ELI5: Activities on Chymia

The Chymia protocol is a set of smart contracts that allows users to perform the following activities:

• Deposit supported tokens as collateral and use the collateral to mint cUSD, an overcollateralized stablecoin pegged to the US dollar. Each supported token will have its own unique vault. When a user mints cUSD, the user is essentially taking on the cUSD as debt.

• Stake cUSD in a stability pool, which acts as a liquidity provider to cover the debt from any liquidated vault. It functions as a primary safeguard to ensure the protocol is solvent.

  • When a vault is liquidated, the cUSD in the stability pool will be used to pay off the debt, and in return, the previously deposited collateral will be transferred from the affected vault to the stability pool.

  • As the stablecoin is always overcollateralized, the stability pool will be able to effectively receive the collateral at a discount to its existing market value. A user staking in the stability pool will, over time, be swapping cUSD for collateral at a discount.

• Redeem any supported collateral in any vault using cUSD, at a face value of cUSD = $1. A user is not restricted to redemption on his or her own vault; the user can redeem any collateral of choice.

  • When a user redeems, the user is paying off the vault's cUSD debt in exchange for the vault's supported collateral.

• Pay off the debt incurred from the minting of cUSD, and in exchange, receive collateral that was previously deposited.