i. General
Mint/Redeem USDca
How to Mint/Redeem USDca?
Minting USDca Guide
A whitelisted user signs an EIP-712 signature, providing USDT/USDC/WETH or an ETH LST, and receiving USDca in return assuming CAMP signs as well.
CAMP transfers the backing asset directly to an “off-exchange” custody account with transparency of position solvency. This position is fully auditable onchain and backing never leaves the protocol wallets to minimize custody and exchange counterparty risk.
CAMP delta hedges the deposited amount of backing assets immediately. Stability is supported through the delta-neutral positioning between spot backing assets and the short perpetual or expiring futures position – the position is generally 100% collateralized.
Once the hedge execution has been confirmed via API, CAMP mints USDca to the minter’s wallet.
Redeeming USDca Guide
A whitelisted user transfers USDca to CAMP’s redeem ****smart contract.
CAMP makes available for withdrawal the proportional amount of backing assets into the desired receipt asset.
CAMP closes the corresponding delta hedging short position.
CAMP transfers the backing asset to the whitelisted user’s wallet address once accounting for the derivative hedge.
Am I only able to get USDca via minting USDca with CAMP?
No, users are able to acquire USDca via decentralized protocols such as Curve, Balancer and Uniswap. Users can also currently buy & sell USDca on centralized exchanges’ spot markets such as Bybit, Bitget and Kucoin.
Can I provide less or more collateral value than the amount of USDca I want to mint?
No. Whitelisted users are not able to under or overcollateralize a mint of USDca. This is because CAMP is intended to be a fully backed synthetic dollar that utilizes minters’ transferred backing assets to margin the delta hedging derivatives positions at a 1:1 ratio to promote capital efficiency and scalability.
How is ongoing portfolio delta neutrality maintained?
CAMP’s internal systems monitors the delta of the protocol backing assets as well as the delta of the hedging derivatives positions. There are multiple systems and sources of redundancy maintaining both the integrity of the data as well as the integrity services that manage the hedging.
The delta hedging mechanism is maintained as follows:
Systems are continuously running and maintaining delta neutrality, when mint and redeems are requested they get added to a queue and netted out if possible.
When a delta is detected, CAMP seeks optimal execution among venues using multiple metrics:
Synthetic price
Calculating the fair value of a given asset is the cornerstone of good execution, when a perpetual is trading at a temporary premium/discount this is taken into account.
Funding rate
Projection of future yield and its persistence is used to adjust the synthetic price, given current and recent historical funding rates as well as platform native futures premium.
Risk limits
Overall system delta needs to be balanced, with exposure on each venue being maintained at optimal levels of the TVL size according to venue specific contribution to total open interest.
Position on a single venue must have a percentage of open interest cap.
Delta is either hedged in full or partially distributed over connected exchanges. Market impact is always taken into account to ensure a high execution quality.
An aggregated orderbook with synthetic price offsets is maintained, making it possible to identify where the liquidity is located and how to route it.
When liquidity is sourced from multiple venues, latencies between CAMP systems and the venue are taken into account and hitting orders are sent in such a way that they hit simultaneously.
Large mint/burn requests that can’t be automatically performed within 10bps of fair value, enter “manual” flow, where the request is fulfilled at a future price found according to a TWAP plus a risk markup over multiple blocks. Due to per-block mint and redeem limits the practical occurrence of this is minimal.
What can I use USDca for outside of a store of value and staking to earn a return?
At the moment, whitelisted participants are able to mint and redeem USDca De to use as transactional money in DeFi or CeFi*,* earn on staked USDca, as well as use staked USDca **within DeFi as supported by third-party applications.
CAMP is now enabling (and will continue to enable) a lot more opportunities across both centralized and decentralized ecosystems for integrations.
Finally, other DeFi applications will be able to leverage and build upon sUSDca as a reserve asset within their own products.
What common scenarios could lead to the protocol’s positions ceasing to be delta neutral?
Funding Payments/Costs. The protocol receiving or paying funding might cause the portfolio to deviate from within the accepted delta neutrality boundaries. This is mitigated by real-time monitoring and execution of subsequent hedges.
Exchange Failure. An exchange failure could lead to a moment wherein the system delta is not hedged as the positions on the exchange no longer exist, though in some cases the PnL may be recoverable. In this instance, the system would automatically execute hedges on alternative exchanges using existing collateral. The absence of material leverage on existing positions affords the protocol flexibility.
Hedges using Inverse (coin-margined) contracts. Hedges on contracts margined in the same currency as the underlying mean the delta will fluctuate in a narrow band around 0 as the price of the underlying changes. During rapid underlying price movements, the collateral margining the derivatives positions can quickly become more or less valuable which surfaces a level of convexity on these contracts. The delta of the system may need to be hedged/unhedged to ensure the system delta remains within acceptable delta boundaries.
Is it possible for a hedge not to be executed on mint/redeem?
It is extremely unlikely. CAMP taps into a large number of liquidity pools across CeFi, DeFi, and OTC markets. It’s important to keep in mind that CAMP always retains the ability to reject user requests to mint/redeem USDca in the case it is not executed to ensure users do not carry naked spot asset price risk even if only for a short period of time. In the millisecond period wherein CAMP signs a request for a mint/redeem and every pool of liquidity goes offline a the same time, CAMP has a reserve fund, as well as limits to the amount of USDca that can be minted/redeemed within a single transaction, that can bear the delta risk for a brief period until liquidity pools are available again.
Who bears the cost of minting/redeeming?
The cost of minting/redeeming USDca is borne by the minting and redeeming whitelisted users. The protocol doesn’t explicitly charge these fees, but rather presents the mint/redeem prices users accept to incorporate costs.
The protocol has a number of costs that are passed on, such as gas & execution fees, to avoid the protocol bearing the cost. CAMP endeavors to keep these costs as low as possible and there is no intention for the protocol to earn any fees or profit from mint/redeem operations, although it is possible for minimal profit to accrue due to reduced execution costs vs. estimated.
How does the protocol convert stablecoins to BTC, ETH, or LSTs?
CAMP accesses multiple different pools of liquidity to execute swaps between different tokens to align backing assets for the mint/redeem workflow. These include CeFi orderbooks, DeFi AMMs including Curve, Uniswap, Balancer, and Maverick, onchain RFQ venues such as 0x, 1inch, and Bebop, or OTC pools of liquidity.
Do I have to KYC to mint/redeem USDca?
Yes - whitelisted market making counterparties who directly mint/redeem USDca with CAMP must be KYC’d. However, all users are able to buy/sell USDca in permissionless or centralized exchange markets per the KYC policies of the relevant venue. This is functionally similar to the mechanism in place at Circle.
When I mint/redeem USDca, where do my assets go?
When you mint USDca and the signature request has been confirmed, the system atomically and trustlessly swaps backing assets transferred for USDca. This swap occurs within a single Ethereum transaction. You will receive newly minted USDca in your wallet and your provided backing asset is transferred to an OES custody solution.
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