trenUSD
A USD pegged algorithmic stablecoin backed by long tail assets native to Tren Finance
What is $trenUSD?
The trenUSD token is a USD-pegged stablecoin backed by a variety of long tail assets. Tren Finance maintains a constant value for the $trenUSD token through overcollateralized loans, allowing for the token to keep its peg to 1 USD.
trenUSD operates as an ERC20 token but offers additional functionality beyond the standard ERC20 behavior. Standard token operations, such as transfers, allowances, and balance inquiries, adhere to the established ERC20 protocol.
Circulating Supply
The total trenUSD supply encompasses all minted tokens, irrespective of their present status or location. This includes tokens that are available for borrowing by users but are not actively in circulation. It is imperative to note that not all minted trenUSD tokens are immediately injected into active circulation.
Upon minting, trenUSD tokens are often directly placed into pools, which function as isolated lending markets. In these containers, tokens are made accessible for user borrowing. It is only when you choose to borrow these tokens that they enter true circulation. This is a crucial distinction because the "circulating supply" denotes tokens that are actively borrowed and thus available for movement, not just tokens in existence.
Maintaining The Peg
As trenUSD is a stablecoin pegged to the US dollar, it is essential to maintain its peg to the USD. This is achieved through arbitrage mechanisms, which can be executed in various ways.
Users who have borrowed trenUSD may observe that it is trading at a discount to 1 USD in some markets. In response, they might purchase trenUSD at this discounted rate to reduce their debt. This influx of buying activity can drive up the price of trenUSD relative to the trading volume.
Users who possess valid collateral may notice that trenUSD is trading above 1 USD in certain markets. They might choose to initiate positions and sell the borrowed trenUSD to allocate funds elsewhere. This action can contribute to a decrease in the price of trenUSD relative to the trading volume.
Individuals holding various cryptocurrencies, whether stablecoins or not, might observe disparities in trenUSD's trading prices across the aforementioned markets. They could opt to buy trenUSD in a market where the price is below 1 USD and sell it in another market where the price is at or above 1 USD. The reverse scenario can also occur.
In most instances, automated bots play a significant role in executing Market-to-Market arbitrage. These bots continually monitor liquidity pools for opportunities to capitalize on price discrepancies. This automated process helps in swiftly correcting any deviations from the desired price peg.
trenUSD minted into any of the containers on Tren does not enter circulation unless it is overcollateralized by a borrower through the money market so it does not lower the direct collateral ratio
Minting Formula
The contract has a special way of creating new tokens, and it's designed to control how many can be created within a certain timeframe. Each time new tokens are created, the timeframe restarts. This creation process is handled by a function called mint.
The rules for creating new tokens are managed by a structure called Minting, which has two parts:
Additionally, there are some fixed values related to token creation:
The mint function needs two things to work
to: The address where the new tokens will be created.
amount: The quantity of tokens to create.
totalSupply × MINTING_INCREASEMINTING_PRECISIONtotalMintedAmount
amount ≤ balanceOf[msg.sender]
Before creating tokens, the function checks that the destination address isn't zero and that the total supply of tokens won't go over the limit set by the token creation mechanism. This mechanism ensures that the total amount of tokens created in a specific period doesn't exceed the total supply multiplied by the MINTING_INCREASE divided by the MINTING_PRECISION. If everything checks out, new tokens are created, added to the balance of the destination address, and the total supply is updated accordingly. A record of this transaction is then emitted through a Transfer event, indicating that tokens have been moved from the zero address (created) to the specified address.
Consequently, the circulating supply of trenUSD typically remains smaller than the total supply. While the total supply encompasses all minted tokens, the circulating supply accounts solely for tokens actively borrowed and in circulation. Therefore, when evaluating the trenUSD supply, it is vital to differentiate between these two concepts for a precise understanding of the token's availability.
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