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Collateral Assets

Overview

Collateral Assets can be deposited into the protocol to enable borrowing Kresko Assets against the value of the deposit. Each Collateral Asset has a oracle feed that keeps the protocol updated with the most recent market information about it.

Collateral Asset Types

  • Native cryptocurrencies: existing digital assets available within the relevant blockchain ecosystem such as ETH.
  • Stablecoins: digital assets pegged to a stable fiat currency, such as USDC, DAI, or USDT.
  • Wrapped cryptocurrencies: wrapped digital assets representing a non-native cryptocurrency that has been bridged from another blockchain such as wBTC.
  • Synthetic assets: synthetic assets minted by Kresko Protocol can be supplied back to the protocol as collateral.

Criteria

Initially the protocol founding team has decided a list of assets to include but later on new collaterals can be added using a governance module.
Collateral Assets in the protocol can basically be any ERC-20 token with following properties
  • Has value.
  • Sufficient liquidity on-chain.
  • Good reputation.
  • Trustworthy oracle feed is available.
Kresko Asset can also be whitelisted as a Collateral Asset.

Collateral Factor

Collateral Factor (CF) is a value for each collateral based on its risk profile. Generally, the higher the volatility of an asset, the higher the risk.
It is a fraction between 0 and 1 that is used to calculate the risk-adjusted valuation of deposited collateral. Given an asset a, CF can be represented as follows:
CFa=[0,1]CF_a = [0,1]
A Collateral Factor of 1 means the protocol values the Collateral Asset in full when calculating a CDP's total collateral value.

Collateral Factor Example

Example
  • Collateral DAI has a cFactor of 1. Oracle price $1
  • Collateral wBTC has a cFactor of 0.8. Oracle price $15000
​
Bob deposits 100 DAI as collateral currently worth $100
Bob does another deposit with 0.1 wBTC currently worth $1500
​
Calculating the individual deposit values:
  1. 1.
    DAI = $100 * 1 = $100
  2. 2.
    wBTC = $1500 * 0.8 = $1200
​
Protocol will consider Bobs total collateral value as:
$1200 + $100 = $1300

Collateral Deposit Value

The quantity, price, and the asset's collateral factor are used to determine the deposit value (v) of an individual collateral deposit. Deposit value enables the protocol to properly weight different collaterals and calculate the total deposit value of the assets in real-time.
Given a user’s collateral a, oracle price
PaP_a
, quantity
QaQ_a
, and collateral factor
CFaCF_a
, the deposit value
vav_a
 can be represented as follows:
va=Qa∗Pa∗CFav_a = Q_a*P_a*CF_a
Example
If Alice has deposited 1,000 USDC, oracle price of 1 USDC = $1.01, CF for USDC = 0.99, then the deposit value can be calculated as follows:
vUSDC=1,000∗$1.01∗0.99=$990v_{USDC} = 1,000 * \$1.01 * 0.99 = \$990
​
For multiple collaterals, the total deposit value (V) is calculated by adding the deposit values of all the individual assets deposited.
Given n collaterals, a user’s total deposit value V is calculated as follows:
V=∑i=invi=∑i=1nQi∗Pi∗CFiV = \sum_{i=i}^n v_i = \sum_{i=1}^n Q_i * P_i * CF_i
Example
If Alice has deposited 1,000 USDC (v = $990), 1 ETH (v = $2,734.01), and 600 OP (v = $1,072.55), then the total deposit value is:
V=$990+$2,734.01+$1,072.55=$4,796.56V = \$990 + \$2,734.01 + \$1,072.55 = \$4,796.56
​
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