@taktikorg/nisi-reprehenderit-amet v1.0.10

Zero: Decentralized Borrowing Protocol

Zero is a decentralized protocol based on Liquity that allows RBTC holders to obtain maximum liquidity against their collateral without paying interest. After locking up RBTC as collateral in a smart contract and creating an individual position called a "Line of Credit" aka "Trove", the user can get instant liquidity by minting ZUSD, a USD-pegged stablecoin. Each Line of Credit is required to be collateralized at a minimum collateral ratio of 110%. Any owner of ZUSD can redeem their stablecoins for the underlying collateral at any time. The redemption mechanism and algorithmically adjusted fees guarantee a minimum stablecoin value of 1 USD.

An unprecedented liquidation mechanism based on incentivized stability pool deposits and a redistribution cycle from riskier to safer Lines of Credit provides stability at a much lower collateral ratio than current systems. Stability is maintained via economically-driven user interactions and arbitrage rather than by active governance or monetary interventions.

More information

Visit the Sovryn website to find out more and join the discussion.

Zero System Summary

• Zero: Decentralized Borrowing Protocol
  • More information
  • Zero System Summary
  • Zero Overview
  • Liquidation and the Stability Pool
    • Liquidation gas costs
    • Liquidation Logic
      • Liquidations in Normal Mode: TCR >= 150%
      • Liquidations in Recovery Mode: TCR \< 150%
  • Gains From Liquidations
  • ZUSD Redemption
    • Partial redemption
    • Full redemption
    • Redemptions create a price floor
  • Recovery Mode
  • Project Structure
    • Directories
    • Branches
  • Core System Architecture
    • Core Smart Contracts
    • Data and Value Silo Contracts
    • Contract Interfaces
    • PriceFeed and Oracle
    • PriceFeed Logic
    • Testnet PriceFeed and PriceFeed tests
    • PriceFeed limitations and known issues
    • Keeping a sorted list of Lines of Credit ordered by ICR
    • Flow of RBTC in Zero
    • Flow of ZUSD tokens in Zero
  • Expected User Behaviors
  • Contract Ownership and Function Permissions
  • Deployment to a Development Blockchain
  • Running Tests
    • Brownie Tests
    • RSK Regtest node
  • System Quantities - Units and Representation
    • Integer representations of decimals
  • Public Data
  • Public User-Facing Functions
    • Borrower (Trove) Operations - BorrowerOperations.sol
    • Line of Credit Manager Functions - TroveManager.sol
    • Hint Helper Functions - HintHelpers.sol
    • Stability Pool Functions - StabilityPool.sol
    • ZUSD token ZUSDToken.sol
  • Supplying Hints to Line of Credit operations
    • Example Borrower Operations with Hints
      • Opening a Line of Credit
      • Adjusting a Line of Credit
    • Hints for redeemCollateral
      • First redemption hint
      • Partial redemption hints
      • Example Redemption with hints
  • Gas compensation
    • Gas compensation schedule
    • Liquidation
    • Gas compensation and redemptions
    • Gas compensation helper functions
  • The Stability Pool
    • Mixed liquidations: offset and redistribution
    • Stability Pool deposit losses and RBTC gains - implementation
    • Stability Pool example
    • Stability Pool implementation
    • How deposits and RBTC gains are tracked
  • Zero System Fees
    • Redemption Fee
    • Borrowing fee
    • Fee Schedule
    • Intuition behind fees
    • Fee decay Implementation
    • Staking SOV and earning fees
  • Redistributions and Corrected Stakes
    • Corrected Stake Solution
  • Math Proofs
  • Definitions
  • Development
    • Prerequisites
      • Making node-gyp work
    • Clone \& Install
    • Top-level scripts
      • Run all tests
      • Deploy contracts to a testnet
      • Start a local blockchain and deploy the contracts
      • Start dev-frontend in development mode
      • Start dev-frontend in demo mode
      • Build dev-frontend for production
    • Configuring your custom frontend
  • Running a frontend with Docker
    • Prerequisites
    • Running with docker
    • Configuring a public frontend
      • INFURA_API_KEY
    • Next steps for hosting a frontend
      • Example 1: using static website hosting
      • Example 2: wrapping the frontend container in HTTPS
  • Disclaimer

Zero Overview

Zero is a collateralized debt platform. Users can lock up collateral (RBTC), issue stablecoins (ZUSD) to their own RSK address, and subsequently transfer those stablecoins to any other RSK address. The individual collateralized debt positions are called Lines of Credit (aka Troves).

The stablecoins are economically geared towards maintaining a value of 1 ZUSD = 1 USD, due to the following properties:

1. The system is always designed to be over-collateralized - the dollar value of the locked RBTC exceeds the dollar value of the issued ZUSD

2. The stablecoins are fully redeemable - users can always swap $x worth of ZUSD for $x worth of RBTC (minus fees) directly with the system.

3. The system algorithmically controls the generation of ZUSD through a variable borrowing fee.

After opening a Line of Credit with some RBTC, users may issue ("borrow") tokens such that the collateral ratio of their Line of Credit remains above 110% e.g. a user with $1000 worth of RBTC in a Line of Credit can issue up to 909.09 ZUSD.

ZUSD is freely transferable - anyone with an RSK address can send or receive ZUSD tokens, whether they have an open Line of Credit or not. The ZUSD are burned upon repayment of a Line of Credit's debt.

The Zero system regularly updates the RBTC:USD price via a decentralized data feed. When a Line of Credit falls below a minimum collateralization ratio (MCR) of 110%, it is considered under-collateralized and is vulnerable to liquidation.

Liquidation and the Stability Pool

Zero utilizes a two-step liquidation mechanism in the following order of priority:

1. Offset under-collateralized lines of credit against the Stability Pool containing ZUSD tokens

2. Redistribute under-collateralized lines of credit to other borrowers if the Stability Pool is emptied

Zero primarily uses the ZUSD tokens in its Stability Pool to absorb the under-collateralized debt i.e. to repay the liquidated borrower's liability.

Any user may deposit ZUSD tokens to the Stability Pool. This allows them to earn the collateral from the liquidated Line of Credit. When a liquidation occurs, the liquidated debt is canceled with the same amount of ZUSD in the Stability Pool (which is burned as a result). The liquidated RBTC is then proportionally distributed to Stability Pool depositors.

Stability Pool depositors can expect to earn net gains from liquidations. In most cases, the value of the liquidated RBTC will be greater than the value of the canceled debt (since a liquidated Line of Credit will likely have an individiual collateralization ratio ICR just slightly below 110%).

Suppose the liquidated debt is higher than the amount of ZUSD in the Stability Pool. In that case, the system tries to cancel as much debt as possible with the ZUSD from the Stability Pool. Then, the system redistributes the remaining liquidated collateral and debt across all active Lines of Credit.

Anyone may call the public liquidateTroves() function, which will check for under-collateralized Lines of Credit and liquidate them. Alternatively, they can call batchLiquidateTroves() with a custom list of Line of Credit addresses to attempt to liquidate.

Liquidation gas costs

Currently, mass liquidations performed via the above functions cost 60-65k gas per Line of Credit. Thus the system can liquidate up to a maximum of 95-105 Lines of Credit in a single transaction.

Liquidation Logic

The precise behavior of liquidations depends on the ICR of the Line of Credit being liquidated and global system conditions: the total collateralization ratio (TCR) of the system, the size of the Stability Pool, etc.

Here is the liquidation logic for a single Line of Credit in Normal Mode and Recovery Mode. SP.ZUSD represents the ZUSD in the Stability Pool.

Liquidations in Normal Mode: TCR >= 150%

Liquidations in Recovery Mode: TCR < 150%

Gains From Liquidations

Stability Pool depositors gain RBTC over time, as liquidated debt is canceled with their deposit. When they withdraw all or part of their deposited tokens or top up their deposit, the system sends them their accumulated RBTC gains.

Similarly, a Line of Credit's accumulated gains from liquidations are automatically applied to the Line of Credit when the owner performs any operation e.g. adding/withdrawing collateral or borrowing/repaying ZUSD.

ZUSD Redemption

Any ZUSD holder (whether or not they have an active Line of Credit) may redeem their ZUSD directly with the system. Their ZUSD is exchanged for RBTC, at face value: redeeming x ZUSD tokens returns $x worth of RBTC (minus a redemption fee).

When ZUSD is redeemed for RBTC, the system cancels the ZUSD with debt from a Line of Credit, and the RBTC is drawn from the Line of Credit's collateral.

To fulfill the redemption request, Lines of Credit are redeemed in ascending order of their collateralization ratio.

A redemption sequence of n steps will fully redeem from up to n-1 Line of Credit, and partially redeems from up to 1 Line of Credit, which is always the last Line of Credit in the redemption sequence.

Redemptions are blocked when TCR < 110% (there is no need to restrict ICR < TCR). At that point, TCR redemptions would likely be unprofitable, as ZUSD is probably trading above $1 if the system has crashed that badly, but it could be a way for an attacker with a lot of ZUSD to lower the TCR even further.

Note that redemptions are disabled during the first 14 days of operation since the deployment of the Zero protocol to protect the monetary system in its infancy.

Partial redemption

Most redemption transactions will include a partial redemption since the amount redeemed is unlikely to perfectly match the total debt of a series of Lines of Credit.

The partially redeemed Line of Credit is re-inserted into the sorted list of Lines of Credit and remains active, with reduced collateral and debt.

Full redemption

A Line of Credit is defined as "fully redeemed from" when the redemption has caused (debt-20) of its debt to absorb (debt-20) ZUSD. Then, its 20 ZUSD Liquidation Reserve is canceled with its remaining 20 debt: the Liquidation Reserve is burned from the gas address, and the 20 debt is zeroed.

Before closing, we must handle the Line of Credit collateral surplus: that is, the excess RBTC collateral remaining after redemption due to its initial over-collateralization.

This collateral surplus is sent to the CollSurplusPool, and the borrower can reclaim it later. The Line of Credit is then fully closed.

Redemptions create a price floor

Economically, the redemption mechanism creates a hard price floor for ZUSD, ensuring that the market price of ZUSD stays at or near 1 USD.

Recovery Mode

Recovery Mode kicks in when the system's total collateralization ratio (TCR) falls below 150%.

During Recovery Mode, liquidation conditions are relaxed, and the system blocks borrower transactions that would further decrease the TCR. New ZUSD may only be issued by adjusting existing Lines of Credit to improve their ICR or by opening a new Line of Credit with an ICR of >=150%. In general, if an existing Line of Credit's adjustment reduces its ICR, the transaction is only executed if the resulting TCR is above 150%

Recovery Mode is structured to incentivize borrowers to behave in ways that promptly raise the TCR back above 150%, and to incentivize ZUSD holders to replenish the Stability Pool.

Economically, Recovery Mode is designed to encourage collateral top-ups and debt repayments. It also acts as a self-negating deterrent: the possibility of it occurring actually guides the system away from ever reaching it.

Project Structure

Directories

• packages/dev-frontend/ - Zero Beta: a fully functional React app used for interfacing with the smart contracts during development
• packages/fuzzer/ - A very simple, purpose-built tool based on Zero middleware for randomly interacting with the system
• packages/lib-base/ - Common interfaces and classes shared by the other lib- packages
• packages/lib-ethers/ - ethers-based middleware that can read Zero state and send transactions
• packages/lib-react/ - Components and hooks that React-based apps can use to view Zero contract state
• packages/providers/ - Subclassed Ethers providers used by the frontend
• packages/contracts/ - The backend development folder that contains the Hardhat project, contracts, and tests
• packages/contracts/contracts/ - The core back end smart contracts written in Solidity
• packages/contracts/test/ - JS test suite for the system. Tests run in Mocha/Chai
• packages/contracts/tests/ - Python test suite for the system. Tests run in Brownie
• packages/contracts/gasTest/ - Non-assertive tests that return gas costs for Zero operations under various scenarios
• packages/contracts/fuzzTests/ - Echidna tests, and naive "random operation" tests
• packages/contracts/migrations/ - contains the Hardhat script for deploying the smart contracts to the blockchain
• packages/contracts/utils/ - external Hardhat and node scripts - deployment helpers, gas calculators, etc
• packages/contracts/mathProofs/ - core mathematical proofs of Zero properties, and a derivation of the scalable Stability Pool staking formula

Backend development is done in the Hardhat framework and allows Zero to be deployed on the Hardhat EVM network for fast compilation and test execution.

Branches

As of 2021-01-18, the current working branch is main. The master branch is out of date.

Core System Architecture

The core Zero system consists of several smart contracts, which are deployable to the RSK blockchain.

All application logic and data are contained in these contracts - there is no need for a separate database or backend logic running on a web server. In effect, the RSK network is itself the Zero backend. As such, all balances and contract data are public.

Contract ownership is granted to the TimelockOwner contract so that Sovryn's governance system can update the logic of the Zero contracts.

The three main contracts - BorrowerOperations.sol, TroveManager.sol and StabilityPool.sol - hold the user-facing public functions, and contain most of the internal system logic. Together they control Line of Credit state updates and movements of RBTC and ZUSD tokens around the system.

Core Smart Contracts

BorrowerOperations.sol - contains the basic operations by which borrowers interact with their Line of Credit: Line of Credit creation, RBTC top-up/withdrawal, stablecoin issuance, and repayment. It also sends borrowing fees to the sovFeeCollector. BorrowerOperations functions call into the Line of Credit Manager, telling it to update the Line of Credit state, where necessary. BorrowerOperations functions also call into the various Pools, telling them to move RBTC/Tokens between Pools or between Pool <> user, where necessary.

TroveManager.sol - contains functionality for liquidations and redemptions. It sends redemption fees to the sovFeeCollector. It also contains the state of each Line of Credit i.e. a record of the Line of Credit’s collateral and debt. The TroveManager does not hold value (i.e. RBTC / other tokens). TroveManager functions call into the various Pools to tell them to move RBTC/tokens between Pools, where necessary.

LiquityBase.sol - Both TroveManager and BorrowerOperations inherit from the parent contract LiquityBase, which contains global constants and some common functions.

StabilityPool.sol - contains functionality for Stability Pool operations: making deposits and withdrawing compounded deposits and accumulated RBTC gains. Holds the ZUSD Stability Pool deposits, and the RBTC gains from liquidations, for depositors.

ZUSDToken.sol - the stablecoin token contract, which implements the ERC20 fungible token standard in conjunction with EIP-2612 and a mechanism that blocks (accidental) transfers to addresses like the StabilityPool and address(0) that are not supposed to receive funds through direct transfers. The contract mints, burns, and transfers ZUSD tokens.

SortedTroves.sol - a doubly-linked list that stores addresses of the Line of Credit owners, sorted by their individual collateralization ratio (ICR). It inserts and re-inserts Lines of Credit at the correct position, based on their ICR.

PriceFeed.sol - Contains functionality for obtaining the current RBTC:USD price, which the system uses for calculating collateralization ratios.

HintHelpers.sol - Helper contract, containing the read-only functionality for calculating accurate hints to be supplied to borrower operations and redemptions.

Data and Value Silo Contracts

Along with StabilityPool.sol, these contracts hold RBTC and/or tokens for their respective parts of the system and contain minimal logic:

ActivePool.sol - holds the total RBTC balance and records the total stablecoin debt of the active Lines of Credit.

DefaultPool.sol - holds the total RBTC balance and records the total stablecoin debt of the liquidated Lines of Credit that are pending redistribution to the active Lines of Credit. If a Line of Credit has pending RBTC/debt “rewards” in the DefaultPool, they will be applied to the Line of Credit when it next undergoes a borrower operation, a redemption, or a liquidation.

CollSurplusPool.sol - holds the RBTC surplus from Lines of Credit that have been fully redeemed from as well as from Lines of Credit with an ICR > MCR that were liquidated in Recovery Mode. Sends the surplus back to the owning borrower when told by BorrowerOperations.sol.

GasPool.sol - holds the total ZUSD liquidation reserves. ZUSD is moved into the GasPool when a Line of Credit is opened, and moved out when a Line of Credit is liquidated or closed.

Contract Interfaces

ITroveManager.sol, IPool.sol etc. These provide a specification for a contract’s functions without implementation. They are similar to interfaces in Java or C#.

PriceFeed and Oracle

Zero functions that require the most current RBTC:USD price data fetch the price dynamically, as needed, via the core PriceFeed.sol contract using the MoC Medianizer RBTC:USD reference contract as its primary and RSK's RBTC:USD price feed as its secondary (fallback) data source. PriceFeed is stateful i.e. it records the last good price that may come from either of the two sources based on the contract's current state.

The current PriceFeed.sol contract has an external fetchPrice() function that is called by core Zero functions which require a current RBTC:USD price. fetchPrice() calls each oracle's proxy, asserts on the responses, and converts returned prices to 18 digits.

PriceFeed Logic

The PriceFeed contract uses the main price feed and fallback to the backup one in case of an error. If both fail, return the last good price seen.

Testnet PriceFeed and PriceFeed tests

The PriceFeedTestnet.sol is a mock PriceFeed for testnet and general back-end testing purposes, with no oracle connection. It contains a manual price setter, setPrice(), and a getter, getPrice(), which returns the latest stored price.

The mainnet PriceFeed is tested in test/PriceFeedTest.js, using ExternalPriceFeedTester contract as mocks for primary and secondary price feeds.

PriceFeed limitations and known issues

The purpose of the PriceFeed is to have some resilience in case of MoC Medianizer failure/timeout and the chance of recovery.

The PriceFeed logic consists of automatic on-chain decision-making for obtaining fallback price data from RSK Oracle and, if possible, returning to MoC Medianizer if/when it recovers.

Keeping a sorted list of Lines of Credit ordered by ICR

Zero relies on a particular data structure: a sorted doubly-linked list of lines of credit that remains ordered by individual collateralization ratio (ICR) i.e. the amount of collateral (in USD) divided by the amount of debt (in ZUSD).

This ordered list is critical for gas-efficient redemption sequences and the liquidateTroves sequence, both of which target Lines of Credit in ascending order of ICR.

The sorted doubly-linked list is found in SortedTroves.sol.

Nodes map to active Lines of Credit in the system - the ID property is the address of a Line of Credit owner. The list accepts positional hints for efficient O(1) insertion - please see the hints section for more details.

ICRs are computed dynamically at runtime and not stored on the node. This is because ICRs of active Lines of Credit change dynamically, when:

• The RBTC:USD price varies, altering the USD value of the collateral of every Line of Credit
• A liquidation that redistributes collateral and debt to active Lines of Credit occurs

The list relies on the fact that a collateral and debt redistribution due to a liquidation preserves the ordering of all active lines of credit (though it does decrease the ICR of each active Line of Credit above the MCR).

The fact that ordering is maintained as redistributions occur is not immediately obvious: please see the mathematical proof which shows that this holds in Zero.

A node inserted based on current ICR will maintain the correct position relative to its peers as liquidation gains accumulate, as long as its raw collateral and debt balances have not changed.

Nodes also remain sorted as the RBTC:USD price varies, since price fluctuations change the collateral value of each Line of Credit by the same proportion.

Thus, nodes need only be re-inserted to the sorted list upon a Line of Credit operation - when the owner adds/removes collateral or debt to/from their Line of Credit.

Flow of RBTC in Zero

RBTC in the system lives in three Pools: the ActivePool, the DefaultPool, and the StabilityPool. When an operation is made, RBTC is transferred in one of three ways:

• From a user to a Pool
• From a Pool to a user
• From one Pool to another Pool

RBTC is recorded on an individual level, but stored in aggregate in a Pool. An active Line of Credit with collateral and debt has a struct in the Line of Credit Manager that stores its RBTC collateral value in a uint, but its actual RBTC is in the balance of the ActivePool contract.

Likewise, the StabilityPool holds the total accumulated RBTC gains from liquidations for all depositors.

Borrower Operations

Trove Manager

Stability Pool

Flow of ZUSD tokens in Zero

When a user borrows from their Line of Credit, ZUSD tokens are minted to their own address, and a debt is recorded on the Line of Credit. Conversely, when they repay their Line of Credit’s ZUSD debt, ZUSD is burned from their address, and the debt on their Line of Credit is reduced.

Redemptions burn ZUSD from the redeemer’s balance, and reduce the debt of the Line of Credit redeemed against.

Liquidations that involve a Stability Pool offset burn ZUSD from the Stability Pool’s balance, and reduce the ZUSD debt of the liquidated Line of Credit.

The only time ZUSD is transferred to/from a Zero contract, is when a user deposits ZUSD to, or withdraws ZUSD from, the StabilityPool.

Borrower Operations

Trove Manager

Stability Pool

Expected User Behaviors

Generally, borrowers call functions that trigger Line of Credit operations on their own Line of Credit. Stability Pool users (who may or may not also be borrowers) call functions that trigger Stability Pool operations, such as depositing or withdrawing tokens to/from the Stability Pool.

Anyone may call the public liquidation functions, and attempt to liquidate one or several Lines of Credit.

ZUSD token holders may also redeem their tokens, and swap an amount of tokens 1-for-1 in value (minus fees) with RBTC.

SOV holders may stake their SOV, to earn a share of the system fee revenue, in RBTC and ZUSD.

Contract Ownership and Function Permissions

All the core smart contracts inherit from the OpenZeppelin Ownable.sol contract template. As such all contracts have a single owning address, which is the deploying address. The contract's ownership is transferred to Sovryn's governance system thorough it's TimelockOwner contract.

Several public and external functions have modifiers such as requireCallerIsTroveManager, requireCallerIsActivePool, etc - ensuring they can only be called by the respective permitted contract.

Deployment to a Development Blockchain

The Hardhat migrations script and deployment helpers in utils/deploymentHelpers.js deploy all contracts, and connect all contracts to their dependency contracts, by setting the necessary deployed addresses.

The project is deployed on the RSK testnet.

Running Tests

Run all tests with npx hardhat test, or run a specific test with npx hardhat test ./test/contractTest.js

Tests are run against the Hardhat EVM.

Brownie Tests

⚠ These tests are not working and might not be supported due to the fact they require some accounts to be preloaded in a specific way and rskj does not support it out of the box. This tests exercise the system in a way that's already covered by the JS tests.

There are some special tests that are using Brownie framework.

To test, install brownie with:

python3 -m pip install --user pipx
python3 -m pipx ensurepath

pipx install eth-brownie

and add numpy with:

pipx inject eth-brownie numpy

Add OpenZeppelin package:

brownie pm install OpenZeppelin/openzeppelin-contracts@3.3.0

Run, from packages/contracts/:

brownie test -s

RSK Regtest node

Add the local node as a live network at ~/.brownie/network-config.yaml:

(...)
      - name: Local RSK
        chainid: 31
        id: rsk-testnet
        host: http://localhost:4444

Make sure state is cleaned up first:

rm -Rf build/deployments/*

Start RSK node from this repo’s root with:

yarn start-dev-chain:rsk

Then, again from packages/contracts/, run it with:

brownie test -s --network rsk-testnet

To stop the RSK node, you can do it with:

yarn stop-dev-chain

System Quantities - Units and Representation

Integer representations of decimals

Several ratios and the RBTC:USD price are integer representations of decimals, to 18 digits of precision. For example:

etc.

Public Data

All data structures with the ‘public’ visibility specifier are ‘gettable’, with getters automatically generated by the compiler. Simply call TroveManager::MCR() to get the MCR, etc.

Public User-Facing Functions

Borrower (Trove) Operations - BorrowerOperations.sol

openTrove(uint _maxFeePercentage, uint _ZUSDAmount, address _upperHint, address _lowerHint): payable function that creates a Line of Credit for the caller with the requested debt, and the RBTC received as collateral. Successful execution is conditional mainly on the resulting collateralization ratio which must exceed the minimum (110% in Normal Mode, 150% in Recovery Mode). In addition to the requested debt, extra debt is issued to pay the issuance fee, and cover the gas compensation. The borrower has to provide a _maxFeePercentage that he/she is willing to accept in case of a fee slippage, i.e. when a redemption transaction is processed first, driving up the issuance fee.

addColl(address _upperHint, address _lowerHint)): payable function that adds the received RBTC to the caller's active Line of Credit.

withdrawColl(uint _amount, address _upperHint, address _lowerHint): withdraws _amount of collateral from the caller’s Line of Credit. Executes only if the user has an active Line of Credit, the withdrawal would not pull the user’s Line of Credit below the minimum collateralization ratio, and the resulting total collateralization ratio of the system is above 150%.

function withdrawZUSD(uint _maxFeePercentage, uint _ZUSDAmount, address _upperHint, address _lowerHint): issues _amount of ZUSD from the caller’s Line of Credit to the caller. Executes only if the Line of Credit's collateralization ratio would remain above the minimum, and the resulting total collateralization ratio is above 150%. The borrower has to provide a _maxFeePercentage that they are willing to accept in case of a fee slippage i.e. when a redemption transaction is processed first, driving up the borrowing fee.

repayZUSD(uint _amount, address _upperHint, address _lowerHint): repay _amount of ZUSD to the caller’s Line of Credit, subject to leaving 20 ZUSD debt in the Line of Credit (which corresponds to the 20 ZUSD gas compensation).

_adjustTrove(address _borrower, uint _collWithdrawal, uint _debtChange, bool _isDebtIncrease, address _upperHint, address _lowerHint, uint _maxFeePercentage): enables a borrower to simultaneously change both their collateral and debt, subject to all the restrictions that apply to individual increases/decreases of each quantity with the following particularity: if the adjustment reduces the collateralization ratio of the Line of Credit, the function only executes if the resulting total collateralization ratio is above 150%. The borrower has to provide a _maxFeePercentage that they are willing to accept in case of a fee slippage i.e. when a redemption transaction is processed first, driving up the borrowing fee. The parameter is ignored if the debt is not increased with the transaction.

closeTrove(): allows a borrower to repay all debt, withdraw all their collateral, and close their Line of Credit. Requires the borrower to have a ZUSD balance sufficient to repay their Line of Credit's debt, excluding gas compensation - i.e. (debt - 20) ZUSD.

claimCollateral(address _user): when a borrower’s Line of Credit has been fully redeemed from and closed, or liquidated in Recovery Mode with a collateralization ratio above 110%, this function allows the borrower to claim their RBTC collateral surplus that remains in the system (collateral - debt upon redemption; collateral - 110% of the debt upon liquidation).

Line of Credit Manager Functions - TroveManager.sol

liquidate(address _borrower): callable by anyone, attempts to liquidate the Line of Credit of _user. Executes successfully if _user’s Line of Credit meets the conditions for liquidation (e.g. in Normal Mode, it liquidates if the Line of Credit's ICR < the system Critical Collateral Ratio CCR).

liquidateTroves(uint n): callable by anyone, checks for under-collateralized Lines of Credit below MCR and liquidates up to n, starting from the Line of Credit with the lowest collateralization ratio; subject to gas constraints and the actual number of under-collateralized Lines of Credit. The gas costs of liquidateTroves(uint n) mainly depend on the number of Lines of Credit that are liquidated, and whether the Lines of Credit are offset against the Stability Pool or redistributed. For n=1, the gas costs per liquidated Line of Credit are roughly between 215K-400K, for n=5 between 80K-115K, for n=10 between 70K-82K, and for n=50 between 60K-65K.

batchLiquidateTroves(address[] calldata _troveArray): callable by anyone, accepts a custom list of Line of Credit addresses as an argument. Steps through the provided list and attempts to liquidate every Line of Credit, until it reaches the end or it runs out of gas. A Line of Credit is liquidated only if it meets the conditions for liquidation. For a batch of 10 Lines of Credit, the gas costs per liquidated Line of Credit are roughly between 75K-83K, for a batch of 50 Lines of Credit between 54K-69K.

redeemCollateral(uint _ZUSDAmount, address _firstRedemptionHint, address _upperPartialRedemptionHint, address _lowerPartialRedemptionHint, uint _partialRedemptionHintNICR, uint _maxIterations, uint _maxFeePercentage): redeems _ZUSDamount of ZUSD for RBTC from the system. Decreases the caller’s ZUSD balance, and sends them the corresponding amount of RBTC. Executes successfully if the caller has sufficient ZUSD to redeem. The number of Lines of Credit redeemed from is capped by _maxIterations. The borrower has to provide a _maxFeePercentage that he/she is willing to accept in case of a fee slippage i.e. when another redemption transaction is processed first, driving up the redemption fee.

getCurrentICR(address _user, uint _price): computes the user’s individual collateralization ratio (ICR) based on their total collateral and total ZUSD debt. Returns 2^256 -1 if they have 0 debt.

getTroveOwnersCount(): get the number of active lines of credit in the system.

getPendingRBTCReward(address _borrower): get the pending RBTC reward from liquidation redistribution events, for the given Line of Credit .

getPendingZUSDDebtReward(address _borrower): get the pending Line of Credit debt "reward" (i.e. the amount of extra debt assigned to the Line of Credit) from liquidation redistribution events.

getEntireDebtAndColl(address _borrower): returns a Line of Credit’s entire debt and collateral balance, which respectively include any pending debt rewards and RBTC rewards from prior redistributions.

getEntireSystemColl(): Returns the systemic entire collateral allocated to Lines of Credit i.e. the sum of the RBTC in the Active Pool and the Default Pool.

getEntireSystemDebt() Returns the systemic entire debt assigned to Lines of Credit i.e. the sum of the ZUSDDebt in the Active Pool and the Default Pool.

getTCR(): returns the total collateralization ratio (TCR) of the system. The TCR is based on the the entire system debt and collateral (including pending rewards).

checkRecoveryMode(): reveals whether or not the system is in Recovery Mode (i.e. whether the Total Collateralization Ratio (TCR) is below the Critical Collateralization Ratio (CCR)).

Hint Helper Functions - HintHelpers.sol

function getApproxHint(uint _CR, uint _numTrials, uint _inputRandomSeed): helper function, returns a positional hint for the sorted list. Used for transactions that must efficiently re-insert a Line of Credit to the sorted list.

getRedemptionHints(uint _ZUSDamount, uint _price, uint _maxIterations): helper function specifically for redemptions. Returns three hints:

• firstRedemptionHint is a positional hint for the first redeemable Line of Credit (i.e. Line of Credit with the lowest ICR >= MCR).
• partialRedemptionHintNICR is the final nominal ICR of the last Line of Credit after being hit by partial redemption, or zero in case of no partial redemption (see Hints for redeemCollateral).
• truncatedZUSDamount is the maximum amount that can be redeemed out of the the provided _ZUSDamount. This can be lower than _ZUSDamount when redeeming the full amount would leave the last Line of Credit of the redemption sequence with less debt than the minimum allowed value.

The number of Lines of Credit to consider for redemption can be capped by passing a non-zero value as _maxIterations, while passing zero will leave it uncapped.

Stability Pool Functions - StabilityPool.sol

provideToSP(uint _amount, address _frontEndTag): allows stablecoin holders to deposit _amount of ZUSD to the Stability Pool. It sends _amount of ZUSD from their address to the Pool, and tops up their ZUSD deposit by _amount and their tagged frontend’s stake by _amount. If the depositor already has a non-zero deposit, it sends their accumulated RBTC gains to their address.

withdrawFromSP(uint _amount): allows a ZUSD holder to withdraw _amount of ZUSD from the Stability Pool, up to the value of their remaining Stability Pool deposit. It decreases their ZUSD balance by _amount. It sends the depositor’s accumulated RBTC gains to their address. If the user makes a partial withdrawal, their deposit remainder will earn further gains. To prevent potential loss evasion by depositors, withdrawals from the Stability Pool are suspended when there are liquidable Lines of Credit with ICR < 110% in the system.

withdrawRBTCGainToTrove(address _hint): sends the user's entire accumulated RBTC gain to the user's active Line of Credit, and updates their Stability Pool deposit with its accumulated loss from debt absorptions.

getDepositorRBTCGain(address _depositor): returns the accumulated RBTC gain for a given Stability Pool depositor

getCompoundedZUSDDeposit(address _depositor): returns the remaining deposit amount for a given Stability Pool depositor

ZUSD token ZUSDToken.sol

Standard ERC20 and EIP2612 (permit() ) functionality.

Note: permit() can be front-run, as it does not require that the permitted spender be the msg.sender.

This allows flexibility, as it means that anyone can submit a Permit signed by A that allows B to spend a portion of A's tokens.

The end result is the same for the signer A and spender B, but does mean that a permit transaction could be front-run and revert - which may hamper the execution flow of a contract that is intended to handle the submission of a Permit on-chain.

For more details please see the original proposal EIP-2612: https://eips.ethereum.org/EIPS/eip-2612

Supplying Hints to Line of Credit operations

Troves in Zero are recorded in a sorted doubly linked list, sorted by their NICR, from high to low. NICR stands for the nominal collateral ratio that is simply the amount of collateral (in RBTC) multiplied by 100e18 and divided by the amount of debt (in ZUSD), without taking the RBTC:USD price into account. Given that all Lines of Credit are equally affected by RBTC price changes, they do not need to be sorted by their real ICR.

All Line of Credit operations that change the collateralization ratio need to either insert or reinsert the Line of Credit to the SortedTroves list. To reduce the computational complexity (and gas cost) of the insertion to the linked list, two ‘hints’ may be provided.

A hint is the address of a Line of Credit with a position in the sorted list close to the correct insert position.

All Line of Credit operations take two ‘hint’ arguments: a _lowerHint referring to the nextId and an _upperHint referring to the prevId of the two adjacent nodes in the linked list that are (or would become) the neighbors of the given Line of Credit. Taking both direct neighbors as hints has the advantage of being much more resilient to situations where a neighbor gets moved or removed before the caller's transaction is processed: the transaction would only fail if both neighboring lines of credit are affected during the pendency of the transaction.

The better the ‘hint’ is, the shorter the list traversal, and the cheaper the gas cost of the function call. SortedList::findInsertPosition(uint256 _NICR, address _prevId, address _nextId) that is called by the Line of Credit operation firsts check if prevId is still existant and valid (larger NICR than the provided _NICR) and then descends the list starting from prevId. If the check fails, the function further checks if nextId is still existant and valid (smaller NICR than the provided _NICR) and then ascends list starting from nextId.

The HintHelpers::getApproxHint(...) function can be used to generate a useful hint pointing to a Line of Credit relatively close to the target position, which can then be passed as an argument to the desired Line of Credit operation or to SortedTroves::findInsertPosition(...) to get its two direct neighbors as ‘exact‘ hints (based on the current state of the system).

getApproxHint(uint _CR, uint _numTrials, uint _inputRandomSeed) randomly selects numTrials amount of Lines of Credit, and returns the one with the closest position in the list to where a Line of Credit with a nominal collateralization ratio of _CR should be inserted. It can be shown mathematically that for numTrials = k * sqrt(n), the function's gas cost is with very high probability worst case O(sqrt(n)) if k >= 10. For scalability reasons (Infura is able to serve up to ~4900 trials), the function also takes a random seed _inputRandomSeed to make sure that calls with different seeds may lead to different results, allowing for better approximations through multiple consecutive runs.

Line of Credit operation without a hint

1. User performs Line of Credit operation in their browser.
2. Call the Line of Credit operation with _lowerHint = _upperHint = userAddress.

Gas cost will be worst case O(n), where n is the size of the SortedTroves list.

Line of Credit operation with hints

1. User performs Line of Credit operation in their browser.
2. The frontend computes a new collateralization ratio locally, based on the change in collateral and/or debt.
3. Call HintHelpers::getApproxHint(...), passing it the computed nominal collateralization ratio. Returns an address close to the correct insert position.
4. Call SortedTroves::findInsertPosition(uint256 _NICR, address _prevId, address _nextId), passing it the same approximate hint via both _prevId and _nextId and the new nominal collateralization ratio via _NICR.
5. Pass the ‘exact‘ hint in the form of the two direct neighbors, i.e. _nextId as _lowerHint and _prevId as _upperHint, to the Line of Credit operation function call. (Note that the hint may become slightly inexact due to pending transactions that are processed first, though this is gracefully handled by the system that can ascend or descend the list as needed to find the right position.)

Gas cost of steps 2-4 will be free, and step 5 will be O(1).

Hints allow cheaper Line of Credit operations for the user, at the expense of a slightly longer time to completion, due to the need to await the result of the two read calls in steps 1 and 2 - which may be sent as JSON-RPC requests to Infura, unless the Frontend Operator is running a full RSK node.

Example Borrower Operations with Hints

Opening a Line of Credit

  const toWei = web3.utils.toWei
  const toBN = web3.utils.toBN

  const ZUSDAmount = toBN(toWei('2500')) // borrower wants to withdraw 2500 ZUSD
  const RBTCColl = toBN(toWei('5')) // borrower wants to lock 5 RBTC collateral

  // Call deployed Line of Credit Manager contract to read the liquidation reserve and latest borrowing fee
  const liquidationReserve = await Line of Credit Manager.ZUSD_GAS_COMPENSATION()
  const expectedFee = await Line of Credit Manager.getBorrowingFeeWithDecay(ZUSDAmount)
  
  // Total debt of the new Line of Credit = ZUSD amount drawn, plus fee, plus the liquidation reserve
  const expectedDebt = ZUSDAmount.add(expectedFee).add(liquidationReserve)

  // Get the nominal NICR of the new Line of Credit 
  const _1e20 = toBN(toWei('100'))
  let NICR = RBTCColl.mul(_1e20).div(expectedDebt)

  // Get an approximate address hint from the deployed HintHelper contract. Use (15 * number of Lines of Credit) trials 
  // to get an approx. hint that is close to the right position.
  let numTroves = await sortedTroves.getSize()
  let numTrials = numTroves.mul(toBN('15'))
  let { 0: approxHint } = await hintHelpers.getApproxHint(NICR, numTrials, 42)  // random seed of 42

  // Use the approximate hint to get the exact upper and lower hints from the deployed SortedTroves contract
  let { 0: upperHint, 1: lowerHint } = await sortedTroves.findInsertPosition(NICR, approxHint, approxHint)

  // Finally, call openTrove with the exact upperHint and lowerHint
  const maxFee = '5'.concat('0'.repeat(16)) // Slippage protection: 5%
  await borrowerOperations.openTrove(maxFee, ZUSDAmount, upperHint, lowerHint, { value: RBTCColl })

Adjusting a Line of Credit

  const collIncrease = toBN(toWei('1'))  // borrower wants to add 1 RBTC
  const ZUSDRepayment = toBN(toWei('230')) // borrower wants to repay 230 ZUSD

  // Get Line of Credit's current debt and collateral
  const {0: debt, 1: coll} = await Line of Credit Manager.getEntireDebtAndColl(borrower)
  
  const newDebt = debt.sub(ZUSDRepayment)
  const newColl = coll.add(collIncrease)

  NICR = newColl.mul(_1e20).div(newDebt)

  // Get an approximate address hint from the deployed HintHelper contract. Use (15 * number of Lines of Credit) trials 
  // to get an approx. hint that is close to the right position.
  numTroves = await sortedTroves.getSize()
  numTrials = numTroves.mul(toBN('15'))
  ({0: approxHint} = await hintHelpers.getApproxHint(NICR, numTrials, 42))

  // Use the approximate hint to get the exact upper and lower hints from the deployed SortedTroves contract
  ({ 0: upperHint, 1: lowerHint } = await sortedTroves.findInsertPosition(NICR, approxHint, approxHint))

  // Call adjustTrove with the exact upperHint and lowerHint
  await borrowerOperations.adjustTrove(maxFee, 0, ZUSDRepayment, false, upperHint, lowerHint, {value: collIncrease})

Hints for redeemCollateral

TroveManager::redeemCollateral as a special case requires additional hints:

• _firstRedemptionHint hints at the position of the first Line of Credit that will be redeemed from,
• _lowerPartialRedemptionHint hints at the nextId neighbor of the last redeemed Line of Credit upon reinsertion, if it's partially redeemed,
• _upperPartialRedemptionHint hints at the prevId neighbor of the last redeemed Line of Credit upon reinsertion, if it's partially redeemed,
• _partialRedemptionHintNICR ensures that the transaction won't run out of gas if neither _lowerPartialRedemptionHint nor `_up