🏹Architecture
What is insde of BitU Protocol.
BitU Protocol is a decentralized stablecoin protocol backed by crypto assets. Users can mint corresponding amounts of $BITU stablecoins based on the Collateral Ratio (CR) by providing supported collateral assets.
The minting process in BitU Protocol operates under a whitelist mechanism, meaning only whitelisted addresses can use their collateral to mint $BITU. Once minted, $BITU becomes fully decentralized and permissionless, allowing anyone to use it in the open market. No individual or entity can impose restrictions on the usage and circulation of $BITU.
During the minting process, different supported assets have different collateral ratio requirements. Upon successful minting, the user's collateral is directly transferred to a trusted custodial address through the minting contract, where it is held by third-party licensed custodians. Apart from the minting user, no one can misappropriate or retrieve the collateral.
The collateral stored in the custodial institution is mapped to centralized exchanges through the custodian's mapping service. It is then managed by BitU's Active Liquidity Management Module (ALMM).
It's important to note that at this stage, ALMM only manages the mapping of the collateral on exchanges and does not have direct access or control over the collateral. The mapped assets are subsequently used for two types of trading activities:
Borrowing/lending
Market-neutral investment strategies
ALMM will collaborate with Liquidity Technology Protocol (LTP), a leading prime broker in the crypto world, in managing the mapped assets. LTP will assist BitU's ALMM in implementing risk control measures for the income strategies associated with the mapped assets, thereby maximizing the yield generated.
The yield generated by the mapped assets through ALMM will be sent to the BitU Staking contract in the form of $BITU. Any user can stake their $BITU holdings in the staking contract to share in the profits earned by the ALMM.
Furthermore, users have the flexibility to unstake their $BITU from the staking contract at any time by burning their $sBITU holdings, and pending a 7-day cooldown period. They can also sell their $BITU on the open market or utilize BitU's minting and redemption contracts to burn $BITU and reclaim their collateral assets.
Specifically, the BitU protocol consists of four main components:
BITU ERC20 Contract
The BITU ERC20 contract defines the basic characteristics of the BITU ERC20 token. The Minter, which refers to the BITU minting and redemption contract, has the exclusive authority to mint any amount of $BITU to a specified address by calling the Mint function of the BITU ERC20 contract.
For users who want to mint $BITU by providing collateral assets, they need to interact with the BITU minting contract.
Minting and Redemption of $BITU
The minting and redemption contract for $BITU executes the minting and redemption functions of BITU. Only users whitelisted in the minting and redemption contract can utilize these functions.
By providing collateral to the minting and redemption contract, users can call the mint function in the minting contract. The minting contract determines the amount of $BITU that can be minted based on the Oracle price and the collateral ratio chosen by the user.
Once the user confirms the transaction, the determined amount will be sent to the BITU ERC20 contract, and the mint function of the ERC20 contract will be called to mint the corresponding $BITU tokens and send them to the wallet that initiated the minting.
Simultaneously, the collateral provided by the user will be sent directly to a custodial address. The custodial address serves as an onchain transparent storage for all collateral assets, and users can redeem their collateral by burning the minted $BITU.
Apart from the users who provide collateral, no one else can access these assets. The security of user collateral is one of the core functions of the BitU protocol.
BITU Staking
Users holding $BITU can stake their $BITU tokens into the BITU Staking contract at any time. The Staking function does not require whitelist authentication. $BITU acquired from the open market can also be staked.
After depositing $BITU into the Staking contract, users will receive staked BITU ($sBITU). $sBITU serves as proof of holding $BITU within the Staking contract. To reclaim their BITU, users only need to burn $sBITU within the Staking contract and wait a 7-day cooldown period.
ALMM
ALMM stands for Active Liquidity Management Module in the BitU protocol. It is specifically responsible for the following:
Ensuring the security of user collateral by ensuring that it is safely held in trusted and licensed custodial institutions.
Collecting income generated from mapped assets on exchanges and converting all income into USDT, which is then stored in the custodial address. Additionally, using the earned USDT as collateral, new BITU tokens are minted and distributed to Staking users.
Providing initial liquidity for $BITU within the ecosystem.
Risk management and portfolio liquidation: ALMM monitors user positions and ensures that the overall leverage ratio of the protocol remains above the safety threshold.
Redemption of $BITU and collateral assets: ALMM handles the redemption of $BITU and the release of collateral assets.
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