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Azos Protocol 101

Azos Framework Mechanics​

What is AZOS?​

  • Captures-Value: Azos captures more of the intrinsic value it creates through its unique mechanics.
  • AMMOs: Azos utilizes a smart contract concepts pioneered by FRAX called algorithmic market making operations (AMMOs) to capture value, and support the health of the protocol.
  • Stability-Module: The Azos Protocol's first AMMO is called the stability module. The stability module enables Azos to deliver increased price stability and scalability to the ZAI token.
  • Protocol-Owned-Liquidity-House: Azos builds rich protocol-owned liquidity through surplus. Protocol surplus is paired with the AZOS governance token and supplied as liquidity to DEXes. This reduces our dependency on external liquidity providers over time.
  • VE-Long-Tail-Emissions: The governance token of the protocol will be distributed or a long period of time as incentives to users that utilize the voting escrow mechanics. This ensures decentralization of ownership, and alignment of stakeholders.
  • Dollar-Denominated: Both the system coin and the collaterals are denominated in US Dollar.
  • Collateral-Backed: A diverse basket of collateral types backs the minting of the system coin.
  • Control-Pegged: A PID controller dynamically adjusts the funding rate to balance value transfer between minters (debtors) and holders (creditors).
  • Settleable: The system can undergo a Global Settlement, during which all debts are squared and ZAI holders can redeem tokens for a share of the collateral pool, regardless of whether they have outstanding debts.

Glossary​

Units of Measurement​

  • WEI: The base unit for raw ERC20 amounts.
  • WAD: A unit with 18 decimal places, used for representing balances.
  • RAY: A unit with 27 decimal places, utilized for rate computations.
  • RAD: A unit with 45 decimal places, employed for calculating owed amounts.

    Note: The Math Library handles all unit multiplications and divisions.

Tokens​

  • systemCoin: The ERC20 stablecoin issued by ZAI.
  • protocolToken: The ERC20 governance token AZOS, used for system parameter voting and participating in debt/surplus auctions.
  • collateral: Any ERC20 token that serves as collateral, enhancing the corresponding cType balance. Azos protocol focuses on regenerative collaterals that target areas of the ecological benefits framework.

Key Concepts​

  • cType: Represents a unique identifier for a collateral type within the Azos system.
  • COIN: An internal balance of system coins convertible to systemCoin on a 1:1 basis.
  • DEBT: An internal ledger entry representing unbacked debt, erasable with COIN on a 1:1 basis.
  • SAFE: A vault-like contract holding collateral and generating COINs, which may also accrue DEBT.
    • lockedCollateral: The collateral amount held within a SAFE.
    • generatedDebt: The debt incurred by a SAFE during the COIN generation process. Note that it does NOT correlate directly to the amount of COINs generated.
    • Liquidation: A process triggered for under-collateralized SAFEs, wherein their generatedDebt is moved to the system's DEBT and collateral is seized for auction to cancel out the DEBT.
  • redemptionPrice: The internal price at which system coins can be exchanged for collateral.
  • targetPrice: A reference price utilized to adjust the redemptionPrice, often aligned with market price.
  • redemptionRate: Governs how the redemptionPrice changes over time, essentially functioning as the system's funding rate.
  • stabilityFee: A separate interest rate, unconnected to the redemptionRate, applied to user debts and collected by the system.
  • accumulatedRate: Reflects the compounded stabilityFee applied to a cType, determining the relationship between generatedDebt and the COINs produced.

This guide aims to provide a comprehensive understanding of the Azos framework and its intricacies. Armed with this knowledge, you'll be better equipped to interact with the protocol effectively.