Nick Krash is a Blockchain Architect at Platinum Q DAO Engineering. In this article, he shares the unique nature of USDQ/KRWQ, a stablecoin his team is helping to develop. Prior to his career, Nick successfully participated in a number of software development projects for major European and Asian banks. USDQ or KRWQ leverages a stack of novel technologies, among which are predictive capabilities, algorithmic stabilization, and community incentives. Soon there will be even more fully backed stable coins: JPYQ, KRWQ, SGDQ, HKDQ, CNYQ, RUBQ under Q DAO brand. Read on to learn about what makes USDQ/KRWQ so unique. Moreover, KRWQ – a stablecoin pegged to Korean Won will be attached to Q DAO family. This will not only make a huge impact on the local Korean market but also to the whole Asian region. It will be traded like other ERC-20 tokens on exchanges like BTCNEXT.
Procedures to repay collateral and liquidate smart contract
Q DAO enables users to carry out an easy and fast process to collateralize Bitcoins and obtain a loan in the stablecoin. I am sure that wider crypto community will find Q DAO highly convenient and cost effective as it provides ample options for margin trading and hedging against unwanted price moves.
I want to make it clear that we are actively talking to the crypto community, hearing all kinds of advice and recommendations. We have lots of competing ideas within our team and we might change the system’s architecture in the coming months because our project is work in progress and we need this “wiggle room” to be as flexible as possible. Blockchain development is an extremely young industry. So, having this kind of flexibility is totally justified and necessary for a success story in this emerging niche.
In this article, I would like to describe the procedures we’ve designed for collateral repayment and smart contract liquidation. This technical information will be of use to blockchain engineers trying to gain a better understanding into the underlying mechanisms for our stablecoin generation system.
But first I want to share a brief overview of the application overall.
At Figure 1 below, you can see a bird’s-eye view on the architecture. The yellow-colored rectangles are used to depict the main modules within the system. The arrows show potential interactions between system’s components. All of the modules are fully automated with isolation from other components to assure resilience across the system.
Figure 1
The Module “Customer Web Panel”, shown in the upper left corner, is a customer interface. It’s an external component and it helps manage interactions between users and the system. The Module “Dapp p2p network” is another external module which is used to enable consensus, reachable between neural network agents. These modules act as an additional protective layer, helping mitigate any disruptive impacts from external components.
I find it of high importance that we’ve created the Security Module in such a way as to assure that all users interactions pass through it. This helps us assure the integrity of the Local Chain (a distributed ledger, acting as a chain of transactions and used to change transactions statuses within the system).
We’ve designed BTC Node Integration and ETH Node Integration as the modules that enable interactions between the system and external blockchains. Listener is a module that supplies information on external events into the internal system. Notify is used to inform external partners as to the events occurring within the system.
I think that this overview gives you a general understanding as how our system is designed and how it interacts with external environment. And now let’s dig deep into the processes to close the deal within the system.
Procedure to Repay Loan and Return Funds
Our system is designed based on the assumption that the tokens will be burned upon the repayment from the same wallet, to which the funds were originally transferred. The user will act on their own in order to transfer the tokens to the smart contract for the subsequent burning to be carried. The smart contract will be responsible for making the decision regarding tokens burning.
Let’s take a look at Figure 2. Here, we show the main principle governing the interactions between the modules within the system, as performed for the collateral repayment process.
Figure 2
Here’s a detailed sequence of actions, as performed within this process. I use the [] symbols to identity the order number for signatures placed by parties.
1. In the wallet that was used to obtain the loan, the user needs to accumulate the amount of USDQ/KRWQ tokens, required for the collateral repayment, as well as the amount of governing tokens, required to pay the associated fees.
2. The user authorizes the process for the return of the user’s funds from the collateral wallet to the earlier specified BTC wallet. In this case, the user has to act on his own in order to sign the transaction within the BTC network and the record within the local chain.
3. The BTC Node Integration Module verifies sufficiency of the funds and validity of the data. It places its signature below the record in the local chain and the user’s transaction.
4. Listener verifies that the data matches the actual market conditions. It places its signature below the record in the local chain and the user’s transaction.
5. ETH Node Integration checks the data validity. By this time, the tokens must already have been blocked or burned by the user. It places its signature below the record in the local chain and the user’s transaction.
6. Security Module verifies the integrity of the local chain. Then it places its signature below the record in the local chain and the user’s transaction.
We’ve designed the system, so that, following this stage, the blocked funds would be burned, enabling the token price to balance on the market.
I’d like to draw your attention to the fact that within this sequence we don’t engage Q Box system and thus its signature is not required. So, the user retains the ownership to the funds throughout his interactions with the system – until they have paid back the debt and taken away the collateral assets. The fact that we see that the stablecoins previously generated were burned and that the user signed the valid operation with his private key is enough for us, i.e. we don’t have the “moral right” to engage any other components into such operations.
And now let’s look into the process we’ve designed for the collateral termination.
Procedure to Liquidate Collateral
Should the collateralized asset experience a sufficiently big fall in the price (with the liquidation price being determined based on the parameters specified by the user upon the loan generation), the system burnes a portion of USDQ//KRWQ tokens and the collateralized funds are being liquidated. Whenever the BTC price starts getting close to the liquidation price, the user receives the notification. This notice specifies that the collateralized assets may be liquidated and the user is ought to balance the collateral in order to avoid this situation.
In the event that the user fails to ensure the sufficiency of the collateral, the smart contract will be liquidated. Meanwhile if the user balances the collateral, a new liquidation price will be determined. The scheme for modules interactions is depicted at Figure 3.
Figure 3
Let’s review the sequence of actions occurring within this process.
1. The information delivery agent receives the information as to the BTC market price, initializes the transaction for funds liquidation whenever the price has reached the required level. It creates the transaction within the BTC network (referring to the Security Module for the information, while subtracting the interest and fines) and signs the transaction within the BTC network. Subsequently, it signs the record within the local chain.
2. The BTC Node Integration Module verifies the sufficiency of the funds and validity of the data. It places its signature below the record in the local chain and the transaction by the information delivery agent.
3. The ETH Node Integration Module verifies the validity of the network’s operations and information about the loan, as specified by the smart contract. It places its signature below the transaction by the information delivery agent.
4. Security Module verifies the integrity of the local chain. Then it places its signature below the record in the local chain and the transaction by the information delivery agent.
5. The decentralized portion of the Q Box system checks the validity of the actions performed. Then, having gathered the required consensus of the internal signatures, the module deciphers the unique private key, which is used to sign the transaction and the record within the local chain.
6. The Module ETH Node Integration awaits the actions to be performed by the liquidating body. After the information as to the USDQ/KRWQ tokens liquidation has been confirmed, it signs the record within the local chain. Subsequently, the collateral within the system is deemed as liquidated.
The funds, being returned to the users, will be retained at their BTC wallets. These wallets may contain free funds, available for users to transact in. The system automatically signs the transactions, initiated by users, for withdrawals, while it also confirms actions by users with users having no active collaterals in place. Meanwhile, the Security Module is designed to prevent the signing of transactions at the initiative of Q Box component or the information delivery agent, since this will disrupt the network’s integrity. This enables us to protect the system against disinformation attacks by external actors. Thus, we make sure that the assets the users have collateralized will not be liquidated in the event due hacking attack.
Afterword
Maybe you heard about the project MAKER DAO and their DAI?
I want to praise these guys – they are first to create a decentralized stable coin.
We occupy an honorable second place at this race, and basically, we were inspired by the technologies of MAKER`s DAI.
Some Q DAO functionality is similar to MAKER DAO, so we decided to use Maker`s terminology because we do believe – their technologies should be a reference for creating any decentralized stable coins.
Why we are using BTC as collateral? 1) Bitcoin is a most liquid digital asset 2) we have many friends who are big Bitcoin holders (BTC whales) or Bitcoin OTC traders.
We hope even so big guys like Brothers Winklevoss (Cameron Winklevoss and Tyler Winklevoss) will start to use Q DAO. They have a lot of Bitcoins, but they don’t want to sell it. So if they need money – they can pawn their bitcoins to Q DAO and immediately get USDQ/KRWQ.
Why we built Q DAO based on Ether smart contracts, but not Tron (by Justin Sun) and not EOS ( by Daniel Larimer)?
Our genius engineers are love ETHEREUM because of mass adoption of this blockchain, also we respect the approach of Vitalik Buterin (we met him a few times). Maybe in the future, we will consider using TRON or EOS, in case their foundations can provide enough funds to proceed with development.
BTCNEXT Exchange – next generation spot and margin trading platform by the PLATINUM Q DAO ENGINEERING team. It is the first Strategic business partner of USDQ/KRWQ stablecoin that is based on a DAO technology. All pairs will be listed with USDQ/KRWQ. BTCNEXT customer service will be happy to answer all of your questions.
Platinum Q DAO Engineering is always happy to share its latest development and architecture solutions, helping stakeholders to spread improvements across crypto projects. Being an expert company on the market, Platinum Q DAO Engineering has already helped 150 crypto startups, enabling them to efficiently raise funds and introduce blockchains to their business models. With offices in Japan, South Korea, Thailand, Russia, Belarus and Australia the team is always ready to have in-person meetings, focusing on how companies can leverage blockchain technology in order to meet their unique needs. The team welcomes readers to connect on Telegram, and Facebook.
This overview may not be fully exhaustive and does not assess the viability of any project, nor its team legitimacy. Readers should conduct their own due diligence before using or investing in any of the listed Stablecoins. This article represents the author’s opinions only and should not be considered investment advice. All described functionality in the article is still under development, it can be changed/processed. Please follow the updates.
# Q DAO diary {dev.day: 367, round: 1, 21 days until ieo#2, Q DAO price: $1}
# BTCNEXT diary { dev.day: 264, daily volume ~$10000k, 25 coins listed, IEO count “3”, BNX price $n/a }
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