--- SIP: '0039' Title: ZERO Token Sale via Origins Author: Edan Yago (@YagoBit) Status: Approved Track: Other Created: 2021-11-15 --- # SIP-0039: ZERO Token Sale via Origins ## Introduction I hereby submit this SIP to utilise the Sovryn Origins platform as a launchpad for the Zero protocol as a Sovryn [subprotocol](https://forum.sovryn.app/t/new-utility-for-sov-minting-subprotocol-tokens/1611). ## Motivation Zero can create a new dynamic for Bitcoin, allowing hodlers to avoid ever having to sell their BTC. Zero allows BTC to be used to create a 0% interest Line of Credit (LoC) for fiat-denominated needs. Everything that would have previously required selling BTC can now be accomplished by borrowing against this LoC. With the introduction of the Sovryn Mynt, Sovryn aims to improve the decentralization and security of stablecoin liquidity. With the addition of Zero, Bitcoiners can use their BTC as collateral for creating stablecoins that can be used for their everyday economic needs, including trading, lending, payments and hedging. LoCs are 0% interest positions that can be held into perpetuity. As the value of the underlying BTC collateral accruces value, the LoC expands allowing for additional borrowing. It is conceivable to maintain LoC borrowing indefinitely without the need to pay them down, unless it is desired to, once again, make the collateral liquid. ## Background Zero is a decentralized protocol that aims to provide interest-free stablecoin loans using RBTC as collateral, with a minimum RBTC collateral ratio of 110%. Loans are further secured by a Stability Pool containing ZUSD and by fellow borrowers collectively acting as guarantors of last resort. The ZUSD token will not be needed by the borrower, as it will automatically generate the B.Stables minted by the Sovryn Mynt. The Zero protocol is non-custodial, operated purely by smart contracts with no central controlling entity. As with the rest of the Sovryn ecosystem, users will interact directly with the Zero protocol with no KYC or intermediary interference. **Use cases:** - Borrow Stables secured by BTC by opening a Line of Credit (LoC) - Secure Zero by providing ZUSD to the Stability Pool in exchange for rewards - Stake the ZERO token to earn fee revenue paid for borrowing or redeeming ZUSD - Redeem 1 ZUSD for $1 worth of BTC when the ZUSD peg falls below $1 ## The ZERO Token ZERO is the subprotocol token issued by Zero. It captures the fee revenue generated by the system and incentivizes early adopters. The token will be economically tied to SOV via a bonding curve. As such supply is unlimited but becomes increasingly expensive in SOV terms as more are created - however, by proxy, the supply limit of SOV would theoretically limit ZERO supply at some point. More information about the ZERO bonding curve can be found in the ZERO Token Economics section below. Users can earn from ZERO in two different ways: - Deposit ZUSD to the Stability Pool and earn liquidation gains (in RBTC) and ZERO rewards. - Stake ZERO and earn ZUSD and RBTC revenue from borrowing and redemption fees. It is important to highlight that ZERO is not a stablecoin. Instead, ZUSD is used as the USD-pegged stablecoin used to pay out loans on the Zero protocol - and is collateral for the Sovryn Mynt. It can be redeemed at any time for the underlying collateral at face value. **ZERO Protocol benefits include:** - 0% interest rate - borrowers do not need to worry about constantly accruing debt. - Minimum collateral ratio of 110% - efficient use of RBTC on deposit. - A subprotocol of the Sovryn protocol - all operations are algorithmic and fully automated, and protocol parameters are upgradable by Bitocracy. - Directly redeemable - ZUSD can be redeemed at face value for the underlying collateral at any time, guaranteeing a price floor of $1. - Bitocracy controlled - Zero will be deployed within the Sovryn protocol, making it censorship-resistant and under the control of Bitocracy. It is expected that ZERO stakers will govern the Zero subprotocol. However, there may be a transition period where Zero is still directly governed by SOV Bitocracy. ## Proposal - Perform the initial issuance of the ZERO token sale on Sovryn’s Origins Launchpad Platform. - The initial issuance will be at a fixed exchange rate of SOV to ZERO. - List the ZERO token on the Sovryn AMM. - Integrate interest-free loans and the remainder of the Zero Protocol into Sovryn. - A trading fee of 0.3% will be applied to trades that redeem ZERO for SOV. The fees thus collected will accrue to the Sovryn protocol and distributed to SOV stakers. This fee will be applied in SOV. ## Timing - It is anticipated that Zero subprotocol and the Sovryn Mynt subprotocol will launch within 6 weeks of both protocols having been approved. - It is anticipated that the bootstrap sale for the Zero bonding curve will occur shortly after this SIP is passed. ## ZERO Token Economics 20% of Zero subprotocol revenue will accrue to SOV stakers and 80% will accrue to ZERO stakers. **Bootstrap Sale Details** Bootstrap Supply: 65% Incentive Supply: 35% Bootstrap conversion rate: 100 ZERO per 1 SOV | | | Lockup | Vesting | | ------------------------ |:-------:|:-----------------:|:------------------------:| | Bootstrap Supply | 65% | Up to 1 Month | N/A | | Incentive Supply | 35% | See Below | See Below | | | | | | | **Incentive Supply*** | | | | | Zero Founders | 9% | N/A | 36 Months, 6 Month Cliff | | Liquidity Mining | 9% | Exchequer | N/A | | Stability Pool | 8% | Algorithmic | N/A | | Zero Treasury | 5% | 1 Month | 36 Months | | Fully-vested SOV stakers | 3% | Algorithmic | N/A | | LQTY Merkledrop | 1% | Active acceptance | N/A | | **Total** | **35%** | | | > `*` The Incentive Supply will first be sent to the Exchequer Committee, who will then distribute the Incentive Supply to the groups specified in this table. The bootstrap sale will take place as a week-long event during which SOV can be deposited, via Origins, in the bootstrap smart contract. The amount of SOV that can be deposited will be uncapped. ### Bootstrap and Bonding Curve Formulas ZERO is a continuous token that is economically tied to SOV through a bonding curve smart contract. The bootstrap and bonding curve smart contracts define a mathematical relationship between the ZERO/SOV bootstrap conversion rate, the amount of SOV that participates in the bootstrap event, the Initial Supply of ZERO, and how much SOV is allocated as reserves for the bonding curve and Zero Treasury. The math formulas and how they are used to calculate the relevant values are described below. **Bootstrap Supply** `P * c = W` ZERO will be minted by bootstrap participants, where `P = Participating SOV`, `c = bootstrap conversion rate (100)`, and `W = Bootstrap Supply`. `P` is the amount of SOV that participates in the bootstrap event. **Incentive Supply** `W * m / (1 - m) = X` ZERO will be minted in addition to the Bootstrap Supply and sent to the Exchequer Multisig for further distribution according to the table above, where `W = Bootstrap Supply`, `m = Incentive Supply multiplier (0.35)`, and `X = Incentive Supply`. **Bonding curve reserve** `(Y / c) * r = Z` SOV from the bootstrap event will be used as reserves for the bonding curve, where `Y = Initial ZERO Supply (Bootstrap Supply + Incentive Supply)`, `c = bootstrap conversion rate (100)`, `r = reserve ratio (0.4)`, and `Z = Bonding curve reserve`. **Treasury reserve** `P - Z = T` SOV from the bootstrap event will be sent to the Exchequer Multisig as a reserve to be used for supporting the Zero protocol, where `P = Participating SOV`, `Z = Bonding curve reserve`, and `T = Treasury reserve`. ### ZERO Total Supply As detailed above, the Initial Supply is equal to the Bootstrap Supply + Incentive Supply, which in turn are determined by how much SOV participates in the bootstrap event. Once the bootstrap event is over, the ZERO bonding curve will go live at a starting conversion rate equal to the bootstrap conversion rate (100 ZERO/SOV), and from there both the ZERO/SOV conversion rate and total supply of ZERO will be dictated by the bonding curve formula (Bancor formula). Said simply, as SOV is deposited into the bonding curve, the ZERO supply and the ZERO/SOV rate will both increase; as SOV is withdrawn from the bonding curve, the ZERO supply and the ZERO/SOV rate will both decrease. ## License Copyright and related rights waived via [CC0](https://creativecommons.org/publicdomain/zero/1.0/).