DeFi-TokenizedDepositSystemForRWA

• This is a DeFi protocol where users can "deposit" collateral (simulated as ERC-20 tokens representing real-world assets like bonds or commodities) to mint tokenized RWA Share tokens, which act as stable, yield-bearing representations of those assets.
• Incentives of holding these RWA Share tokens are that they are yield-bearing and liquid as they represent a claim, not the asset itself.
• This project is inspired by real banking tokenization initiatives, namely Project Guardian, allowing for the exploration of RWA standards, secure minting/burning mechanics, and compliance-like features purely on-chain.

MAS Project Guardian

• Monetary Authority of Singapore (MAS), recently rolled out an initiative called "Project Guardian"
• Project Guardian is a collaborative initiative between policymakers and the financial industry to enhance liquidity and efficiency of financial markets through asset tokenisation.
• Essentially a cross-border sandbox for real-world deployment, aiming to integrate TradFi with DeFi safely.

Project Overview

• Users deposits ETH to mint RWA Token (representing RWAs, e.g., a mock "GoldToken" for physical gold), with the amount of RWA Token minted based on the current asset price. The amount of tokens minted is based on a 1/10 denomation of the asset's value at mint time.
  • Eg. If gold is $2,500/oz, 1 RWA Token = $250 worth (0.1 oz).
• Users lock RWA Token (ERC-20 collateral) into a vault contract to mint "ShareTokens" (ERC-20 compliant, with yield rewards).
• The system ensures over-collateralization to mimic banking stability, with liquidation mechanics if collateral value drops (using a mock oracle).
• This simulates tokenizing real-world deposits/assets for on-chain custody and exchange, focusing on secure, scalable blockchain for payments and RWAs.

Protocol

• The RWA Token's value is tied to the underlying asset's price via oracles, so price movements directly impact everything downstream (health factor, redemption, liquidation).

  1. On Minting RWA Token:

     • Price up (gold to $3,000/oz) → user gets fewer RWA Tokens for the same ETH
     • Price down (gold to $2,000/oz) → user gets more RWA Tokens for the same ETH

  2. On Depositing to Tokenized Deposit Engine (Minting RWA Share Token):

     • The "value" of the deposit is based on the current oracle price of the underlying asset

  3. Health factor is calculated using USD value from oracles:

     • If asset price rises → collateral USD value increases → health factor improves (more buffer against liquidation)
     • If asset price falls → collateral USD value decreases → health factor drops (position becomes riskier)

  4. On Redemption (Burning RWA Share Token):

     • User burns RWA Share Token to get back RWA Token + yield.
     • As USD value of RWA Token fluctuates (underlying RWA):
       • Asset price up → redeemed RWA Token is worth more USD than when deposited.
       • Asset price down → redeemed RWA Token is worth less USD.

  5. Liquidation:

     • Asset price drop → collateral value drops → health factor falls → liquidation risk increases.
     • Liquidator can liquidate other users → pays back some minted shares, claims collateral at a discount
     • incentivizes liquidators to keep the system healthy

Protocol Disclamers

• RWA Token and RWA Share Token values fluctuate with the underlying asset price, no price stability is guaranteed.
• Deposits are not insured, liquidation can occur on price drops.
• Asset price movements amplify risk/reward:
  • Rising asset prices make positions safer and more profitable.
  • Falling asset prices trigger liquidations.

Features

• Allows fractional ownership of high-value assets without requiring users to buy a full unit
• Contract supports dynamic asset deployment
• Supports yield interest rate adjustments

Key Components

1. RWA Collateral Token (ERC-20)

   • RWA token representation
   • The collateral token

2. RWA Share Token

   • The minted token representing the tokenized deposit
   • Yield-bearing representations of the RWA Collateral Token
   • Implements burnable/pausable features

3. Vault Contract

   • Users approve and lock RWA collateral to mint DepositTokens at a collateral ratio
   • Redemption: Burn DepositTokens to unlock collateral
   • Liquidation: If collateral value drops below threshold (mock oracle price feed), allow liquidators to seize and auction collateral

4. Mock Oracle

   • Retrieves real world price feed of the RWA

Documentation

• Transferring/Trading RWA share token forfeits redemption rights to the recipient

Notes

• Yield rewards retrieved from reward pools are prefunded with RWA Share Tokens
• Yield is calculated per period between user interactions (deposit/withdraw/claim) using a locked-in interest rate from the start of each period
• Implements staleness checks for Oracle price feeds