How does tDOT work?
tDOT is first minted by providing both DOT, and the DOT derivative into a dedicated liquidity pool.
For example, on Acala, you can contribute DOT and LDOT into the Tapio pool, where you then receive tDOT in return.
For example, on Acala, you can contribute DOT and LDOT into the Tapio pool, where you then receive tDOT in return.
This tDOT can then be held, as if you were simply holding native DOT, however it will be accumulating rewards from the underlying yield generating assets (like LDOT), swap fees (from users swapping DOT to LDOT and vice versa) and token incentives (such as $TAP), which can then be claimed.
However, the tDOT can also be redeemed for native DOT or LDOT at anytime due to the inherent peg that’s sustained by the pool allowing you to maintain the stability of holding DOT while not sacrificing any upside.
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tDOT is powered by the Stable Asset System
Stable Swap
Enables highly efficient swap between native DOT and DOT derivatives
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Stable Asset
A synthetic asset (tDOT) is minted and backed by standalone liquidity pools (ie. DOT-LDOT)
How is tDOT minted?
Stable Asset system can be deployed as a Substrate pallet or EVM module across different Parachains
tDOT is backed by DOT-DOT derivative liquidity pools (ie. DOT-LDOT, DOT-lcDOT)
tDOT minter function is deployed on Acala, which serves as the hub for minting tDOT
tDOT accrues yield and swap fees from the underlying liquidity pools
XCM enables the transfer of tDOT across parachains
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What problems does this solve?
01
Fragmentation of liquidity across the ecosystem
As the Dotsama ecosystem develops, the number of derivatives is steadily increasing and can be seperated into 2 categories:
• Staked DOT e.g. Acala’s LDOT and Parallel’s sDOT
• Crowdloan DOT e.g. Acala’s lcDOT
This unfortunately fragments all the shared (and already low) DOT liquidity amongst these assets and parachains.
• Staked DOT e.g. Acala’s LDOT and Parallel’s sDOT
• Crowdloan DOT e.g. Acala’s lcDOT
This unfortunately fragments all the shared (and already low) DOT liquidity amongst these assets and parachains.
tDOT unifies this liquidity by serving as a catch all asset class which is transferrable and able to be used interchangeably.
02
Parachains have to compete for DOT liquidity
Each of these DOT derivatives have to bootstrap their own liquidity and find stable pricing which is difficult and time consuming, due to the competition with countless other assets.
As a result, parachains have to compete with each other for DOT liquidity which doesn’t promote unity or collaboration within a communal ecosystem.
As a result, parachains have to compete with each other for DOT liquidity which doesn’t promote unity or collaboration within a communal ecosystem.
However, rather than having various pools with unrelated LP tokens, parachains can instead create additional use cases for tDOT and consolidate liquidity accordingly.
03
Adoption is increasingly difficult for application builders
Another side effect of multiple forms of DOT derivatives is that adoption of them becomes increasingly more challenging both from the parachains perspective, but also as an application builder.
With so many assets, dApps have to individually integrate and support all these different versions, compounding the already uphill battle.
With so many assets, dApps have to individually integrate and support all these different versions, compounding the already uphill battle.
Instead, if all of the derivatives exist within liquidity pools that subsequently mint tDOT, then new projects (and existing ones) can instead opt to support tDOT and hence have access to all the assets and liquidity with far less difficulty.
What are the usecases?
Serves as an extremely efficient stable swap engine for DOT and DOT derivatives (ie. swap engine for DOT-LDOT)
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Seamlessly integrate with DeFi primitives:
- Staking
- Collateral (ie. use tDOT as collateral for margin trading)
- Lending (ie. Mint aUSD or borrow against tDOT)
- Staking
- Collateral (ie. use tDOT as collateral for margin trading)
- Lending (ie. Mint aUSD or borrow against tDOT)
Siloed DOT liquidity on a parachain can be used to mint tDOT, enabling dApps on the native parachain to support a single unified DOT standard
Naturally serves as a cross parachain swap mechanism (thanks to XCM)
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XCM Swap
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Naturally serves as a cross parachain swap mechanism (thanks to XCM)
Stable Swap
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Serves as an extremely efficient stable swap engine for DOT and DOT derivatives (ie. swap engine for DOT-LDOT)
DeFi Primitives
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Seamlessly integrate with DeFi primitives
- Staking
- Collateral (ie. use tDOT as collateral for margin trading)
- Lending (ie. Mint aUSD or borrow against tDOT)
- Staking
- Collateral (ie. use tDOT as collateral for margin trading)
- Lending (ie. Mint aUSD or borrow against tDOT)
Liquidity Optimization
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Siloed DOT liquidity on a parachain can be used to mint tDOT, enabling dApps on the native parachain to support a single unified DOT standard