IRON

What is a Stablecoin? A Stablecoin is a digital asset pegged to a traditionally stable fiat currency like the US Dollar. The use of stablecoins in Decentralized Finance (DeFi) is considered a cornerstone for smart investing. Stablecoins provide an excellent way to hedge during times of market instability. Stablecoins are also used as a safer and consistent valued token in trading pairs when added to Liquidity Pools. The primary use of stablecoins is centered around its stability and predictability in a traditionally volatile crypto coin market. It offers DeFi users, especially traders, a hedge against volatility and provide stability when farming token pairs.

There are a few methods of issuing a stablecoin that can maintain a consistent market value peg. Some Stablecoins are entirely Fiat backed(USDC), others are crypto-collateralized(DAI), there are also some algorithmically stabilized(Basis, ESD, DSD). The issue with Fiat-backed stablecoins is that they are not 100% decentralized(USDC) and crypto-collateralized stablecoins(DAI) have issues with over-collateralization. The purely algorithmic stablecoin protocols (Basis, ESD, DSD) provide a very noble solution to maintain the consistency of stablecoins with out any Fiat backed assets. The issue with these purely algorithmically backed stablecoin protocols is their tendency to overreact during a big but quick correction in the market. This results in many of these algo-stablecoins ending up in a dead zone and struggle to return to their peg. The answer lies in utilizing a bit of each approach to creating a true decentralized stablecoin.

Inspired by FRAX, a unique fractionally-algorithmic stablecoin on the Ethereum network, and utilizing a similar approach, we have created IRON, the first partially-collateralized stablecoin on Binance Smart Chain.

The IRON protocol makes use of 2 tokens to achieve it's goal: STEEL and IRON.

STEEL – The share token of the Iron finance protocol. Serves as part of the collateral behind IRON. Backed by seigniorage revenue as well as the value of any excess collateral .

IRON – A stablecoin pegged to $1. Partially backed by a continuously adjusting ratio of collateral equal to $1 in value.

In the beginning IRON will be collateralized in part by a centralized stablecoin (BUSD, USDT) and part STEEL, the protocol token driven algorithmically by the market principals of supply and demand. The Collateral Ratio (CR) is the ratio of tokens required for collateralization of IRON. The market price of IRON and STEEL are provided to the protocol by the built in Oracle.

New IRON can be minted by depositing a predetermined ratio of our system token STEEL and another token (For now BUSD is used by the protocol for its consistency and in these early days of the protocol, to help IRON establish its $1 peg. Governance voting can be used to change these tokens in the future). So for example a combination of BUSD + STEEL will be needed to MINT a new IRON. This IRON will require exactly $1 in value(Oracle) worth of token combinations regardless of the 'market price' of IRON at that time. When a new IRON is minted the portion of that combination that is STEEL is 'burnt' during the process, removing it from circulation, decreasing the total supply, and increasing STEEL's value.

If the market price of IRON(data provided by the Oracle) is above $1.00, the protocol adjusts the ratio required to Mint IRON. Regulated by the protocol, the Target Collateral Ratio(TCR) is adjusted down by 0.25% per hour (max 6% a day). More STEEL and less BUSD is need to mint IRON.

If the market price of IRON(data provided by the Oracle) is less than $1.00, then the protocol increases the Target Collateral Ratio(TCR) by 0.25% per hour (max 6% per day). Now minting the same IRON requires more BUSD and less STEEL.

Part of STEEL's value comes from its use when minting new IRON. STEEL holders also receive a continuous revenue stream when staked in the foundry. Part of the excess collateral, the revenue generated from the 0.2% minting fee and 0.3% redeeming fee are returned as a reward, paid out in BUSD, contributing to the value of STEEL in circulation.

This entire process is reversed when redeeming IRON. Though this time ECR( Effective Collateral Ratio) is used to calculate the ratio of tokens returned during the 'REDEEM' process. This entire process will give IRON the tools it needs to maintain a peg of $1 while also being a fully decentralized stablecoin.