MCR is generated, backed, and kept stable through collateral assets that are deposited into Land Vaults on the MonolithosDAO Platform. A collateral asset is a digital asset that MDT holders have voted to accept into the Platform.
All accepted collateral assets can be leveraged to generate MCR in the MonolithosDAO Platform through smart contracts called Land Vaults. Users can access the MonolithosDAO Platform and create Vaults through a number of different user interfaces (i.e., network access portals), including Land Borrow and various interfaces built by the community.
To generate MCR, the MonolithosDAO Platform accepts as collateral any Ethereum-based asset that has been approved by MDT holders. MDT holders must also approve specific, corresponding Risk Parameters for each accepted collateral (e.g., more stable assets might get more lenient Risk Parameters, while more risky assets could get stricter Risk Parameters). Detailed information on Risk Parameters is below. These and other decisions of MDT holders are made through the MonolithosDAO decentralized governance process.
Creating a Vault is not complicated, but generating MCR does create an obligation to repay the MCR, along with a Stability Fee, in order to withdraw the collateral leveraged and locked inside a Vault.
● Step 1: Create and Collateralize a Vault
A user creates a Vault via the Land Borrow portal or a community-created interface by funding it with a specific type and amount of collateral that will be used to generate MCR. Once funded, a Vault is considered collateralized.
Interacting with a Land Vault
● Step 2: Generate MCR from the Collateralized Vault
The Vault owner initiates a transaction, and then confirms it in his/her unhosted cryptocurrency wallet in order to generate a specific amount of MCR in exchange for keeping the collateral locked in the Vault.
● Pay Down the Debt and the Stability Fee
To retrieve a portion or all of the collateral, a Vault owner must pay down or completely pay back the MCR he/she generated, plus the Stability Fee that continuously accrues on the MCR outstanding. The Stability Fee can only be paid in MCR.
● Step 4: Withdraw Collateral
With the MCR returned and the Stability Fee paid, the Vault owner can withdraw all or some of his/her collateral back to the wallet. Once all MCR is completely returned and all collateral is retrieved, the Vault remains empty until the owner chooses to make another deposit.
Importantly, each collateral asset deposited requires its own Vault. So, some users will own multiple Vaults with different types of collateral and levels of collateralization.
Liquidation of Risky MonolithosDAO Vaults
To ensure there is always enough collateral in the MonolithosDAO Platform to cover the value of all outstanding debt (the amount of MCR outstanding valued at the Target Price), any Land Vault deemed too risky (according to parameters established by MonolithosDAO Governance) is liquidated through automated MonolithosDAO Platform auctions.
The Platform makes the determination after comparing the Liquidation Ratio to the current collateral-to-debt ratio of a Vault. Each Vault type has its own Liquidation Ratio, and each ratio is determined by MDT voters based on the risk profile of the particular collateral asset type.