TCAP Architecture

System Components and Interactions

1. Liquidity Provider

• Role: Supplies collateral to the Vault.

• Actions:

  • Adds or removes collateral.
  • Mints or burns TCAP tokens based on the collateral deposited.

2. Vault (Heart of the System)

• Role: Manages collateral and ensures the smooth functioning of TCAP issuance and redemption.

• Structure: Divided into two pockets:

  • Default Pocket: Holds collateral without generating any interest.

  • Aave Pocket: Deposits collateral into Aave to earn interest.

• Responsibilities:

  • Stores collateral provided by Liquidity Providers.

  • Facilitates the minting and burning of TCAP tokens.

  • Integrates with external components (e.g., Chainlink Oracle, Interest Rate Setter) for stability and price tracking.

3. TCAP ERC20

• Role: Represents the synthetic token pegged to the total cryptocurrency market capitalization.

• Actions:

  • Minted or burned through interactions with the Vault.

  • Fee revenue from minting and burning operations is sent to the Cryptex Treasury.

4. Cryptex Treasury

• Role: Receives fees from the minting and burning of TCAP tokens.

• Purpose: Maintains the sustainability and growth of the protocol by managing collected fees.

5. Interest Rate Setter

• Role: Ensures peg stability for TCAP by dynamically adjusting interest rates.

• Actions:

  • Sets interest rates for collateral in the Vault.

  • Collaborates with the Vault to stabilize TCAP's value.

6. Chainlink Oracle

• Role: Provides the market price of the total cryptocurrency market capitalization.

• Actions: Feeds price data to the Vault for accurate minting and burning of TCAP.

7. Cryptex DAO

• Role: Decentralized governance body managing the protocol.

• Actions:

  • Modifies protocol parameters as needed.

  • Ensures the protocol adapts to market changes.

8. Liquidator

• Role: Ensures the health of the system by liquidating unhealthy Vaults.

• Actions: Monitors Vaults and liquidates positions with insufficient collateral.

Workflow Overview

Minting and Burning TCAP

1. A Liquidity Provider deposits collateral into the Vault.

2. The Vault calculates the amount of TCAP to mint based on the collateral value (tracked using Chainlink Oracle data).

3. Minted TCAP is issued to the Liquidity Provider.

4. For burning, TCAP is returned to the Vault, and the corresponding collateral is released.

Interest and Collateral Management

• The Vault manages collateral through two pockets:

  • Default Pocket: Simple storage of collateral.

  • Aave Pocket: Generates interest by lending collateral on Aave.

• The Interest Rate Setter adjusts rates to maintain the TCAP peg and incentivize desired collateral usage.

Fee Management

• Minting and burning operations incur fees.

• Fees are transferred to the Cryptex Treasury to support protocol operations and development.

Stability Mechanism

• The Interest Rate Setter adjusts rates to counteract price deviations of TCAP.

• The Chainlink Oracle ensures real-time price tracking of the total cryptocurrency market cap.

Liquidation Process

• Vaults with insufficient collateral ratios are flagged as unhealthy.

• Liquidators step in to liquidate these Vaults, maintaining system integrity.