How Unitas Protocol Works
Why Unitas? What are the problems we propose to solve?
To understand Unitas, we can leverage USDT’s main use case.
Let us consider a scenario where, a person A owes 1000 USD to another person B. If A and B tried to use Bitcoin for this settlement purpose, the amount of Bitcoin will keep fluctuating due to volatile nature of Bitcoin/USD rate. ETH and other crypto tokens will also be not really useful because of similar issues.
If we look at below chart, we can see the value of 1BTC keeps changing. This makes it difficult for businesses to adapt it.
To solve for the above problem, we can issue a token which is pegged at 1 USD. This allows for an easy transaction between A and B. By bringing stability to the token price, USD pegged stablecoins solved many such accounting and financial problems. USDT enabled lending, b2b transfers, cross-border remittance and still enabling new use cases. The simplicity of USDT and it’s valued being pegged to 1 USD has led to USDT acquiring large growth and highest market share in the stablecoin market. USDC, the second largest stablecoin has similar principles and similar use cases.
Let us consider another scenario, where a person C owes another person 1000 Indian rupee. If C and D tried to use USDT for this settlement purpose, the amount of USDT will keep fluctuating due to volatile nature of USDT/INR rate. USDC/INR has the same issue. Any other USD pegged stablecoin will also be not useful for this purpose.
In above chart we can see the value 10 USDT keeps changing and is not suitable for businesses using INR. It will require additional skills to adapt to USDT.
By issuing INR pegged stablecoin, USD91 we solve problems faced by local businesses and individuals. This will further enable adoption of blockchain and cypto in the India market.
To solve for above problem, we are proposing INR pegged stablecoin called USD91. This will allow person C and D to easily settle their transaction without having to worry about the USDT/INR fluctuation rate.
Similarly we will issue other emerging market currency pegged stablecoins to enable their local economy and promote financial inclusion.
How does Unitas Protocol work?
Unitas works as a value translator for existing USD pegged stablecoins. The protocol uses oracles built by Unitas team to mint USD91 and other EMC tokens against the reserve of USDT. USD91 minters need to provide USDT, the protocol will mint USD91 equivalent in value. This makes the protocol 100% reserved in USDT. The minting process does not create any CDP and the minters are free to swap back to USDT permissionlessly.
Although the protocol is reserved at 100%, volatile nature of emerging market currencies may risk the protocol of being under reserved. It is better for protocol stability if the reserve is over 100% and sufficient enough to absorb any volatility in emerging market currencies.
Example
Initially
| USD91 mint price | USDT provided by minters | USD91 in supply |
|---|---|---|
83 | 100 | 8,300 |
How reserve ratio changes with USD91 prices over the time
| Time | USD91 price | Reserve ratio |
|---|---|---|
T0 | 83 | 100.00% |
T1 | 85 | 102.41% |
T2 | 81 | 97.59% |
T3 | 86 | 103.61% |
Although it is less likely but to mitigate the risk against an appreciating emerging market currency, we invite additional risk takers called Insurance Providers.
Insurance providers deposit additional USDT in insurance pool to secure against an appreciating emerging market currency. The protocol rewards insurance provides by sharing the revenue.
Unitas Protocol Phase1
For simplicity of development, we are launching the Unitas Protocol feature with only minting and burning feature.
Unitas protocol will allow minting and burning of USD1, USD91, USD971, and USD84 in this phase.
This will enable USD1 and Unitized local stablecoins swaps on both sides.
Unitas will handle the insurance pool manually for this launch and build the insurance pool smart contract in the next phase.
Other operations like monetary policies, revenue distribution and treasury management etc will be taken care manually by Unitas foundation and will be launched in phases.
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