Abstract— VIGOR is a crypto-backed decentralized stablecoin on the EOS blockchain that tracks the US dollar.

I. INTRODUCTION

The VIGOR stablecoin is a financial engineering innovation with regards to a decentralized stable unit of account. This project creates a crypto-backed stablecoin without a central counterparty by enabling participants to separate and transfer both volatility risk and price event risk through open source escrow smart contracts. Stablecoins are created and loaned out when EOS native crypto tokens are put into escrow as collateral and backed by insurers. This project introduces a decentralized system of borrowing & insuring; a crypto credit facility with only two distinct independent participants:

Borrowers escrow EOS native tokens as collateral take stablecoin loans, maintaining collateral level pay premiums over time to insure their collateral



Insurers escrow EOS native tokens as insurance assets earn premiums based on contribution to solvency bailout: take-over & recap undercollateralized loans



A. The Problem

Currently there is no decentralized stablecoin on EOS. Many use cases involving time value of money require this kind of basic functionality. Other projects suffer the following problems that this project will attempt avoid or improve upon:

Intractable Governance governance token concentrated to a few whales leading to manipulation voter apathy, voters expected to vote on complex topics for which they have no interest nor specialty making bug fixes and software upgrades especially on ethereum require odd workarounds requiring central control or bloat



Weak financial engineering arbitrary loan pricing with no financial model nor market price discovery complete lack of risk modeling participants having no way to know if risk/return is attractive no stress testing is done nor considered underestimating frictions of bailing out impaired financial products



Not scalable arbitrarily restricting users to use only low leverage poor user experience such as transaction fees and slow block times



B. The Solution

VIGOR stablecoin system allows users to borrow stablecoin against their EOS crypto. It facilitates the transfer of volatility and price event risk embedded in token prices. No mechanism yet exists on EOS mainnet for seperating and transfering these risks. Users can do the following:

Income earn income on EOS native tokens by escrowing them for use as insurance assets that back stablecoin loans



Leverage get up to 10x leveraged exposure to token prices by taking secured stablecoin loans followed by selling it for EOS



Hedge token holders can reduce exposure to prices by taking secured stablecoin loans followed by hodling stablecoin, effectively overlaying a put option on the crypto



VIGOR is structured as a decentralized autonomous community (DAC) for the advantages this governance structure provides. Elected custodians manage multisig access to update the contract code. The custodians will make critical operating decisions and will hopefully be experts in their respective fields. The governance token is called VIG. It’s utility is to provide access to the system, to be used as a fee token, and to be used as a final reserve (see subsection II-F). Custodian elections will be facilitated by randomly selecting users and requiring them to cast a vote when transacting on the system. Both borrower and insurer will have a voice in the elections. VIG tokens are paid-in by borrowers to purchase loan insurance and a cut is held by the system to be used as final reserve. The VIG token distribution methodology will try to discourage whale-sized holders, by distributing equally to all DAC genesis custodians, and by airdrop. The bailout mechanism is low friction and does not require auctions but rather the insurers simply take possession of the remaining collateral and debt of failed loans thus the illiquidity risk is offloaded to insurers who are compensated to take this risk. VIGOR is built on EOS to take advantage of no user transaction fees and fast blocktimes. Some unique requirements of the VIGOR system can perhaps be met using the new liquidapps.io DAPP network powered by DSP’s with vRAM and forthcoming vCPU. Specifically this will enable the VIGOR project to benefit from the ability to generate free escrow accounts for users, store large datasets of historical prices for risk and stress testing calculation, use oracles for obtaining the price datasets (though at first we are considering Delphi Oracle or Oraclize), obtain random deviates required for risk simulation, and execute cpu intensive algorithms for pricing and stress testing. We are aware that Block.one may build stablecoin tech into the base layer eos.io but to date there is no evidence, and it may be a good thing to have competing systems. Users will be able to stake their tokens (both collateral and insurance asset tokens) even when locked in escrow to utilize their ram and net resources however the system will automatically begin unstaking if collateral levels fall too low relative to user debt. VIGOR was designed from day one to have solid financial engineering specification using structured products and derivatives along with standards in regulatory risk management. For example our smart contract implementation focuses heavily on the duality:

Pricing: valuation model & price discovery

Risk: risk framework, stress model, & capital adequacy

The result is a self-sustaining ecosystem balanced by borrowers and insurers which is robust to extreme price events. VIGOR is a crypto-backed stablecoin system with relatively tractable governance, higher leverage capability for borrowers, and higher adoption/scalability than has ever been possible.

Footnotes:

*VIGOR stablecoin project originates from the many not the few.

[1] Special thanks to genesis custodians.

Vigor Stablecoin and DAC Social Links