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What is Unit Protocol and Why Does it Matter? by@unitprotocol

What is Unit Protocol and Why Does it Matter?

Unit Protocol  Hacker Noon profile picture

Unit Protocol

Unit is a decentralized lending protocol that allows using a variety of tokens as collateral. Acc is owned by community.

Unit Protocol is a decentralized protocol that allows you to mint stablecoin $USDP using a variety of tokens as collateral.

Why does it matter?

Many crypto holders own a diversified portfolio of assets, including a variety of capitalized and under-capitalized tokens. Popular liquid assets are easily sold on exchanges and holders can access instant liquidity without the need to borrow. However, less liquid assets are difficult to sell quickly, yet they represent a significant measure of value in the crypto asset world. Right now there is no way to borrow liquidity for such assets. It limits DeFi applications, funding, and usability.

The DUCK token is the governance token and core token of the Unit Protocol economy.

Unit protocol collects stability fees when users repay their USDP and liquidation fees if CDPs were liquidated. During the first year, 100% of all fees will go to the protocol ecosystem directly.

The governance pool will play a significant role in Unit Protocol decision-making system and add stability to the system, so it is essential to incentivize DUCK stakers and help them be involved in the voting process. DUCK token holders will be able to stake their tokens to participate in governance and collect protocol fees. We are working on the governance pool, but the infrastructure is not ready yet. Before it is operational, all the allocated fees will be used to buyout DUCK from the open market and burn it.

Future changes in fee distribution are subject to governance decisions. Eventually, community engagement will help Unit protocol userbase grow faster, becoming a more decentralized ecosystem. It will provide better adoption, security, and utility of Unit protocol.

Unit protocol needs price data for system contracts to know the current price of provided collaterals. It is necessary to count borrowing parameters and manage collateralized debt positions (CDPs) in the protocol.

We use Keep3r oracle as the primary oracle to receive our collaterals' price in ETH and Chainlink oracle to receive ETH price. Keep3r provides time-weighted Uniswap && Sushiswap price feed with a specific time period. Keep3r oracle feed

Additionally to the solution, in reserve, we have our oracle solution - Keydonix(also based on uniswap price feed), as well as Chainlink oracle for token prices.

DUCK token address:

How to use Unit protocol

First, we take a look at the "Choose collateral" section:


Choose Collateral section

It let us choose the interested token and see basic parameters for the collateral. Every term has its hint. If you press on the information icon, you will see a pop-up with helpful information explaining the term. But let's define them one more time here:

Initial collateral ratio(ICR), % - debt/collateral ratio represents the maximum amount of debt a user can borrow initially (when opening CDP) with a selected collateral token.

For example, 40% means that for every $1000 collateral value, a user can borrow a maximum of $400 USDP initially.

Liquidation ratio(LR), % - debt/collateral ratio represents the limit after which anyone can liquidate the CDP.

As an example: 50% means that if the debt/collateral ratio will be >50%, the position can be triggered for liquidation.

LR>ICR creates a safety reserve to avoid instant liquidation if a user borrows the maximum limit.

Stability fee, % - represents the cost of USDP debt per year. It capitalizes during every action, which reduces debt/collateral ratio like withdrawing collateral and borrowing more USDP.

Liquidation fee, % - fee which represents a % from the loan. Will be deducted from collateral if liquidation will occur.

USDP available to borrow with current collateral, USDP - the maximum amount of USDP which can be borrowed for selected collateral token.

In our case, it is 0 because all the available USDP limit was already taken for the DUCK token at that moment.

Your Balances section:

This section shows your wallet balances: DUCK, USDP, and selected token-collateral.


Deposit collateral & Borrow USDP section:

Input the amount of tokens you would like to deposit as collateral and how much you would like to borrow.

Max button for token collateral will input your token wallet balance. Max button for USDP will count the amount of USDP based on the ICR ratio.

The "Exectute" button will send the transaction to your wallet and ask you to sign for execution.


Deposit collateral & Borrow USDP

Repay USDP and withdraw collateral

If you already borrowed some funds and would like to partially or fully repay your debt or withdraw collateral, you will need the section.

Max button for USDP will set the amount to Borrowed USDP + Stability fee for debt period.

Max button for collateral will count the amount of collateral you can withdraw based on your CDP parameters and current input. For complete withdrawal, press max for USDP to set full repayment first.


Repay USDP & Withdraw collateral

Your CDP section

This section represents the situation with your selected collateral CDP. To switch between different CDPs, choose another token in the section "Choose collateral".


Let's take a look at the terms here:

Borrowed USDP - the amount of initially borrowed USDP for this main collateral CDP.

Utilization - % of borrowed USDP compare to maximum USDP, which is possible to borrow for the CDP.

Health factor - the indication of CDP liquidation safety. If it goes below 1 - the position can be liquidated. The parameter can be found from the equation.