Abstract
This proposal strives to achieve consensus within the community and deploy the core Increment protocol smart contracts to zkSync Era mainnet.
Proposal details
Purpose and Background
The Increment protocol empowers onchain perpetual swaps and strives to become a fundamental piece of DeFi infrastructure on zkSync Era and beyond. In order to achieve this mission, the Increment smart contract system will be deployed onto zkSync Era mainnet.
Technical Implementation
The smart contract system of the Increment protocol is designed as follows, each blue box representing a smart contract:
The Increment contracts are non-upgradable and the core contracts will only need to be deployed once. The contracts listed below are proposed to be deployed under this proposal:
- ClearingHouse
- Vault
- Insurance
- UA
- Oracle
After the deployment of the core contracts, if the community via the onchain governor decides to add new markets in the future then for each new market, new pools, tokens, and a perpetual contract will need to be deployed:
- 2 virtual tokens, one vBase and a vQuote
- 1 Curve V2 pool for these 2 tokens, at their current ratio
- 1 Perpetual contract, that users will interact with from the ClearingHouse contract
Please note that deploying new markets will require a successful onchain governance proposal and execution by the community.
Upon deployment, the initial global parameters of the Increment system are proposed to be set as the following but can be changed in the future through governance. Please note that some parameters are purposely set in a conservative manner for this initial launch.
| Global Parameters | Description | Implementation | Contract |
|---|---|---|---|
| minMargin | Minimum maintenance margin | 3% | ClearingHouse |
| minMarginAtCreation | Minimum margin for opening a position | 5% | ClearingHouse |
| minPositiveOpenNotional | Minimum order size | 35 UA (ie. USDC) | ClearingHouse |
| liquidationReward | Percent of openNotional paid to liquidator and insurance | 1.5% | ClearingHouse |
| insuranceRatio | Minimum value of insurance reserve as a % of collateral in vault | 10% | ClearingHouse |
| liquidationRewardInsuranceShare | % of liquidation reward paid to insurance when position is liquidated | 30% | ClearingHouse |
| liquidationDiscount | Discount given to liquidator on non-UA assets during collateral liquidations | 95% | ClearingHouse |
| nonUACollSeizureDiscount | Discount applied to margin calculations involving non-UA collateral, ensuring they are never valued higher than their liquidatable value. | 85% | ClearingHouse |
| uaDebtSeizureThreshold | Maximum value of losses non-UA collateral can be used to cover, before it is liquidated. | 10,000 UA | ClearingHouse |
| initialTokenMaxMintCap | Cap on UA able to be minted against each USD-pegged reserve asset | 10,000,000 UA | Vault |
USDC is proposed to be used as the sole reserve asset and is deemed 1:1 ratio to UA at deployment. No other assets will be supported as collateral for the time being.
Simultaneously, the Governor contract address: 0xcce2065c1DC423451530BF7B493243234Ba1E849 will be assigned as the onchain governor of the protocol. Anyone with enough voting power via the governance token INCR can propose or vote on future changes to the protocol, such as adding new markets and making changes to all the parameters listed above.
Effect and Impact Analysis
Increment is proposed to be deployed on zkSync Era, a Layer-2 protocol that scales Ethereum with cutting-edge ZK tech. At the time of writing, zkSync Era is still in the Full Launch Alpha stage and the sequencers are solely run by the Matter Labs team.
According to L2BEAT for the time being, the code that secures the system can be upgraded or changed arbitrarily and without notice by the governor, that currently is a 4 / 8 Multisig. The governor can also change the Verifier contract without notice. In addition, the sequencer cannot selectively skip transactions but can stop processing the queue entirely. In other words, if the sequencer censors or is down, it is so for everyone. That said, zkSync Era has plans to decentralize the system and allow participants in as operators in the near future.
Copyright
Copyright and related rights waived via CC0.
Poll vote: Closes on Nov 10
- Let’s deploy on zkSync Era!
- No, don’t do it
