Collateral

Collateral listing and risk assessment are handled by the DAO. Detailed methodologies for asset ratings and risk parameters will be added.

USDPro is collateralized by 3 types of assets: base assets (ETH, wBTC, stETH, etc.), LP tokens and stablecoins.

There are several main metrics used to evaluate assets in the collateral for the StableUnit protocol

1. Contract risk - 0 to 1: How unlikely the asset/project can be compromised. based on a) the amount and quality of audits, b) how long the project existed.

2. Liquidity - 0 to 1: Based on the a) amount of locked liquidity in DeFi, b) average daily trading volume for the previous semester.

3. Volatility - 0 to 1: based on the maximum daily price changes over the previous 3 months.

All collaterals have a debt ceiling in the protocol. LP tokens and less liquid assets (other than ETH, wBTC & stETH) have a standard risk parameter with the maximum initial collateralization ratio (Coll. Ratio) and a higher liquidation threshold.

In addition to that, these assets have a max collateral price which is the price above which it is not possible to originate debt. For example, if a token is suddenly trading a hundred times higher than the regular price, it’s not possible to borrow a hundred times more USDPro. This limit is set as an additional safeguard against market price manipulation, such as the Moola attack.

Due to its async liquidation system, the protocol accepts whitelisted stablecoins such as USDC. But, there is a ceiling related to the amount of stablecoins the protocol can hold to mitigate censorship risks.

However, StableUnit mainly targets highly liquid assets such as ETH, wBTC, stETH, eETH and LPs from the biggest yield optimizers in the industry such as Pendle, Convex, Aura and Tokemak.

Besides these parameters, a DAO vote is needed to add new assets or to change the risk assessment parameters used by the core team.

Please refer to Risk and mitigation chapter of this documentation for more details.