How TiUSD is minted and redeemed
Last updated
Last updated
In TiTi Protocol, users can freely mint TiUSD or redeem reserve through TiTi-AMMs. The whole process is similar to the experience of swap in AMM DEX such as Uniswap. The biggest difference is that in TiTi-AMMs, the price of TiUSD will moderately anchor a fixed peg price through a mechanism called ReOrders. In other AMMs, the user's trading behavior is usually used for price discovery. Specifically, you can buy or sell TiUSD at the peg price in TiTi-AMMs most of the time, the peg price is usually $1.
As indicated by the yellow arrow in the figure, Assuming Alice wants to buy TUSD with ETH, she can choose the ETH/TiUSD trading pair in TiTi-AMMs to trade to get TiUSD. At this time, the marked price at the time of purchase is usually 1800 TiUSD/ETH (assuming the oracle price of ETH at this time for $1800). Of course, just like any AMM, Alice needs to consider the slippage cost in the whole process, which depends on the liquidity of the corresponding trading pair in TiTi-AMMs and Alice's desired purchase volume.
Assuming that there are 100 ETH and 180,000 TiUSD in the ETH-TiUSD M-AMM in the initial state. When Alice buys TiUSD with 1 ETH, she will get:
Alice can get about 1782.18 TiUSD; the average purchase price is 1782.18 ETH/TiUSD. After the trade, there are 178217.82 TiUSD and 101 ETH left in the TiTi-AMM ETH/TiUSD pair. TiTi Protocol judges that there are more purchase demands and adjusts the number of TiUSD in the pool to ensure that the number of TiUSD in the pool and the number of ETH remain 1800:1 (ETH's current oracle price). Likewise, the protocol mints 3582.18 (101 * 1800 - 178217.82) TiUSD into the pool. It's worth noting that this will happen during the ReOrders process. After this round of ReOrders, the balance of tokens in the pool is 181800 TiUSD and 101 ETH. The price immediately returned to 1800 ETH/TiUSD.
During this process, Alice’s 1 ETH will be allocated to the multi-asset reserve, and all reserves will be used to respond to users’ redemption requests, so we say that TiUSD is a decentralized stablecoin with more than 100% asset back. The slippage generated during the process will be used as the source of Rainy Day Fund and Protocol Fee, of which Rainy Day Fund is mainly used to deal with the shortage of Reserve Ratio, which is described in detail in the following chapters on the stability mechanism, and Protocol Fee is the protocol tokenomics important foundation.
Similar to buying, when Alice wants to redeem ETH, she can choose to trade in the ETH/TiUSD pair in TiTi-AMMs to obtain ETH. Then TiTi-AMMs will use the ETH in the reserve to pay Alice. Therefore, Alice has reason to believe that at any moment, TiTi-AMMs has sufficient liquidity to meet her redemption needs, because each single TUSD in circulation will have a 1:1 value of reserve assets in TiTi-Protocol.
Of course, none of the above statements take into account the price fluctuations of reserve assets and the composition of reserve portfolios, because we hope to help you quickly understand the principles of TiTi Protocol with the simplest examples. The above issues will be discussed in detail in the following explanations.
