (anchor and asset) are stablecoin paired pools.
A system that has adopted a liquidity slip-based fee maximizes revenue for liquidity providers when demand for liquidity is high. Thus, the liquidity model prevents manipulation and supports collateral liquidation.
Although slip-based fees break path independence, a member can theoretically achieve better price execution with smaller trades. This is a beneficial feature because smaller trades slow the rate at which a price can change, as the base fee paid (fixed in cost) provides a lower tolerance threshold.
However, a member has no freedom of choice in the trade size of a position that is resolved by the protocol. This is arguably the most important aspect of the system.
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Nothing on Cryptinus constitutes professional and/or financial advice. Always think for yourself and make informed decisions when investing. Never invest money that you cannot afford to lose.
This article is not sponsored in any way. Our income comes only from donations, so we don’t depend on anyone. Read more about our journalistic values and how you can support our mission.
Nothing on Cryptinus constitutes professional and/or financial advice. Always think for yourself and make sound decisions when investing. Never invest money that you can’t afford to lose.