UPFI Network

UPFI is the stable coin partially backed by collateral and partially stabilized algorithmically.

What is UPFI?

UPFI token is a partially collateralized token, soft pegged to the U.S. Dollar. The protocol aims to maintain UPFI token’s price stability. This collateral is used for redemptions, helping to maintain price stability.

The collateral consists of two tokens. USDC and UPFI share token (UPS). The USDC token is deposited into the protocol when a user mints UPFI token, while the UPS token, serving as collateral is burned when a user mints UPFI token and minted by the protocol when a user redeems UPFI token.

Minting

Minting is the name of the process which creates UPFI tokens. In order to mint 1 UPFI token, the user must deposit approximately $1.00 worth of collateral into the protocol in the form of USDC and UPS token. The ratio of USDC and UPS token that is required for minting UPFI token is determined by the Target Collateral Ratio (TCR)

The percentage of USDC token required always equal to the TCR percentage, while the required percentage of UPS token is 100% minus the TCR percentage.

Example

If you would like to mint 1,000 UPFI tokens and the TCR percentage is 75%, then you need 75% USDC and 25% UPS

Redeeming

Redeeming is the name of the process where the user returns UPFI token to the protocol in exchange for collateral. The protocol burns the redeemed UPFI token and pays the user approximately $1.00 worth of value in USDC and UPS token.

The ratio of USDC and UPS token paid to the user is determined by the Effective Collateral Ratio (ECR). The ECR percentage equals to the percentage of USDC token the user receives in the redeeming process, while the percentage of UPS token paid to the user is the sum of 100% minus the ECR percentage.

Example

If you would like to redeem 1,000 UPFI token and the ECR percentage is 85%, then you should receive 850 USDC token and 150 USDC worth of UPS token.

Collaterals

The protocol works with two collaterals, USDC and UPS token. USDC token is received by the protocol when the user mints UPFI token and this deposited USDC is stored in the protocol’s time- locked smart contracts. The UPS token which is used in the minting process is used as collateral dynamically, meaning when the user mints UPFI token using USDC+UPS token, then UPS token is burned and if the user redeems UPFI token, then UPS token is minted.

The Effective Collateral Ratio (ECR) , is the percentage of USDC stored as collateral relative to the supply of UPFI token. If the ECR is 85% and the supply of UPFI is 10 million, then 8.5 million USDC is stored in the protocol, while the other 1.5 million UPFI is dynamically collateralized with UPS token.

Price stability

The UPFI token’s price stability is supported by multiple mechanisms. The main pillar of the price stability comes from the possibility of redeeming UPFI token for approximately one U.S. Dollar worth of tokens.

Another mechanism to support the price peg is the arbitrage opportunity offered by the minting and redeeming functions.

If the price of the UPFI token is less than one U.S. Dollar, then anyone can purchase it on the open market and redeem it for approximately one USD worth of value.

If the price of the UPFI token is more than one U.S. Dollar, then anyone can mint it with the protocol for approximately one USD worth of value and sell it on the open market.

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