WENWEN: Algorithmic Stablecoin Protocol
Since Ethereum was launched, the market realized that the permissionless and decenterize property made blockchain a best way for asset management and investment, thus a large bunch of on-Chain financial tools and DAOs have merged, and the most important one of them is pegging protocol. There are two major category implementation of pegging, collateral based (such as DAI and USDT) and algorithm based (BASIS, etc.), And implementation is a hybird of them. On the algorithm pegging layer, we used classic value migration method based on market force, and to achieve Distributed Nash Equilibrium. We introduced a collateral vault, which is implied as a leadship of the game processing.
WENWEN seeks to be the first stablecoin protocol to implement two design principles, namely the creation of a highly scalable, trust-free, extremely stable, ideologically pure on-chain currency. the WENWEN protocol is a dual token system consisting of multiple stable WENWEN tokens (USDN,JPYN,EURN ….) and a governance token, WENWEN Share (SHAREN). The protocol also has a contract pool of collateral, and the pool can be added or removed by governance.
While there is no predetermined timeframe for the rate of collateral changes, we believe that as USDN usage increases, users will prefer to see a higher percentage of the USDN supply stabilized algorithmically rather than through collateral. The collateral ratio refresh function in the protocol can be called by any user once per hour. If the price of USDN is above or below $1, this function allows to change the collateral ratio by 0.25% each time. The function lowers the collateral rate once when the USDN price is above $1, and raises the collateral rate once when the USDN is below $1. Both the refresh rate and adjustment rate parameters can be adjusted through governance. With future protocol updates, they can even be dynamically adjusted using the PID controller design.USDN, SHAREN, and collateral prices are all calculated based on a time-weighted average of Uniswap pair prices and Chainlink oracle prophecy machine prices for USD.
The Chainlink oracle makes it possible for the protocol to obtain the true price of USDN rather than the average price of the stable pool on Uniswap. This allows USDN to remain stable relative to the USD itself, which will provide greater flexibility than just using the weighted average of the existing stable coins.
Stablecoins can be minted as long as the appropriate collateral is placed in the system. In the initial state, WENWEN is 100% collateralized, meaning that only collateral needs to be placed in the minting contract for the stablecoin to be minted. In the hybrid phase, the creation of WENWEN requires setting the appropriate collateral ratio. While the protocol is designed to accept any type of cryptocurrency as collateral, the implementation of the WENWEN protocol will primarily accept on-chain stablecoins as collateral to eliminate the volatility of collateral and thus allow WENWEN to transition to more algorithmic ratios smoothly. As the speed of the system increases, it will become easier and safer to incorporate volatile cryptocurrencies (such as ETH and WBTC) into future governance pools.
