How to mint btUSD

Over-Collateralized Position: Trove

Satoshi Finance utilize a classical over-collateralization pattern for issuance of the stable coin: btUSD. Each wallet address could have up to one over-collateralized position called "trove" which symbolize its collection of assets within Satoshi Finance: collateral and debt(minted btUSD).

BTCB will be used as the collateral and the minimum collateralization ratio allowed, i.e., the market face-value of collateral provided against the minted amount of btUSD, is as low as 110%(Minimum Collateralization Ratio), i.e., a user(just any wallet address) could open its trove by providing $1100 worth of BTCB and take out 1000 btUSD. But note that any trove with a collateralization ratio(Individual Collateralization Ratio) less than 110% will be subject to liquidation, thus keep a reasonable higher collateralization ratio is strongly recommended.

There is also a friendly minimum requirement on how much btUSD a trove should at least mint: 200.

Any fee would be paid to mint btUSD?

As long as a user mint btUSD from its own trove, an one-time mint fee is charged on the minted amount and included into the trove's total debt. Please note that the mint fee is variable (and determined by algorithm coded in smart contract) and has a minimum floor value of 0.5% in normal scenario. The fee is 0% during Recovery Mode which is explained below.

No additional interest will be charged so user doesn't need to worry about how long should they keep the trove open. The costs to keep hold of minted btUSD for one week and one year are the same thus make Satoshi Finance a good fit for leveraged bitcoin long trader in the long run.

The mint fee is calculated by multiplying the amount of minted btUSD with the sum of fee floor value(0.5%) and a "baseRate". For example: If the mint fee stands at 1% and the user wants to mint 1000 btUSD then a fee of 10 btUSD will be charged and the user's trove will have a total debt of 1010 btUSD.

What is Recovery Mode and Normal Mode

We calcualte the ratio of the market face-value of total collateral locked in system against the total minted btUSD as Total Collateralization Ratio. For example, there are two troves in the system with same collateral amount of 1 BTCB, but with different debts of 20000 btUSD and 10000 btUSD respectively. If market price of collateral is $40000, then TCR could be calculated as \(\frac{(1+1)*40000}{20000+10000}=266.67\%\)

When TCR is less than 130%(Critical Collateralization Ratio), Recovery Mode is triggered. Otherwise, the system is in Normal Mode.

When system is in Recovery Mode, there will be more restrictions for operations like open trove or adjust trove to guarantee the system TCR shall not deteriorates further. And more troves may become liquidatable in Recovery Mode to faciliate a quick safe-state restore of the system.

How could I create a leveraged trove?

You could swap the minted btUSD on the market for more BTCB and use the latter as extra collateral for your exiting trove.

This process is repeatable and allow trove owner to expose more on collateral via more btUSD mint-then-swap steps.

If we assume the market price is trading perfectly at 1 btUSD = $1, then the maximum achievable leverage ratio is 11x given by this formula: \(\frac{MCR}{MCR - 100\%}\).