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Welcome to the Coffin Finance documentation guide.
Coffin Finance
Coffin Finance will be the first of its' kind, fully decentralized, capital-efficient, partially collateralized stable-token protocol on the Fantom Opera Network.
Stablecoins
Stablecoins are a type of cryptocurrency with an exchange rate pegged to an existing fiat currency (such as the United States dollar), or any fiat-related index, thereby drastically increasing their usefulness as a medium of payment for members of the crypto-space.
The volatility associated with cryptocurrencies has proven to be a major issue for mass adoption. Especially in the case of Fantom, our protocol is designed to bring much more comfort in price stability with the hopes to ease the minds new user's for across the field.
The protocol aims to not only increase liquidity, while creating a way to store value on Fantom Opera Network, but also want see its' implementation as a medium for more advanced use-cases after a successful launch.
Types of stablecoins.
As you may know, there are many forms of unique stable tokens.
Fiat-backed stable tokens
Fiat-backed stable tokens, such as USDC and USDT, are issued by centralized entities.
Such custodians as these choose to escrow USD and issue the stable coins onto different blockchains. They are always able to be redeemed for for their underlying assets via collateralization. However, there are some risks. One being, it is not convenient for users to confirm that a centralized authority has enough of that currency to reflect the collateral that has been reported. Another, is that such fiat-collateralized stable coins are subject to the risk of ever-changing regulatory institutions. It is for these reasons we believe such coins are not suitable for an truly decentralized culture.
Crypto-collateralized stablecoins
Crypto-collateralized stable coins, such as DAI and sUSD, are issued on chain through an overly-collateralized mechanism.
Because of this extensively collateralized mechanism, we don't need to ask a centralized authority to mint more tokens. Smart-contracts on the blockchain issue tokens automatically as long as there is enough collateral to do so.
The problem here is the capital-inefficiency that results from the need for a sufficient buffer to keep it stabilized, maintaining its' value at peg. This means generating new tokens regularly, causing unnecessary financial burden. We believe that the growth of crypto-collateralized stable-coins has limits. We feel the need to look for more innovative solutions to solve this problem.
Algo/non-collateralized stable coins
There have been several evolving stable-coin projects so far. Some are already in the "graveyard". Though others remain resilient, still imploring innovation. All of them are capital-efficient, but some, are still not very stable.
- Basis Cash
- Pollo Basic Cash
- Ampleforth
- Tomb Finance
- Terra
In the absence of collateral, as seen in these projects, it seems that only tokens which issue a tax or an auto-burning mechanism to prevent total failure.
Why do we seek more potential from algorithmic, partially-collateral coins?
There is yet another, multilateral form of a stable token. This being the partially-algorithmic token.
We believe it is one of the most innovative functions in the field of the current DeFi world.
Coffin Finance inspired a lot from:
- Frax Finance
- Iron Finance
We have learned a lot from them, and would like to add other features to make it more even stable. One might suggest, we are going to release an improved and more perfect version of themselves.
There are many examples of failure in this field. So, before you join our project, we strongly suggest you read the article below prior to further engagement.
Bank Run in DeFi – Iron Finance Fiasco Explained
Finematics
How can we prevent bank runs?
We have and adamantly continue to learn from failures of our own and study those of the past.It is ferociously difficult to identify the true reasons for such failures, but we can take a guess.
We believe we need to make improvements in terms of the following:
- Price Oracles
- Deflationary mechanisms.
- Diversified collateral.
- Arbitrage opportunities.
- Incentives to maintain the peg price.
You will find a more detailed explanation in the following pages:
Last modified 2mo ago
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