What is Standard Protocol?
Built on Substrate, Standard Protocol is the first Collateralized Rebasable Stablecoin (CRS) protocol for synthetic assets, and will operate in the Polkadot ecosystem. It introduces a new paradigm for liquidity aggregation. In contrast to the previous generation of algorithmic stablecoins, Standard rebases its stablecoin supply in each era. It will act as the catalyst for the financial activities of other parachains, to enable leveraged trading and arbitrage via a built-in AMM. It will also include a protocol for synthetic asset markets by way of a decentralized oracle.
Problems that Standard Protocol solves:
If you are a crypto investor, you might have known about Stablecoins such as TrueUSD, Tether,... But three biggest problems with current algorithmic stablecoins are:
1. Too much focus on price stability, with no sustainable use cases for interoperability:
First generation algorithmic stablecoins like USDT, DAI,... focus only on automated price stability. Although they provide some interoperability between tokens with initial distribution via yield farming, there is still no sustainable way for them to interoperate in financial activities without the unsustainable level of token issuance distributed to staking pools.
2. Current oracles are centralized, and there is no decentralized ecosystem to reward these oracles:
Most oracles of current algorithmic stablecoins are centralized and they are controlled by validators or even by the companies themself. If the oracles of a stablecoin system is centralized, many bad things can happen and the whole system might collapse. Here are some example about potential risks of centralized oracles:
Wrong data input/output.
Physical and natural disasters like: Fire, ice storm, blackout,...
Even if the oracles data can be dependent on DEXes, but they are prone to flash swaps and generating unwanted arbitrage data when compared to centralized exchanges. In order to provide aggregated and balanced data, oracle providers must be rewarded in a decentralized manner. Standard Protocol proposes a reward mechanism in each era and slashes equivocation with the IQR rule.
3. Auctions are hard to track and are centralized:
Liquidation auctions are hard to track and participate in, and thus only experienced traders can benefit from them. A more decentralized method to liquidate positions must be considered. Auction orders come in high volumes of collateral, which can lead to plutocracy.
The Most Characteristic Features of Standard Protocol and how Standard use them to solve current problems:
To understand how Standard Protocol solves above problems, we have to know what feature does it have:
a. Elastic Supply:
MTR issuance ratio (inverse of collateralization ratio) is fully controlled by governance within an epsilon range; However, when the MTR price goes out of the epsilon range, emergency shutdown executes and no more MTR will be issued for the rest of the era.
Starting from the next era, the system takes charge and adjusts MTR issuance ratio to stabilize MTR price to USD until MTR price recovers to 3 quarters of the epsilon range.
If MTR price is above USD, more MTR will be minted from collateralization in the next era.
If MTR price is below USD, less MTR will be minted from collateralization in the next era.
The total supply is adjusted to follow the ratio above.
Ampleforth (AMPL) uses elastic supply to rebase its total supply of tokens. Standard rebases its stablecoin supply in each era, and utilizes overcollaterization to mint its stablecoin, Meter (MTR).
Standard (STND) automatically rebases the collateralized stablecoin, in the manner of an algorithmic reserve bank with decentralized governance for STND holders. By rebasing the price in each era, the total supply of the stablecoin Meter (MTR) and the amount that can be issued are adjusted to peg Meter (MTR) to the value of USD.
Meter (MTR) supplies are measured in each rebase and adjusted with the medianized price from oracles.
b. Decentralized Oracle Ecosystem:
Oracles are used for generating synthetic assets from the stablecoin Meter (MTR). Standard Protocol treats oracles like validators for operating across the wide scope of the DeFi ecosystem.
Oracle clients from various sources (e.g. Binance, Coinbase, HydraDX, etc) can provide aggregated price information so that the price cannot be manipulated by a single entity.
Standard Protocol builds an oracle module to share block rewards with oracle providers. Substrate enables developers to split block rewards to other network participants in every era. Block rewards to oracle providers maintain an 8:2 ratio between validators and the providers in an era. The total block rewards in each era is 10% (governance controlled) of total STND produced in the era.
Oracle providers are selected using the phragmen algorithm.
Selected oracle providers have no fee.
Block can only have up to a certain number of oracle transactions recorded. This is to prevent too many oracle transactions taking up one block.
c. Market Efficient Liquidity:
Instead of hosting an auction for liquidating collateral, Standard Protocol deposits liquidated collateral to its AMM pair so that Meter (MTR) holders can purchase other liquidated digital assets. Standard protocol uses a built-in AMM module to provide liquidation in a more market efficient way where liquidated assets are utilized to conduct arbitrage trades.
Standard Protocol rewards stakeholders who find expired loans by giving them a percentage (10% or more) of the collateral. The rest of it goes to Standard Protocol's built-in DEX to provide arbitrage opportunities to stakeholders who use the exchange
d. Stable Base Price:
By being algorithmically stabilized through rebasing, Standard Protocol provides cash which can act as a base price. For speculating on a digital asset, Meter can be used to estimate how much the asset is worth with the price pegged to USD.
e. Interoperable Ecosystem:
Standard Protocol is a collateralized, rebasable stablecoin (CRS) protocol, working across different blockchains as a form of smart contract in each network. Together, the Standard Protocol ecosystem for interoperability represents a blockchain hub. Standard Protocol will be able to share price information to other chains or fiat assets without charging fees due to its self-sustaining oracle reward ecosystem.
f. RUNTIME Modules:
Standard Protocol is implemented using Parity Substrate and has 9 runtime modules built using pallets available in the Open Runtime Module Library (ORML). Here are the details for each of these modules:
1. TOKEN module:
The Token module is a registry which stores asset information about Standard Protocol and other chains. Derived from the ORML’s XCM token, Standard Protocol’s token module manages assets that flow in and out via Cross-Chain Message Passing (XCML) across parachains. Assets are managed with a unique identifier.
2. MARKET module:
The Market module in Standard Protocol manages pairs for the automated market maker (AMM) between each collateral and its stablecoin Meter (MTR). Derived from Uniswap V2 contracts, the AMM module facilitates trading in the Standard Protocol ecosystem. The module enables MTR holders to purchase other digital assets or provide liquidity to earn fees on every exchange in the market.
3. VAULT module:
The Vault module collaterizes other digital assets and generates MTR. MTR holders can generate other synthetic assets with price information provided by oracle providers.
4. STAKING module:
The Staking module uses NPoS(Nominated Proof of stake) mechanism to select validators and rewards them with their actions in each era. Staking module comes with other module sets, including authority discovery on authority key candidates for each block, authorship for recording block authors and following reporting modules: offences, babe, grandpa, collective for managing slashes, im-online for reporting liveness, treasury, bounties, tips for distributing slashed validator’s balance to communities.
5. ORACLE module:
The Oracle module is an election and price feed information module which stores prices from external data with asset IDs from the Token module as keys. Oracle providers are elected in every era with the amount staked from the users. Oracle providers produce price information and are rewarded in each era on each block reward. Prices are stored in the state, and oracle providers are reviewed in each era. If they produce outliers, they get slashed. The total reward for each oracle provider in each era is recorded by the Reward module and stakers can get their rewards by claiming them.
6. FARM module:
The Farm module models after the existing Solidity contracts that are used for yield farming projects in Ethereum. It distributes rewards proportionally based on staked amount and elapsed time. The Farm module will be used to reward liquidity providers who supply liquidity for each pair of assets consisting of MTR and some other asset.
7. REWARD module:
The Reward module manages the annual inflation rate through governance and stores the total reward for network participants in each era. With 5% initial annual inflation rate of STND, the reward is distributed to oracle and validator with 2:8 ratio. Other network participants (e.g. liquidity providers) can be added through on-chain upgrade of runtime.
8. DEMOCRACY module:
The Democracy module manages the governance for operating Standard Protocol. The module has access to all root methods for each of the runtime modules and holders can propose changes in the network. The voting rules follow the same rules laid out in the Polkadot wiki.
9. TREASURY module:
The Treasury module manages the funds collected from fees or slashes in Standard Protocol. The module is used for funding protocol developers, monthly payouts for operators and team, stability fee management, or tipping community members.
These features help Standard Protocol users make profit in both kinds of market -- Bull and Bear:
In Bullish Condition:
Standard generates its stablecoin, Meter (MTR) by collateralizing other digital assets. One of the key ways a Vault owner can use the Meter (MTR) she generates is to purchase more collateral — typically DOT. This enables leverage trading to maximize profits with existing one's assets. Alternatively MTR holders can generate
synthetic assets from oracles like virtual stocks,
In Bearish Condition:
MTR holders can still earn profit by purchasing other digital assets from liquidation. Assets can be purchased with MTR and sold on other DEXes or centralized exchanges.
Utilities Of MTR, LTR & STND Tokens:
Different from many other projects, Standard Protocol have 3 different tokens, each of them serving specific features that we mentioned above. Let’s take a look at them in detail:
1. METER (MTR):
Meter (MTR) is the stablecoin which is synthetically generated by the protocol's vault. By rebasing the stablecoin’s total supply with the oracle price provided by oracle clients, the stablecoin’s supply is adjusted to have a value maintained at 1 USD. Holders can use MTR as a medium of exchange, to buy other assets, and to farm tokens within the Standard Protocol ecosystem by providing liquidity. MTR’s supply is expanded and contracted accordingly in order to maintain the peg.
2. LITER (LTR):
Liter (LTR) is a liquidity provider token that represents a share of the MARKET (AMM) module. Similar to LP tokens in Uniswap, LTR can be burned in an AMM to receive deposited assets. LTR can also be used for liquidity mining
3. STANDARD (STND):
Standard (STND) is the network and governance token for using Standard Protocol. STND can be used for the following cases:
● Network Staking: STND token holders have an option to stake STND on the Standard Protocol network. (Standard Protocol validators or collateral providers). By doing so, the staker receives the nomination reward and the network becomes more secured and decentralized.
● Stability Fee Rewards: Stability fee collected from a user closing his/her vault goes to STND holders.
● Transaction: To use Standard Protocol's system, you need to pay fees with STND. STND can be burned or given to validators depending on the module's transaction.
● On Chain Governance: STND holders can participate in the governance of the Standard Protocol ecosystem.
Meter (MTR) and Liter (LTR) is for stable purposes so they won’t have token distribution. We will walk through the token distribution and the release schedule of Standard (STND) token which total supply is 100M STND:
- Seed round: 5% - These tokens are assigned to top venture capital firms and proactive investors. 15% of these tokens sold in the seed round will be released on TGE with the remaining subject to a linear release schedule every quarter over one year.
- Strategic partners: 5% - The strategic partner tokens are to be allocated to strategically value adding funds. 20% of the tokens will be released on TGE, with the remaining subject to a linear release schedule every quarter over one year.
- Private round: 10% - The private sale tokens are to be allocated to good partnership funds and community funds. 20% of the private sale tokens will be released on TGE, with the remaining subject to a linear release schedule every quarter over one year.
- Public IDO: 1.3% - 1.3% of the total supply will be released on an IDO platform such as Polkastarter. It will be fully unlocked on TGE.
Ecosystem Partners and Advisors: 3% - These tokens are assigned to global advisors. Tokens are distributed a linear release schedule every month over one year after 3 month cliff.
Team: 10% - These tokens are assigned to the core team and full-time employees. Tokens are distributed a linear release schedule every month over one year after 3 month cliff.
Marketing and Ecosystem: 4.7% - These tokens are assigned to early-stage community builders for growing traffic in different social platforms, crypto communities, Reddit communities and developer forum communities.
Community Incentive: 6% - These tokens are to be distributed to various communities so that more people can join the Standard Protocol community.
Foundation: 15% - These tokens are to be assigned to a Foundation reserved for business partnerships and collaboration.
Yield Farming, Staking Distribution: 30% - These tokens are to be assigned for liquidity mining rewards.
Protocol Developers & The external contributors: 10%
- Validator (grant developer): 2% -These tokens are to be distributed to initial grant programmers or testnet validators before market discovery and test net structures are rolled out.
- Community developer: 4% - These tokens are to be distributed to programmers in post market discovery.
- Crown Loan Airdrop (Parachain Incentive): 4% - These tokens are to be distributed in establishing the Polkadot ecosystem partnership consortium.
Currently, the roadmap of Standard Protocol only last to the end of 2021:
2021 Q1: Oracle Module integration & Council recruit.
2021 Q2: Kusama Parachain crowdloan, Chainbridge testnet on Kusama & Run 1st Council Yield farming starts.
2021 Q3: Polkadot parachain crowdloan.
2021 Q4: Yield farming starts if Polkadot parachain is connected. After that, Standard Protocol will apply this protocol to other ecosystems like Cosmos, Ethereum,...
Partner and Cooperator of Standard Protocol
Currently, Standard Protocol only has a technical partnership with Polkastarter as launch partner. The IDO of STND token on Polkastarter will take place on the 27th of April. A total of $325K of Standard DAO token $STND will be available for sale.
Additionally, Standard Protocol are backed by a lot of popular investors and ventures to help them build a successful protocol. They are:
Core Team & Advisors Of Standard Protocol
The Standard Protocol core team is made up of many popular and potential people in the blockchain industry:
Hyungsuk Kang: Founder & CTO - Hyungsuk Kang is the Lead Developer at Plasm - The first project that successfully sent a cross-chain message from Plasm Network to Acala in Rococo testnet.
Jaewon Shin：Co-founder - Jaewon Shin is Founder of Chiko Media, Co-founder of PolkaKR, Formerly Korean Executive Director at BitBlock Group.
Billy Lee: Lead Developer - Billy Lee is the Software Engineer with over 4 years of experience in full stack web development, Leading UX for Standard Protocol.
Tony Ling: Head of China - Tony Ling is Founding partner of Bitblock Capital, Guest lecturer at Zhejiang University, Author of “Unlock the New Cipher, From Blockchain to Crypto”.
Dixon Wong: Product Owner - Dixon Wong is Product Manager in Digital Banking, Former Marketer and Analytics Consultant, Ex TEDx Organiser.
Beli Hong: Operational Director - Beli Hong is Co-founder of Fiat Capital, Ex-chairman of Zhejiang University Blockchain Association, Operational Director of DeepThinker Capital.
Michelle Tsing: Community Director - Michelle Tsing is Managing Partner at Cognito Capital, Co-founder of Governance Research Institute (e-governance), Host at Laptop Radio.
Charlie Hu: Head Advisor - Charlie Hu is Cofounder of PolkaBase, Partner at CarbonBlue Ventures, Polkadot Ecosystem and Web 3.0 Maestro.
March Zheng: Global Communications Director - March Zheng is General Partner at Bizantine Capital, Born and raised in America, Studied at Emory and Washington and Lee.
Julia Su: Strategic Advisor - Julia Su is Co-founder of Digitalweek.online, Co-founder and CEO of ECIDE - Eurasian Center of Innovation and Digital Economy.
Momo Xu: Marketing Advisor - Momo Xu is Former Administrative Assistant at Google, Top-leader at Nuskin Global Asian market department, Asian market Director of new media operations at Sephora, BD Director at BIKI, Partner at Snapfigers.
With the guidance of a team with many years experienced, coming from large projects as well as investment from funds, along with the solution that Standard Protocol brings, Standard Protocol is certainly a project that cannot be missed.