Alloy by Tether Vaults
Vaults, the core of Alloy by Tether.
Last updated
Vaults, the core of Alloy by Tether.
Last updated
Alloy by Tether works completely on chain, providing easily auditable XAU₮ backings thanks to the Smart Contract design that underpins Tethered Assets. Smart contracts are software programs deployed on a blockchain, designed to execute automatically when predefined conditions are fulfilled. Their primary function is to enhance transparency and auditability in agreements and workflows. By leveraging blockchain technology, smart contracts ensure that all involved parties can instantly verify outcomes without the need for intermediaries, promoting a transparent and easily auditable process. In the case of Alloy by Tether, Smart contracts allow for independent and permissionless verification of the XAU₮ collateral backing each aUSD₮ issued. The aUSD₮'s Vault can be found at the following Ethereum Address: 0x4c1ec3d1519225f36958408fdd33a0d5ba1f2fa7.
Alloy by Tether's core smart contracts are called Vaults. Each Vault serves multiple purposes
Storing User's Collateral.
Storing Unissued aUSD₮.
Storing User's Collateralised Minted Position (CMP) information.
Note: Only Verified Addresses can interact with the Vaults to mint aUSD₮. Once an Address has passed KYC and it is Verified, it is whitelisted and therefore able to interact with it.
The Vaults serve multiple important functions, as these are the records of the on chain interactions of the Address with the Alloy by Tether smart-contract that will receive the transferred XAU₮ as collateral, and inject into circulation the respective aUSD₮.
While this action happens, Vaults store inside them the address' metrics , such as:
Minted aUSD₮
Provided XAU₮
Position's Mint to Value (MTV)
This information is used by the Vault to compute the solvency of the position. If the position approaches liquidation, whitelisted liquidators are able to liquidate it, withdrawing the user's XAU₮ while transferring back aUSD₮ up to the amount of minted aUSD₮. Alloy by Tether's frontend simplifies the monitoring of the user’s CMP by providing users with their liquidation price, computed with the following formula:
Liquidation occurs when the value of collateral in a position fails to adequately cover the minted amount. Each CMP is subject to distinct liquidation thresholds, determined by the Maximum Mint To Value (or Liquidation Point). When a Collateralised Minted Position exceeds the Liquidation Point, it becomes eligible for liquidation, allowing specialised actors known as "liquidators" to settle the position in exchange for a fraction, or the entirety of the collateral. Liquidators buy the collateral at a small discount by returning aUSD₮.
One important characteristic of the Vaults is that each Address can only have a single CMP position. To have more than one position, a User needs to verify and whitelist two or more different Addresses. As any other EVM smart contract, our smart contracts can be interacted with either by using our front end, or directly through Etherscan or other smart contract interaction tools.
Each Vault has specific parameters, that will influence the users CMP, here are some examples:
Liquidation Point: defines the maximum percentage of aUSD₮ mintable given the user's deposited collateral, also known as "Maximum MTV".
Interest: defines the interest rate that must be paid on the minted aUSD₮, currently the interest is 0%.
Minting Fee: defines the fee that a users pays to mint aUSD₮.
Return Fee: defines the fee that a users pays to return aUSD₮.
Liquidation Premium: the percentage discount at which liquidators can buy user's collateral in case of liquidation.
Additionally, each Vault will be using a specific Oracle to price both XAU₮ tokens and the issued Tethered Asset. In the case of aUSD₮, the Tether Asset Oracle is the US dollar price oracle, denominating aUSD₮ as 1 USD.
In the future, new Alloy by Tether denominations could be created that would be Tethered to the price of other currencies (for example the GBP, EUR, CHF or MXN) by simply deploying new vaults, with different Oracles.
Vaults are using an innovative isolated CMP technology to issue aUSD₮. Their code is written in Solidity and is fully open source. Its code can be found here. Alloy by Tether's code is licensed and not able to be forked. Alloy by Tether's Developer documentation can be found in a separate resource page, here.
