What Is Hithotx (HITX)?
The minting process of QSD will burn CEC, and the redemption process will mint CEC. The value of CEC will be directly related to the demands of QSD. When redeeming, the user provides QSD tokens to the system, selects the corresponding collateral, and executes the redemption action. Through redemption, users can use QSD to exchange certain collateral and CEC tokens from the collateral pool. Hithotx the initial stage of the system startup, the CEC tokens obtained from redemption will be encapsulated by the CBT token, which can be converted into CEC tokens under certain conditions.
Since Hithotx supports multiple collaterals, the system will allow users to choose specific collateral to redeem. If a certain amount of collateral is completely redeemed and the user’s redemption goal cannot be fulfilled, the user can continue to select other collateral for redemption until all redemption operations are completed.
Hithotx Storage Key Points
|Source Code||Click Here To View Source Code|
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|Whitepaper||Click Here To View|
|Official Project Website||Click Here To Visit Project Website|
Buybacks & Recollateralization
During the operation of Hithotx, there may be a mismatch between the value of the collateral and the collateral ratio. when the total value of the collateral is less than the current collateral ratio of the system, the collateral needs to be increased when the value of the collateral exceeds the ratio of the collateral ratio, the excess collateral value can be allocated to CEC holders. To quickly redistribute value back to CEC holders or increase system collateral, two functions are built into the protocol buyback and recollateralization.
When the actual collateral ratio of the system is lower than the nominal collateral ratio, the system requires users to replenish the collateral. This process is called recollateralization. Anyone can call the Hithotx function which then checks if the total collateral value in USD across the system is below the current collateral ratio. If it is, the system allows the caller to add up to the amount needed to reach the target collateral ratio in exchange for newly minted CBT at a bonus rate.
The bonus rate is set to 0.5% to quickly incentivize arbitragers to close the gap and recollateralize the protocol to the target ratio. The incentive amount can be adjusted through community governance in the subsequent operation of the agreement. Hithotx Assuming that the system is in a state of insufficient collateral at this time, it needs $500,000 of collateral to reach the target mortgage rate. The user can call the recollateralization function and provide $500,000 worth of collateral to the protocol.
The opposite scenario occurs when there is excess collateral in the system than required to hold the target collateral ratio. In such a scenario, any CEC holder can call the buyback function to exchange the amount of excess collateral value in the system for CEC which is then burned by the protocol.
To effectively redistributes excess value back to the CEC distribution and holders, Hithotx expect the users to actively participate in buybacks to gain value since there is 1% bonus rate for the buyback function, with the consumption in buyback, CEC also has expectations of value growth. After the buybacks occurs, since some CEC will be burned, it can also bring added value to all CEC holders.
This can happen in several ways:
- The protocol has been lowering the collateral ratio successfully keeping the price of QSD stable;
- Interest bearing collateral is accepted into the protocol and its value accrues;
- Minting and redemption fees are creating revenue.
Among the fourth-generation algorithmic stablecoins, bond tokens are designed to cushion the price fluctuations of stablecoins. In QSD, Hithotx studied this design idea and introduced two bond tokens, which are the following tokens one is the bond token CBT released in redemption and recollateralization and the other one is the special bond DBQ activated when the price of QSD significantly deviates from the target value.
The scenarios and algorithms of CBT (CEC buffering token) have been introduced in the QSD redemption and recollateralization section. Here Hithotx will analyze the purpose of this design. The goal pursued by QSD is the continuous growth of QSD issuance and the intrinsic value of CEC. For this goal, the system will set up a mitigation mechanism for the CEC minted at the time of redemption and recollateralization in the early stage of the system to avoid large fluctuations in the price of CEC tokens. Specifically, when redeeming or recollateralizing, the value of CEC tokens in the algorithm part will be converted to CBT.
When certain conditions are met, users can convert CBT to CEC one-to-one. If no one provides collateral when recollateralization is needed, it will easily cause QSD to break into a “death cycling”. In the fractional algorithmic synthetic asset system, when collateral needs to be added, it is often accompanied by a decline in the CEC price and the QSD price below the target price. The additional issuance of CEC tokens during the recollateralization process will undoubtedly intensify the decline in its price.
Hithotx is very risky if all the stability recovery is pinned on the assumption that the CEC market price can sustain by the market itself. Therefore, the Chemix Ecosystem development team proposes to release the buffering token CBT during the recollateralization process instead of directly releasing CEC.