👨‍💻Terminology

The USDAO ecosystem, built around its stablecoin, employs several terms and mechanisms essential for its operation:

• USDAO: A stablecoin pegged to the US dollar (1 USDAO ≈ $1 USD). It is minted using collateralized assets (RP) and serves as a medium of exchange within the protocol.

• RP (RealProton): The underlying collateral token in the USDAO Borrowing Protocol, used to back USDAO issuance.

• Vault: A collateralized debt position (CDP) associated with a single Ethereum address. Users lock RP in a Vault to issue USDAO. Vaults are categorized as either Active (non-zero collateral and debt) or Closed (zero collateral and debt).

• Collateralization Ratio (ICR): The ratio of the dollar value of a Vault’s entire collateral to its entire debt. It determines the safety level of the Vault and affects liquidation conditions.

• Total Collateralization Ratio (TCR): The ratio of the total system collateral value to the total system debt. When TCR falls below 125%, the system enters Recovery Mode.

• Minimum Collateralization Ratio (MCR): 110%. A Vault must maintain a collateralization ratio above this threshold to avoid liquidation in Normal Mode.

• Critical Collateralization Ratio (CCR): 125%. When TCR drops below this level, the protocol enters Recovery Mode.

• Recovery Mode: A system state activated when the TCR falls below 125%. During this mode, stricter rules apply to ensure system stability, including restrictions on new debt issuance.

• Liquidation: The process of force-closing an undercollateralized Vault, redistributing or offsetting its debt and collateral to ensure the protocol remains solvent.

• Offset: Cancelling liquidated debt using USDAO reserves, effectively reducing the total system debt.

• Redistribution: Distributing the collateral and debt from liquidated Vaults to active Vaults with a collateralization ratio above 110%.

• Nominal Collateralization Ratio (NICR): Similar to ICR but does not account for the current RP:USD price. Used for internal Vault sorting and operations.

• SortedVaults.sol: A contract maintaining a doubly-linked list of Vaults sorted by their NICR. It plays a critical role in efficient Vault liquidation and collateral redistribution.

• Gas Compensation: A mechanism to incentivize liquidators by compensating them with USDAO and RP for gas costs during liquidation operations. This ensures prompt liquidation of undercollateralized Vaults.

• DefaultPool.sol: Holds collateral and debt from liquidated Vaults that are pending redistribution to active Vaults.

• CollSurplusPool.sol: Stores excess collateral from Vaults with an ICR above 110% that are liquidated in Recovery Mode. The surplus is claimable by the borrower.

• BorrowerOperations.sol: A core smart contract handling Vault operations such as creation, collateral adjustment, and debt issuance or repayment.

• VaultManager.sol: Manages the state of all Vaults and oversees the liquidation process. It ensures system integrity by enforcing collateralization ratios.

• HintHelpers.sol: A utility contract that helps borrowers provide efficient insertion hints for their Vault operations, reducing gas costs.

These terms and mechanisms collectively ensure the smooth functioning, stability, and security of the USDAO ecosystem, leveraging RP token as collateral and providing a robust framework for its stablecoin operations.