GBPC System
The project is about a collateralized stable coin pegged to the GBP. It will be governed by a DAO, which can propose various protocol adjustments, such as adding a new token as collateral or setting important system parameters.
Project Description
A collateralized stablecoin pegged to the GBP. It will be governed by a DAO, which can propose various protocol adjustments, such as adding a new token as collateral or setting important system parameters. Additionally, it will make use of Chainlink's price feeds for price conversions.
How it's Made
It comprises distinct components, namely the GBP Coin, VaultMaster, Great Vault, GreatDAO DAO, Great Timelock, and Great Coin (GRC token).
The GBP Coin is the stablecoin owned by VaultMaster. VaultMaster, in turn, is owned by the DAO's timelock, and it has the ability to create vaults (Great Vault). To create a vault, a proposal, voting, and execution by the DAO are necessary since the VaultMaster is under the control of the DAO's timelock.
When proposing a new vault deployment, you must specify the collateral (ERC20), USD price feed, liquidation threshold, liquidation spread, and close factor. The VaultMaster, being the sole administrator of the GBPC coin, grants the vault the MINTER role after deployment, enabling it to mint and burn GBPC. The Vault's ownership is also transferred to the DAO's timelock, ensuring that only the DAO can make necessary adjustments, such as changing the liquidation threshold, liquidation spread, close factor, price feeds, and more.
The vault is responsible for all collateralization logic, as well as the minting and burning of GBPC. Vault pricing for collateral in GBPC is determined using Chainlink price feeds. Since Chainlink primarily provides prices in USD, two USD price feeds are used for indirect conversions. For example, for WETH collateral, 1 WETH equals the price of WETH in USD divided by the price of GBP in USD.
In these vaults, if the liquidation threshold is set at 80%, you can only mint GBPC worth 80% of your collateral. For instance, if you deposit collateral worth 10,500 GBP, the resulting borrowing capacity is BC = 10,500 GBP × 80% = 8,400 GBPC. Borrowing the entire 8,400 GBPC means that any drop in the collateral's value can lead to liquidation. For instance, if the collateral's price falls, reducing its value to 9,900 GBP, the borrowing capacity becomes BC = 7,920 GBP (80% of 9,900 GBP). The health factor of the debt position drops to HF = 7,920 GBP / 8,400 GBP ≈ 0.94, which is less than 1, making the collateral available for liquidation.
With a close factor of 50%, a liquidator can only pay off 4,200 GBPC of your debt (50% of 8,400 GBPC), receiving 4,200 GBP worth of collateral, plus the liquidation spread. For example, if the DAO sets the liquidation spread at 10%, the liquidator receives 4,200 GBPC + 420 GBP worth of collateral, totaling 4,620 GBP.
