CW-Stablecoin Smart Contract

This repository contains a CosmWasm smart contract designed to create and manage a stablecoin system backed by collateral.

Overview

The contract allows users to:

• Deposit collateral
• Mint stablecoins
• Redeem collateral
• Burn stablecoins
• Liquidate positions

Maintaining the $1 Peg

The protocol maintains the $1 peg of the stablecoin through the following mechanisms:

1. Collateral Backing:

   • Users deposit collateral (e.g., a native token) which is valued based on an external price oracle.
   • The value of the collateral is used to ensure that each stablecoin minted is backed by sufficient collateral.

2. Health Factor:

   • The health factor is calculated as the ratio of the collateral value to the debt (stablecoins minted).
   • A minimum health factor ensures that the value of the collateral always exceeds the value of the minted stablecoins.

3. Liquidation Mechanism:

   • If a user's health factor falls below a predefined threshold, their position can be liquidated.
   • Liquidation involves burning the user's stablecoins and transferring the equivalent value of collateral to the liquidator, ensuring that the stablecoin remains fully backed.

Reference: calculate_health_factor function

Features

Initialization

The contract is initialized with the following parameters:

• Owner address
• Oracle address
• Denomination of the collateral
• Minimum and liquidity thresholds

Reference: instantiate function

Execute Functions

The contract supports several execute functions to manage the stablecoin system:

• SetToken: Sets the stablecoin token address.
• DepositCollateral: Allows users to deposit collateral.
• DepositCollateralAndMint: Allows users to deposit collateral and mint stablecoins.
• RedeemCollateral: Allows users to redeem their collateral.
• RedeemCollateralAndBurn: Allows users to redeem collateral and burn stablecoins.
• Liquidate: Allows liquidation of a user's position if their health factor is below the safe threshold.
• Swap: Allows users to swap stablecoins for collateral at the current oracle price.

Reference: execute function

Helper Functions

• calculate_health_factor: Calculates the health factor (collateral value relative to debt).
• amount_sent: Calculates the amount of a specific denomination sent by the user.
• calculate_collateral_usd: Converts the amount of collateral to its USD value using the oracle price.
• oracle_price: Fetches the price of the collateral from the oracle.

Reference: helper functions

Minting and Burning Stablecoins

• mint_stable: Mints new stablecoins and sends them to the user.
• burn_stable: Burns a specified amount of stablecoins from the user's balance.

Reference: minting and burning functions

Query Functions

• Config: Retrieves the current configuration of the contract.
• Info: Retrieves information about a user's collateral, total debt, and health factor.

Reference: query function

State Management

The contract tracks the following states:

• Configuration (CONFIG)
• Collateral deposited by users (COLLATERALDEPOSITED)
• Tokens minted (TOKENSMINTED)
• Stablecoin token address (STABLE)

Reference: state management

Error Handling

Custom errors are defined to handle various failure scenarios such as unauthorized actions or insufficient health factors.

Reference: error definitions

Contract Version

The contract version is set using the set_contract_version function from the cw2 crate.

Reference: contract version

Building and Testing

To build and test the contract, you can use the following commands:

cargo wasm
cargo test