Fathom Protocol
  • Introduction
  • FXD Stablecoin
    • FXD Smart Contract Architecture
    • Minting and Burning Mechanisms with LTV Ratio
    • Soft-Pegging to the US Dollar
    • Opening and closing position flows
    • BookKeeping mechanism
      • Stablecoin Accounting
      • Collateral Accounting
    • Liquidation
      • Fixed Spread Liquidation Strategy
      • Liquidation process walk through
    • Emergency Shutdown
    • Maths for position safety
    • Fee structure
    • Risk Management
    • Interfaces
      • ProxyWalletRegistry
      • ProxyWallet
        • FathomStablecoinProxyActions
      • CollateralPoolConfig
      • BookKeeper
      • FXD
      • LiquidationEngine
      • FlashMintModule
      • PriceFeed
      • ShowStopper
      • StabilityFeeCollector
      • SystemDebtEngine
      • AdminControls
    • Deployments
      • XDC Network
    • User Guides
      • Open FXD position
      • Top Up FXD Position
      • Repay and close FXD position
    • Fathom Stablecoin Smart Contracts
    • Fathom Stablecoin Subgraph
  • Vaults
    • Key Features
    • Definitions
    • Architecture
    • Fees
    • Workflows
    • Vault Management
    • Strategy Creation
    • Interfaces
      • Factory
      • Vault
      • BaseStrategy
      • TokenizedStrategy
    • Deployments
      • XDC Network
    • User Guides
      • Deposit and Withdraw in Vault
    • Fathom Vaults Smart Contracts
    • Fathom Vaults Subgraph
  • Lending
    • Core Concepts
    • Protocol Mechanics
    • Architecture
    • Interfaces
      • FmToken
      • VariableDebtToken
      • StableDebtToken
      • L2Pool
      • PoolAddressesProvider
    • User Guides
      • Supply, Borrow, Repay and Withdraw Asset
    • Deployments
      • XDC Network
    • Fathom Lending Smart Contracts
    • Fathom Lending Subgraph
  • DEX
    • Core Concepts
    • Architecture
    • Interfaces
      • Factory
      • Pair
      • Router
    • User Guides
      • Providing Liquidity
      • Swapping Assets
    • Deployments
      • XDC Network
    • Fathom DEX Smart Contracts
    • Fathom DEX Subgraph
  • DAO
    • DAO Structure
    • Governance Process
    • Staking Process
    • Treasury Management
    • Risk Management and Security Measures
    • Contributing to Fathom DAO
    • Interfaces
      • FTHM
      • Staking
        • Vault
        • RewardsCalculator
        • vFTHM
      • Governance
        • TimelockController
    • Deployments
      • XDC Network
    • User Guides
      • Staking
      • Proposing
      • Voting
    • Fathom DAO Smart Contracts
    • Fathom DAO Subgraph
  • Whitepaper
    • Version 1.0
  • Resources
  • FXD Deployments
  • FTHM Deployments
  • Privacy Policy
  • Terms of Service
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  1. FXD Stablecoin

Minting and Burning Mechanisms with LTV Ratio

Minting Mechanism with LTV Ratio Consideration

  1. Collateralization and LTV Ratio: In the Fathom Protocol, users provide collateral to borrow FXD. The Loan-to-Value (LTV) ratio determines the maximum loan amount. This ratio specifies the maximum proportion of the borrowed value relative to the collateral's value.

  2. Example of LTV-Based Minting: For instance, if a user collateralizes $100 worth of collateral asset and the LTV ratio is 65%, the user can borrow up to $65 worth of FXD. This system ensures that the minting of FXD is always in alignment with the value of the collateral based on the predetermined LTV ratio.

  3. Ensuring Balanced Issuance: The LTV ratio is a crucial parameter in smart contracts, ensuring that the issuance of FXD is balanced and proportionate to the underlying collateral. This prevents over-minting and maintains the protocol’s financial stability.

Burning Mechanism and Liquidation Process

  1. Position Closure and FXD Return: When users close their positions, they return the borrowed FXD to the protocol. The smart contracts immediately burn this returned FXD, removing it from circulation.

  2. Liquidation Trigger and Process: If the market value of the collateralized asset falls such that the LTV ratio is breached (i.e., the value of the borrowed FXD exceeds the adjusted permissible limit), a liquidation process may be initiated. This process involves the sale of the collateralized asset to liquidators in exchange for FXD.

  3. FXD Burning Post-Liquidation: The FXD acquired by the liquidator in exchange for the asset is then burned. This step is crucial for offsetting the outstanding debt and maintaining the financial equilibrium of the Fathom Protocol.

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Last updated 11 months ago

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