ℹ️Kresko 101

The overall documentation is in process of being updated to match the latest protocol architecture.

Introduction

Kresko is a non-custodial, capital-efficient synthetic asset protocol that runs on the EVM. It facilitates the creation and management of securely collateralized synthetic assets using smart contracts written in Solidity.

The protocol allows depositing whitelisted Collateral Assets, the collateral is used to mint new Kresko Assets, incurring debt that locks partial or full value of the collateral. The debt is repaid by burning the minted Kresko Assets out of circulation, unlocking the collateral backing it.

This general model is a collateralized debt position (CDP). Kresko has two distinct CDP models complemented by the ability to acquire Kresko Assets outside borrowing, allowing anyone to engage in strategic action using a common ruleset and amplified liquidity.

ICDP

An individual collateralized debt position (ICDP) allows an account to create new Kresko Assets. Each account has control over the management and risk of the position, meaning it can be isolated with a single collateral and debt asset, or a diverse strategy with multiple assets.

The same minimum collateralization ratio and liquidation threshold applies to all positions. Collateralization ratio of a position must be above the MCR to mint Kresko Assets, this ratio is directly increased by repaying debt or depositing more collateral.

SCDP

The shared collateralized debt position (SCDP) allows different accounts to deposit into a single position. These pooled deposits are utilized as liquidity for zero-slippage swaps where Kresko Assets can be exchanged to an equal value of another Kresko Asset.

The position concentrates the liquidity of Kresko Assets while liquidity providers and traders avoid the downsides of a regular AMM, such as slippage, impermanent loss and fragmented liquidity. Accounts can participate in the SCDP as a depositor, trader and/or a liquidator.

Synth Wraps

Kresko Assets can be directly created outside of a CDP if a reputable representation of the underlying asset exists on-chain. In this case, the underlying is "synth wrapped" to an equal amount of the Kresko Asset, which can then be unwrapped by burning the Kresko Assets.

KISS

Finally, the protocol includes a special stable asset, KISS, to onboard stablecoins like USDC into the system without overcollateralization or liquidation risk.

What to do with these things?

For example, Kresko Assets borrowed using the ICDP can be exchanged to another Kresko Asset which translates to a short position on the borrowed asset.

Conversely, using KISS or synth wraps to obtain Kresko Assets which are further swapped using the SCDP allows any Kresko Asset to be acquired without borrowing that can be used to eg. open a long position on an asset.

You can also provide liquidity into the SCDP which is incentivized from the fees paid by traders. Another option is to perform liquidations in the protocol.

Further, a bit advanced use-cases are things like price arbitrage, hedging strategies and extending or using the protocol with your own smart contracts.

Where can I do all this?

Interaction with the protocol happens using an user-interface, an API or just by directly by sending transactions into the blockchain network. The core protocol is open source allowing anyone to build public user-interfaces or other integrations that use the protocol.