Defrost Finance


H2O is a stablecoin or a leveraging tool that can be minted by staking different LP tokens or pool tokens in a vault, which will always be over-collateralized. It is soft pegged 1:1 to the U.S. Dollar. Its stability is not mediated by any central party, nor does its solvency rely on any centralized counterparties. LP tokens or pool tokens with abundant liquidity and market values can be used as collateral to mint H2O. This means that all circulating H2O is generated from vaults in Defrost smart contracts. H2O is used in the same manner as any other cryptocurrency: It can be freely sent to others, used as payments for other assets and services, be held as a hedge against market volatility, and more.
H2O is over-collateralized by LP tokens. Different LP tokens have different requirements of collateral ratios. The types of collaterals like LP tokens will be chosen before launch and additional collateral types will be decided by governance by the community. The additional LP tokens should come from proven safe protocols that have a relatively stable value, for instance, pool tokens in Dexes, lending protocols and other interest-bearing tokens.
LP tokens cross-chained to the Avalanche are functionally accepted. It benefits to increase the liquidity of the crypto space. The cross-chain function is powered by Wanchain's cross-chain technology which ensures decentralized and trusted cross-chain functions.
How to mint H2O
A user creates a Vault via the Defrost Finance portal, by funding it with a specific type and amount of collateral that will be used to generate H2O. Once funded, a Vault is considered collateralized. The user initiates a transaction in order to generate a specific amount of H2O in exchange for keeping his/her collateral locked in the Vault.
For example, LP tokens for the USDC/DAI pair on Uniswap v2 are one of the collaterals in the protocol and due to the stable nature of USDC/DAI LP tokens, the collateral ratio is set to be 105%. Holders could cross the LP tokens to Avalanche and deposit the LP tokens (USDC/DAI) into the protocol to mint H2O. Once Alice deposits $105 worth of LP tokens, a maximum of 100 units of H2O can be minted to Alice's address through the Defrost Protocol.
Last modified 1yr ago