How to Mint Your RUSD
RUSD, is minted through a secure and transparent process that leverages the platform’s tokenization framework and robust collateral management system. Inspired by decentralized stablecoins like DAI, the RUSD minting process involves over-collateralization with tokenized real-world assets (RWAs), ensuring its value remains stable and fully backed. Below is a step-by-step explanation of how RUSD is minted:
Locking Tokenized RWAs as Collateral
To mint RUSD, users must first tokenize their real-world assets—such as real estate, gold, or bonds—on the Novastro platform. These tokenized RWAs are then locked as collateral in Novastro Vaults, smart contracts designed to secure and manage the collateral. Users are required to maintain a safe collateralization ratio, typically 150-200%, to mitigate risks from asset value fluctuations. For example, to mint $1,000 worth of RUSD, users may need to lock $1,500–$2,000 worth of tokenized assets.
Minting RUSD
Once the collateral is locked, the user can mint RUSD up to the maximum amount allowed by the collateralization ratio. For example, if a user locks $10,000 worth of tokenized real estate and the required ratio is 150%, they can mint up to $6,667 RUSD ($10,000 ÷ 1.5).
The smart contract automatically calculates the mintable amount and issues RUSD accordingly.
Stability Fees
Stability fees are interest-like charges applied to the minted RUSD. They serve a dual purpose:
Maintaining Ecosystem Balance: These fees incentivize users to maintain healthy collateralization ratios, mitigating risks of market volatility.
Supporting Platform Operations: The fees fund platform operations, including Oracle services, security audits, and yield optimization mechanisms.
The stability fee rate is dynamically adjusted based on:
Market Conditions: Higher market volatility may lead to increased fees to discourage over-leveraging.
Collateral Asset Type: Riskier or more volatile collateral assets may carry higher stability fees.
System Metrics: Factors such as total collateral value, circulating RUSD supply, and liquidity levels influence fee adjustments.
Example: If the annual stability fee is 2%, users minting $10,000 RUSD would accrue $200 in stability fees annually. These fees must be repaid alongside the principal when unlocking the collateral.
For users, stability fees reduce net yields when leveraging RUSD for staking, liquidity provision, or other DeFi strategies. However, the stable and predictable nature of the fee structure allows users to factor it into their profitability calculations, ensuring informed investment decisions.
Transparency Mechanisms Novastro prioritizes fee transparency to enhance user trust and appeal to investors. Users can view accrued stability fees and projected charges directly on their dashboards. Automated notifications inform users of fee changes or potential liquidation risks due to under-collateralization.
Stability fee parameters are subject to periodic review through the platform's community governance system, ensuring stakeholder alignment. Also, regularly published fee audits provide insights into how fees are allocated and their role in maintaining ecosystem health.
Maintaining the Collateralization Ratio
The value of the collateral must always exceed the circulating RUSD by the required ratio. If the value of the locked assets drops due to market fluctuations, the Vault may face liquidation. If the collateralization ratio falls below the minimum threshold, the Vault partially liquidates the assets to cover the outstanding RUSD and penalties.
To protect the Novastro ecosystem during volatile market conditions, the platform implements a robust liquidation framework designed to mitigate cascading failures caused by the liquidation of under-collateralized vaults. These safeguards ensure market stability and prevent significant disruptions. Novastro uses the following mechanisms:
Gradual Liquidation Mechanism:
Instead of liquidating an entire vault instantly, the system employs phased liquidation, breaking large liquidations into smaller tranches. This prevents sudden shocks to the collateral market, avoiding steep price drops that could exacerbate under-collateralization across the system.
Liquidation Auctions:
When vault collateral falls below the required ratio, liquidation is executed via decentralized auctions. This approach ensures fair market pricing and prevents the collateral from being sold below its intrinsic value. Competitive bidding further minimizes price slippage, protecting both the ecosystem and vault owners.
Stability Fee Buffer:
A portion of stability fees collected from all vaults is allocated to a liquidation reserve fund. During high-volatility periods, this fund is used to cushion the effects of sudden liquidations, providing temporary liquidity to prevent systemic risks.
Circuit Breakers and Emergency Controls:
Novastro employs automatic circuit breakers that pause liquidations under extreme market conditions (e.g., flash crashes or unexpected events). During such pauses, the system recalibrates pricing mechanisms using Oracle data and stabilizes the ecosystem before resuming operations.
Dynamic Risk Management:
Real-time Oracle data ensures accurate valuation of all collateralized assets. This minimizes the chances of incorrect liquidation triggers.
The platform also enforces caps on exposure to highly volatile collateral types, reducing the likelihood of widespread under-collateralization events.
Secondary Market Liquidity Support:
To further protect the system, Novastro leverages its RUSD Collateral Pool and partnerships with liquidity providers to inject liquidity into secondary markets during periods of stress. This reduces the impact of liquidations on asset prices and prevents a domino effect.
Transparent User Alerts:
Users are warned well in advance when their vaults approach the liquidation threshold. Dashboards provide vault owners with up-to-date information on their collateralization ratio, market value, and potential liquidation risks.
Open Governance for Risk Management Policies:
The liquidation framework and risk parameters (e.g., minimum collateralization ratios, and auction mechanisms) are reviewed and adjusted periodically through community governance, ensuring they remain robust and adaptable to changing market conditions.
For real-time valuation, the system uses oracles to continuously monitor the value of the collateral, ensuring transparency and accuracy.
Repaying RUSD and Unlocking Collateral
To retrieve the locked collateral, users must repay the minted RUSD along with any accrued stability fees. Once the repayment is complete, the system burns (removes) the repaid RUSD from circulation and releases the collateral.
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