Yves RennoLead Analyst
Lesley CzumaBusiness Development
Peter StreelmanSr Project Manager Tech Team
Veniamin KhrapovTech Lead
Eric WangAdvisory on EQ ecosystem development
Joe PetrowskiAdvisory on the Initial Parachain Offering strategy
Equilibrium is a DeFi 2.0 cross-chain money market protocol with high leverage. With Equilibrium users can:
Equilibrium introduces the first DeFi 2.0 protocol on Polkadot with novel on-chain approach to risk and pricing for asset portfolios. It enables borrowing with minimum collateralization as low as 105% and margin trading with up to 20X leverage.
The innovative design of Equilibrium’s bailout mechanism for liquidations that is low friction and does not need auctions allows for the introduction of the first fully on-chain order book based decentralized exchange with high leverage.
Here is what sets Equilibrium apart from other well-known known DeFi protocols:
– There are no arbitrary governance-set interest rates. They are determined by a borrower’s portfolio, borrower debt, overall system liquidity, and the market’s risks and dynamics.
– There are no arbitrarily set LTV requirements. The system makes sure every position remains solvent at a 100% collateralization ratio.
– There are no arbitrarily set liquidation penalties, and no hidden fees when borrowers default on their loan.
– Most loans in popular money markets (AAVE and Compound) are taken in major stablecoins for new investment opportunities. But users need to switch to other applications as there is no trading functionality on the initial platforms. Equilibrium solves this problem efficiently
– The Equilibrium assets module supports:
1. asset lending.
2. fractional reserve system and synthetic asset creation.
3. an exchange that lets users engage in leveraged trading.
4. portfolio hedging.
The Assets module logic lets Equilibrium introduce a broad line of DeFi products within one blockchain, practically out of the box.
– The thought-out design of Polkadot’s consensus and finality mechanisms guarantees the security of the Equilibrium substrate on the blockchain level. Approximately 10 collators manage the Equilibrium parachain with a POA consensus and shared GRANDPA finality and blockchain security provided out of the box by Polkadot.
– Equilibrium achieves cross-chain compatibility by way of Polkadot’s integration of third party bridges to different blockchains. Ecosystem-wide interoperability is further achieved with the help of the Polkadot’s XCM protocol.
Equilibrium will have a native token called EQ. EQ token serves several functions within Equilibrium’s DeFi ecosystem:
– Staking opportunities: EQ holders receive rewards on their tokens staked in governance, lending, and market making pools
– Bailout and collateral liquidity: EQ tokens can be locked in bailout pools to secure loans and earn yield or used as collateral to take out loans
– Platform currency: Users pay transaction fees for transacting on Equilibrium parachain and product fees in EQ
– Governance: token EQ holders have a say in system changes
Resources in a blockchain network are limited. That includes for storage and computation. Transaction fees prevent individual users from consuming too many resources. Equilibrium uses Polkadot’s weight-based fee model.
Fees on the Equilibrium Substrate chain are calculated based on three parameters:
– A per-byte fee (also known as the “length fee”)
– A weight fee
– A tip (optional)
The length fee is the product of a constant per-byte fee and the size of the transaction in bytes.
Weights are a fixed number designed to manage the time it takes to validate a block. Each transaction has a base weight that accounts for the overhead of inclusion (e.g. signature verification) as well as a dispatch weight that accounts for the time to execute the transaction. The total weight is multiplied by a per-weight fee to calculate the transaction’s weight fee.
Tips are an optional transaction fee that users can add to give a transaction higher priority.
Together, these three fees constitute the inclusion fee. This fee is deducted from the sender’s account prior to transaction execution. A portion of the fee will go to the block producer and the remainder will go to the Treasury. At Equilibrium’s genesis, this will be set to 80% and 20%, respectively.
Equilibrium DEX will charge trading fees. We are looking at fees presumably starting in the 0.03% – 0.06% range and then falling based on trade volume, so there will be a commission tier tied to average trading volumes per a specified period of time. The DEX is currently in the making, so actual numbers will be available after we perform some extensive unit and stress testing. The biggest challenge here is to figure out how to avoid transaction costs when placing an order, while at the same time discouraging network spamming by multiple orders. Equilibrium is developing a blended solution of unsigned transaction validation mechanisms and hard-set limits on tradable quantities of instruments.
Interest fees within Equilibrium are determined within the risk and interest rate modules and are based on each individual borrower’s portfolio of assets and the amount of debt/ liabilities this portfolio bears.
In short: the risk model increases borrower rates when bailsmen liquidity compared to collateral liquidity deteriorates and/ or entire system collateral becomes riskier, and vice versa: The risk model decreases borrower rates when liquidity from bailsmen picks up and/ or the entire system collateral becomes less risky.
The governance for Equilibrium will be driven by an on-chain process and will make use of the Democracy and Council pallets similar to how Kusama and the Polkadot chains are governed. The overall intent of these modules is to allow the majority of tokens on the network to determine the outcomes of key decisions around the network. These decisions come in the form of stake-weighted voting on proposed referenda and get enacted by an autonomous enactment system that ensures that user’s decisions are binding.
Some of the main components of this governance model include:
– Council — A group of elected individuals who have special voting rights within the system. Council members are expected to propose referenda for voting and have an ability to veto publicly-sourced referenda. There are rolling elections for council members where EQ token holders will vote on new or existing council members.
– Referendum — A proposal for a change to the Equilibrium system including values for key parameters, code upgrades, or changes to the governance system itself.
– Voting — Referenda will be voted on by EQ token holders on a stake-weighted basis. Referenda which pass are subject to delayed enactment such that people that disagree with the direction of the decision have time to exit the network.
Governance Decentralisation Roadmap
– 1. Initially, while developing, testing and finalising our core logic, Equilibrium will run on PoA consensus with a centralised sudo approach used for applying changes to the network.
– 2. After Equilibrium onboards as a parachain and delivers its line of products, we will introduce a governing council which will make Equilibrium-related decisions and changes to be visible on-chain. Changes to the protocol will still be managed via a SUDO. Council members will be elected from nominees on a basis, similar to what Polkadot does but with Equilibrium-specific parameters.
– 3. At final stage, when system proves to be stable, we will enable recurring council elections, public and council proposed referenda, tallying, adaptive quorum biasing. We will publish the detailed list of system parameters the governance will be able to monitor and change.
Token name: Equilibrium token
Total Supply: 12,000,000,000
Parachain Auction Rewards - 20%
Institutional Investors - 5%
NUT/EQ token swap - 25%
Liquidity farming - 10%
Team - 15%
Treasury - 25%