# Indigo Basics # ๐ŸŒŸIndigo Protocol Brief Overview ## Why Cardano? Given that the Indigo Protocol has been built to manage billions of dollars worth of assets, a well researched, secure, decentralized and scalable blockchain is necessary. Cardano is the most suitable blockchain that meets the requirements to fulfill Indigoโ€™s mission. ## Brief Overview ๐ŸŒŸ Welcome to Indigo Protocol, a decentralized synthetic assets protocol on the Cardano blockchain. Indigo facilitates secure and efficient trading through iAssets, enabling straightforward transactions and strategic trading. Users can mint and trade synthetic assets like iUSD, a stablecoin, and other assets such as iBTC, iETH, iJPY, and iEUR, which mirror the value of their underlying assets. These iAssets provide diverse trading and investment opportunities within the Cardano ecosystem. With [Indigo Protocol V3](/readme/indigo-protocol-v3), users can open loans backed by Cardano Native Tokens (CNTs) in addition to ADA, swap through the Peg Stabilization Module (PSM), and trade on the bi-directional Indigo OrderBook. Collateralized Debt Positions (CDPs) and Liquid Staking allow users to collateralize assets while continuing to earn ADA rewards from the Cardano network, ensuring users can maximize their yield across the protocol. Stability Pools play a vital role in maintaining the protocolโ€™s liquidity and stability by managing debt from liquidated CDPs and ensuring the solvency of iAssets. Through INDY Staking, INDY holders and DAO members can engage in protocol governance, influencing its direction while earning multi-yield rewards, and aligning governance with tangible benefits for its participants. Indigo Protocol is designed to cater to traders, liquidity providers, and governance enthusiasts, offering a range of opportunities in the decentralized finance space on Cardano. Please join the[ Indigo community Discord server](https://discord.com/invite/gVqDRNg7VH) to learn and be part of the community. ## How do I interact with Indigo? To interact with the Indigo Protocol, you simply need to: 1. Select the iAsset you wish to mint. 2. Select a collateral type (ADA or a whitelisted CNT). 3. Deposit collateral at or above the minimum amount for your selected pair. 4. Choose a collateral ratio (this will impact the amount of iAssets you are able to mint). The protocol will then open a [CDP](/readme/collateral-debt-position-cdp) and mint the required amount of iAssets and distribute it to your wallet directly. You are then free to use the iAssets as you see fit. To participate in the governance of Indigo and have a say in its evolution, head on over to our [Governance Forum](https://forum.indigoprotocol.io/)! # Indigo Protocol V2 \ Indigo Protocol V2 was designed to enhance the stability, efficiency, and economic incentives of the protocol. The upgrade introduces new mechanisms and parameters to better manage the minting, trading, and stability of iAssets. ## Key Features of the Upgrade ### **1. Maintenance Ratio (MR)** The Maintenance Ratio is a new parameter that sets the collateralization threshold required for users to mint additional iAssets or adjust their Collateralized Debt Positions (CDPs). This ratio aims to stabilize the system by limiting excessive debt minting, thus aiding in the maintenance of asset pegs. ### **2. Redemption Margin Ratio (RMR)** The RMR is a hard peg mechanism that defines the conditions under which iAssets can be redeemed. RMR is currently set to 185% for $iUSD, 150% for $iETH, and $iBTC. The RMR provides an arbitrage opportunity that incentivizes market correction and peg stability. ### **3. Interest Mechanism** The introduction of an interest rate on all CDPs is a pivotal change in V2. This interest mechanism serves dual purposes: it generates a new revenue stream for the DAO and helps manage the peg of iAssets. By dynamically adjusting interest rates, the protocol can incentivize or disincentivize the minting of a surplus supply of iAssets. ### **4. Fee Restructure** Indigo Protocol V2 introduced the DAO Treasury unlock and several new fee generation streams to create a more predictable and stable revenue model for INDY Stakers and the DAO. Long term, the DAOโ€™s accrual of ADA from Interest will grant Indigo access to resources for development, incentives, and campaigns. * **Debt Minting Fee:** A percentage of the amount minted, deducted during the minting process to generate revenue from increased debt minting activities. * **Redemption Fee:** A 2% fee on redemptions, half directed towards the redeemed CDP and half directed to INDY Stakers, enhancing peg stability while providing additional fee generation for INDY Staking. * **Stability Pool Withdrawal Fee:** A 0.5% fee on withdrawals from the Stability Pool, redistributed among depositors as a loyalty bonus. * **Liquidation Processing Fee:** A 2% fee on liquidated iAssets, replacing the previous collateral fee, ensuring a consistent revenue stream during market downturns. **5. Stability Pool Enhancements** The Stability Pool mechanism is further refined to ensure better management of liquidations and to provide more predictable rewards for stability providers. This includes the introduction of withdrawal fees and the redistribution of liquidation proceeds in a manner that rewards long-term stability pool participants. #### Implementation Strategy While the on-chain upgrade to Indigo Protocol V2 happened quickly, the transition to enable all of the Indigo Protocol V2 features such as interest, or redemption, was gradual and strategic. This approach ensured that the protocol evolved in a balanced and sustainable manner, with community feedback and participation playing a crucial role in the process.
# Indigo Protocol V3 \ Indigo Protocol V3 is the most significant upgrade since launch. It expands the protocol's collateral model beyond ADA, improves peg stability with a new Peg Stabilization Module (PSM), restructures interest so it is paid in iAssets rather than ADA, and introduces a migration toward zero INDY emissions. These changes provide: * Greater collateral flexibility with CNT-backed loans (e.g., NIGHT, USDM/A, USDCx, xBTC) * Reliable peg maintenance and improved stablecoin liquidity through the PSM * Sustainable protocol revenue flows in native iAssets * A migration toward a zero INDY emissions system * Improved UX for borrowers, LPs, and stability providers * Extended runway for DAO POL strategies that include iAsset LP * A diversified DAO Treasury * Bi-directional Indigo OrderBook orders against multiple collateral assets * Integration with Pyth as an oracle provider ## Key Features of the Upgrade ### **1. CNT-Backed Loans (Multi-Collateral Support)** Indigo V3 expands the collateral asset suite to allow users to open loans using Cardano Native Tokens (CNTs) in addition to ADA. Each loan position is single-collateral-type from creation to closure โ€” one loan position is backed by one collateral asset for its entire lifetime. **Product motivation:** * Enables iAssets to expand supply by tapping liquidity across the Cardano ecosystem * Reduces overreliance on ADA market conditions * Mirrors multi-collateral loan systems such as MakerDAO **Core user outcomes:** 1. **Loan position creation:** When opening a loan, the user selects the iAsset to mint (e.g., iUSD, iBTC) and the collateral type to use (e.g., ADA, USDCx, NIGHT). Only whitelisted collateral assets appear as available options. 2. **Collateralization rules:** Each iAsset/collateral pair has its own Liquidation Ratio, Maintenance Ratio, Redemption Ratio, Interest Rate oracle, Price oracle, and Minimum Collateral Amount. 3. **Collateral management:** Users can add or withdraw collateral, but only of the same asset type the loan position was created with. 4. **Interest & liquidations:** Interest is assessed using the collateral's own interest model. Liquidation payouts to Stability Pool depositors now include multi-asset rewards in addition to ADA. 5. **Governance:** The DAO may add or update collateral assets for any iAsset through on-chain proposals. Each iAsset supports a maximum of 8 non-ADA collateral assets. **Supported collateral attributes:** Each collateral type (ADA or CNT) has: 1. **Collateral Asset** โ€” Policy ID and asset name 2. **Collateral Asset Price Oracle** โ€” NFT or Pyth feed providing pricing in Collateral/iAsset (e.g., BTC/iUSD or ADA/iUSD) 3. **Loan Parameters** โ€” LR, MR, and RMR per collateral/iAsset pair 4. **Interest Rate Oracle** โ€” Algorithmic interest rate per collateral type/iAsset pair 5. **Minimum Collateral Amount** โ€” Minimum collateral allowed on a loan position after any user operation **New governance proposal types:** 1. List a new Collateral Asset for an iAsset 2. Update a Collateral Asset for an iAsset When listing or updating a collateral asset, proposers provide: the target iAsset, collateral asset, price oracle, LR, MR, RMR, interest rate oracle, and minimum collateral amount. The following fees remain configured at the iAsset level: Debt Minting Fee, Liquidation Processing Fee, Stability Pool Withdrawal Fee, Redemption Reimbursement Fee, and Redemption Processing Fee. ### **2. Pyth Oracle Integration** With Pyth on Cardano mainnet, Indigo leverages highly accurate, real-time price feeds to strengthen the protocol and expand its iAsset suite. Indigo is among the first protocols utilizing Pyth Pro on Cardano. As part of the V3 upgrade, all existing oracle infrastructure migrates to Pyth, enabling a more scalable and efficient pull-based oracle architecture across the protocol. [Announcement on X](https://x.com/Indigo_protocol/status/2052048918574252118) ### **3. Peg Stabilization Module (PSM)** The PSM introduces a 1:1 swap mechanism between approved iAssets and approved paired collateral assets of stable value relative to the iAsset (e.g., iUSD/USDCx, iUSD/USDA, iBTC/xBTC). **Example flows:** * **USDCx โ†’ iUSD:** Unlimited swaps. User deposits USDCx and receives equivalent iUSD minus an optional minting fee. Slippage-free. * **iUSD โ†’ USDCx:** User burns iUSD and withdraws matching USDCx (minus optional redemption fee), subject to available PSM liquidity. The DAO can enable and disable swaps in one specific direction per pair. **Product motivation:** * Restore and maintain iAsset peg when a liquid on-chain asset matches the iAsset * Provide exit liquidity for ADA/CNT loan borrowers * Position Indigo as the stablecoin swap hub of Cardano **Governance controls per stable pair:** * Add/remove stable pairs from the PSM * Enable/disable minting or redemption * Adjust minting fee, redemption fee, minimum redemption order amount, minimum minting order amount * Optional fee manager to control minting and redemption fees **Other considerations:** * PSM integrates with DEX aggregators such as DexHunter and SteelSwap * One PSM is created per iAsset/stablecoin pair * PSM pools have minimum order sizes in both directions [PSM article on X](https://x.com/Indigo_protocol/status/2024866204611985413) ### **4. Interest Settlement in iAssets Instead of ADA** In Indigo V2.1, borrowers paid interest implicitly in ADA. In V3, interest is minted directly as new iAssets and added to the borrower's debt. Interest is settled at adjustment and can also be settled if it has not been settled within the last 5 days. Upon V3 launch, outstanding ADA interest in V2.1 for all loans is immediately settled. After that, all loans follow the iAsset interest accrual model. **Benefits:** * Eliminates ADA-denominated interest complexity * Creates sustainable, non-volatile revenue streams in iAssets * Simplifies accounting for borrowers **Core user outcomes:** 1. **Debt display:** Borrowers see a single Total Debt number including principal and accrued (unsettled) interest. 2. **Real-time updating:** Debt increases continuously in the UI. The backend batcher periodically settles interest by minting new iAssets equal to accrued interest and charging them against the loan debt. 3. **Distribution of interest revenue** (subject to DAO configuration): * 40% โ†’ Stability Pool depositors * 20% โ†’ Liquidity Providers * 40% โ†’ Treasury 4. **Liquidation behavior:** Upon liquidation, interest is minted into the interest collection script, increasing its principal. The Stability Pool then burns principal debt. ### **5. Flow of Value Through Indigo** Interest flows through a new **Interest Collection Script** โ€” a contract that collects funds for later distribution. **Distribution paths:** * **Stability Pool:** Funds sent to the Stability Pool rewards wallet (Sundae). 15-minute snapshots are created and distributed daily to pool users from day 31โ€“60. * **Liquidity Pool:** Direct to the incentivized DEX (e.g., MinSwap). * **Treasury:** Direct every 30 days. A distribution wallet must sign transactions to distribute funds to respective parties. This wallet can be rotated by the DAO-designated multi-sig through Protocol Parameter governance actions. **INDY Staker allocations:** Revenue directed to INDY Stakers can be converted from iAsset(s) in the Treasury to INDY via open market orders for distribution upon DAO determination. After the first 30 days of V3 deployment, the DAO converts assets to INDY and distributes any revenue allocated to Stakers for the following 30 days on a daily schedule, repeated monthly. This ensures distributions are non-inflationary and maximizes value accrual for INDY stakeholders under zero emissions. [Flow of value article on X](https://x.com/Indigo_protocol/status/2032151178708984268) ### **6. Protocol Fee Changes** * **Debt Minting Fee:** Minted together with debt and paid to the Treasury directly. If a user mints 100 iUSD debt, they receive 99.5 iUSD and 0.5 iUSD goes to the Treasury. * **Loan Redemption Processing Fee:** Paid to the Treasury in the collateral asset of the loan. * **Loan Redemption Reimbursement Fee:** Returns a percentage of collateral back to the loan from the total value returned from redemption. * **Liquidation Processing Fee:** A percentage of collateral that would be paid to the Stability Pool is taken and paid to the Treasury. Capped to prevent Stability Pool providers from incurring a net loss (except for ADA network fees). ### **7. Bi-Directional Indigo OrderBook** Previously, the ROB (now Indigo OrderBook) supported only buy orders: collateral asset โ†’ iAsset. V3 introduces sell orders as well: iAsset โ†’ collateral asset. Users can deposit iAssets and sell them for collateral assets. The Indigo OrderBook for selling iAssets can accept more than one collateral asset, with limit prices individually configured for each asset. **Reimbursement fee update:** The reimbursement fee is now applied as a fee on the redeemed amount and credited to the position owner, denominated in the asset supplied by the redeemer. * **Buy order (owner buying iAssets with collateral):** Redeemer supplies iAsset. Redeeming 10 iUSD at 1% fee results in 9.9 iUSD matched and 0.1 iUSD credited to the position owner. * **Sell order (owner selling iAssets for collateral):** Redeemer supplies collateral. Redeeming 10 ADA at 1% fee results in 9.9 ADA matched and 0.1 ADA credited to the position owner. [OrderBook article on X](https://x.com/Indigo_protocol/status/2039755322705776921) ### **8. Updated Interest Calculation** With the Indigo OrderBook and privatization of loan redemptions, the redeemables-linked discount mechanism has been updated. Redeemable Assets (RA) are now defined as the quantity of iAssets effectively redeemable through in-range OrderBook liquidity (collateral-to-iAsset buy orders within the active price range), rather than redeemable loan positions. This preserves incentive alignment between peg health and borrowing costs: higher available OrderBook liquidity leads to greater interest discounts; reduced liquidity results in higher effective interest rates. **Variable Interest Rate:** $$ \text{Variable Interest Rate} = \max\left\[0, \frac{(\text{ITCR} - \text{NTCR})}{(\text{CTCR} - \text{NTCR})} \times (\text{Upper Limit Int} - \text{base Int})\right] $$ **Final Interest Rate:** $$ \text{Final Interest Rate} = \text{base Int} + (\text{Discount Rate} \times \text{Variable Int}) $$ **Discount Rate:** $$ \text{Discount Rate} = \left(1 - \min\left\[100%, \frac{\text{RA}}{\text{Buffer rate} \times \text{TMS}}\right]\right) $$ Where: * **Base Interest (BaseInt):** Minimum interest charged * **NTCR:** Neutral iAsset Total Collateral Ratio (healthy baseline) * **ITCR:** Current iAsset Total Collateral Ratio * **CTCR:** Maximum capped Total Collateral Ratio * **Upper Limit Int:** Highest possible interest (if ITCR โ‰ฅ CTCR) * **RA:** Redeemable iAssets liquidity available via Indigo OrderBook * **TMS:** Total Minted Supply * **Buffer rate:** % of TMS deemed healthy to be within the redeemable zone ### **9. Protocol Owned Liquidity** When the protocol acts as the liquidity provider: * The POL position earns trading fees from swaps in the pool * It may earn additional rewards from yield farming (e.g., boosted incentives on MinSwap) * The protocol captures 100% of these revenues directly into its Treasury Revenue can be reinvested to deepen liquidity, used for INDY buybacks/burns, distributed to INDY holders/stakers via governance, or allocated to other Treasury initiatives. ### **10. Electorate & INDY Burn** The V2.1 electorate calculation used by AQB is now a static value modifiable through Protocol Parameters. **V3 Launch Electorate and INDY Token Max Supply: 25,000,000 INDY** An estimated 11.4M INDY will remain undistributed from the Rewards allocation. 10M INDY is reserved for a potential future burn upon DAO approval. The difference is redirected to the DAO Treasury. See [AQB & Minimum Quorum](/readme/governance-and-indy-staking/aqb-and-minimum-quorum) for details on the electorate change. ### **11. Stability Pool Fee Changes** A Stability Pool account adjustment cooldown period ensures an account cannot continuously perform actions against the Stability Pool. This replaces the account adjustment fee, which is removed. ### **12. Optional Redeemer Signer for Loan Redemptions** A protocol-configurable signer (through Protocol Parameters) can be required specifically for loan redemptions. If unused, redemptions behave as in V2.1. When a signer is applied, the partial loan redemption fee is removed. At V3 launch, the Indigo Foundation controls loan redemptions. ### **13. Upgrade to Plutus V3 & Latest Aiken** * Lower transaction fees * Higher throughput * More flexible script design * Improved opcode support for numerical operations This upgrade is transparent to users and does not alter visible functionality. ### **14. Indigo Limitless** Indigo Limitless encompasses the launch of new iAssets, collaterals, and PSMs in three tranches shortly after V3 launch. [Indigo Limitless article on X](https://x.com/Indigo_protocol/status/2034320004670185955) **Tranche 1:** * NIGHT as collateral for iUSD * iUSD/USDCx PSM Pool * iJPY as an iAsset with ADA collateral market * iEUR as an iAsset with ADA collateral market **Tranche 2:** * NIGHT and USDCx collateral markets for iJPY * NIGHT and USDCx collateral markets for iEUR * iUSD/USDM PSM Pool * iUSD/USDA PSM Pool **Tranche 3:** * NIGHT and USDCx collateral markets for iBTC * NIGHT and USDCx collateral markets for iETH Expected parameters for these new markets are documented in the Indigo v3 iAsset Parameters specification. ## Implementation Strategy The Indigo Foundation and core contributors from 3EL monitor the launch of these markets and will introduce future iAssets, collateral markets, and PSM pool proposals through DAO governance. V3 represents the most comprehensive upgrade to Indigo Protocol to date, signaling a new era for the system.
# Using Indigo ## **Interacting with the Protocol ๐Ÿ”„** ### **Getting Started** To begin, a user can either purchase iAssets from a DEX, swap through a Peg Stabilization Module (PSM), or open a CDP following these steps: 1. Connect a Wallet to app.indigoprotocol.io 2. Choose an iAsset (iUSD, iETH, iBTC, iJPY, iEUR, and others) to mint. 3. Select a collateral type (ADA or a whitelisted CNT such as USDCx or NIGHT). 4. Provide collateral at or above the minimum collateral amount for the selected pair. 5. Select a Collateral Ratio that aligns with your risk profile, affecting your minting capacity, redemption eligibility, and CDP liquidation price. 6. Upon completion, the protocol creates a CDP, mints the designated iAssets, and sends them to your wallet. Interest begins to accrue on the debt of a CDP continuously. See [Indigo Protocol V3](/readme/indigo-protocol-v3) for details on multi-collateral support, the PSM, and other V3 features. ## **Utilizing iAssets ๐ŸŒ** ### **Stability Pool Deposits** * iAssets can be deposited into the Stability Pool, earning collateral from liquidations and a share of interest revenue by participating in the protocol's liquidation process. ### **Peg Stabilization Module (PSM)** * Swap approved stablecoins for iAssets (e.g., USDCx โ†’ iUSD) or redeem iAssets for stablecoins (e.g., iUSD โ†’ USDCx), subject to available PSM liquidity and direction-specific settings. ### **Indigo OrderBook** * Place buy or sell orders on the Indigo OrderBook to trade between iAssets and collateral assets at configured limit prices. ### **Providing Liquidity** * Utilize iAssets to provide liquidity on Decentralized Exchanges (DEXs) and earn yields through trading fees, protocol incentives, and respective DEX tokens. ### **Integration with dApps** * iAssets, like iUSD, can be used on various decentralized applications (dApps) on Cardano, including popular lending and borrowing platforms. ## **INDY Staking & DAO Participation ๐Ÿ—ณ๏ธ** For Users Interested in INDY and the Indigo DAO If your initial plan doesn't involve opening a CDP and focuses on INDY staking and DAO participation, follow these steps: 1. Swap for INDY on Minswap, Sundaeswap, other Cardano DEXs, or buy INDY on the MEXC centralized exchange 2. Connect a Wallet 3. Navigate to the INDY Staking page on the platform. 4. Begin staking by depositing your INDY in Governance. 5. Start accruing revenue from Protocol Fee Sharing (distributed from Treasury iAsset revenue converted to INDY under V3). 6. Vote in Indigo DAO Governance at least once every 90 days to earn INDY. # Collateralized Debt Positions (CDPs) ## **Overview ๐ŸŒ** ### Understanding CDPs A Collateralized Debt Position (CDP) is fundamental to minting iAssets in the Indigo Protocol. By locking collateral, users can create a CDP, borrowing against this collateral on a variable interest rate to mint iAssets. The protocol ensures that each iAsset is over-collateralized, safeguarding the system against market volatility. In [Indigo Protocol V3](/readme/indigo-protocol-v3), CDPs support multiple collateral types beyond ADA. Each loan position is single-collateral-type from creation to closure โ€” if you open a CDP backed by ADA, you can only add or withdraw ADA for its lifetime. The same applies to CNT-backed positions (e.g., USDCx, NIGHT). ## **Opening a CDP ๐Ÿ”„** When opening a loan, the user selects: 1. The iAsset to mint (e.g., iUSD, iBTC, iJPY) 2. The collateral type to use (e.g., ADA, USDCx, NIGHT) Only whitelisted collateral assets appear as available options. Each iAsset/collateral pair has its own Liquidation Ratio, Maintenance Ratio, Redemption Ratio, interest rate oracle, price oracle, and minimum collateral amount. ## **Managing a CDP ๐Ÿ”„** ### Actions for CDP Owners As a CDP owner, you have the flexibility to: 1. **Deposit Collateral:** Increase your collateral ratio, potentially reducing the risk of liquidation. Only the same collateral asset type used at creation can be deposited. 2. **Withdraw Collateral:** Decrease your collateral ratio, which may elevate liquidation risk. Withdrawals are limited to the same collateral asset type. 3. **Mint iAsset:** Mint additional iAssets, which may lower your collateral ratio. 4. **Burn iAsset:** Increase your collateral ratio by burning iAssets. Burning all iAssets under a CDP closes it, returning your collateral. 5. **Close CDP:** Close your CDP by burning all iAsset debt and settling any accrued interest. ## **Fees ๐Ÿ’ธ** * **Debt Minting Fee:** A percentage of the amount minted, deducted during minting and sent to the Treasury. In V3, the fee is minted together with the debt (e.g., minting 100 iUSD debt yields 99.5 iUSD to the user and 0.5 iUSD to the Treasury). * **Interest Payment:** In V3, interest accrues as iAsset debt rather than ADA. See the [Interest](/readme/interest) page for details. ## **CDP Liquidation โš ๏ธ** Locating and Understanding Liquidation * If your CDP is not locatable, it may have been undercollateralized and liquidated due to collateral or iAsset price fluctuations. Liquidation payouts to Stability Pool depositors include the collateral asset type backing the liquidated CDP. For detailed insights into liquidation processes, refer to the dedicated [liquidation section](/readme/liquidations). # ๐Ÿฆ๓ €ฅ Interest ## Overview ๐ŸŒ The interest mechanism in Indigo Protocol is designed to enhance the stability of iAssets and provide a consistent revenue stream for the DAO. By applying interest rates to Collateralized Debt Positions (CDPs), the protocol encourages responsible borrowing, thereby maintaining the overall health of the system. In [Indigo Protocol V3](/readme/indigo-protocol-v3), interest is settled in iAssets rather than ADA. See the V3 documentation for the full upgrade details. ## How Interest is Applied โš™๏ธ Interest rates are dynamic and can be adjusted by the DAO to respond to market conditions. Interest begins to accrue on all active CDPs from the moment they are created. The interest rate is applied to the debt amount, increasing the total amount owed over time. In V3, each collateral type/iAsset pair has its own algorithmic interest rate oracle. Interest is assessed using the collateral's own interest model. ## Benefits of the Interest Mechanism ๐Ÿ“ˆ 1. **Stability Management:** By adjusting interest rates, the protocol can influence the supply and demand of iAssets. Higher interest rates can discourage excessive borrowing, while lower rates can stimulate it, helping to stabilize asset pegs. 2. **Revenue Generation:** Interest paid on CDPs provides a steady stream of iAsset revenue for the DAO. This revenue is distributed through the Interest Collection Script to Stability Pool depositors, Liquidity Providers, and the Treasury. ## Interest Rate Structure ๐Ÿ’ธ In V3, the interest rate uses an algorithmic mechanism tied to the iAsset Total Collateral Ratio (ITCR) and redeemable liquidity available through the Indigo OrderBook. **Variable Interest Rate:** $$ \text{Variable Interest Rate} = \max\left\[0, \frac{(\text{ITCR} - \text{NTCR})}{(\text{CTCR} - \text{NTCR})} \times (\text{Upper Limit Int} - \text{base Int})\right] $$ **Final Interest Rate:** $$ \text{Final Interest Rate} = \text{base Int} + (\text{Discount Rate} \times \text{Variable Int}) $$ **Discount Rate:** $$ \text{Discount Rate} = \left(1 - \min\left\[100%, \frac{\text{RA}}{\text{Buffer rate} \times \text{TMS}}\right]\right) $$ Where RA is the redeemable iAssets liquidity available via Indigo OrderBook (in-range collateral-to-iAsset buy orders), TMS is Total Minted Supply, and Buffer rate is the percentage of TMS deemed healthy within the redeemable zone. Higher available OrderBook liquidity leads to greater interest discounts; reduced liquidity results in higher effective interest rates. ## Payment Process โš™๏ธ ### V3: iAsset Interest Settlement In V3, interest is minted directly as new iAssets and added to the borrower's debt: 1. **Debt display:** Borrowers see a single Total Debt number including principal and accrued (unsettled) interest. 2. **Real-time updating:** Debt increases continuously in the UI. The backend batcher periodically settles interest by minting new iAssets equal to accrued interest and charging them against the loan debt. Interest is settled at adjustment and can also be settled if it has not been settled within the last 5 days. 3. **During CDP closure:** When closing a CDP, the user repays total debt including all accrued interest (already reflected in the iAsset debt balance). 4. **During liquidation:** Interest is minted into the interest collection script, increasing its principal. The Stability Pool then burns principal debt. ### Interest Revenue Distribution Interest revenue is distributed through the Interest Collection Script (subject to DAO configuration): * 40% โ†’ Stability Pool depositors * 20% โ†’ Liquidity Providers * 40% โ†’ Treasury # ๐Ÿ’งCDP Liquid Staking ## Overview Liquid staking is a unique capability offered by Indigo that allows the staking of ADA collateral within CDPs; enabling users to continue earning ADA rewards from the Cardano network.\ \ Cardano utilizes different keys within a wallet for various purposes. When creating a new wallet, for example using Nami, you are setting up two keys with your wallet: a payment key and a staking key. These keys are then used to derive your wallet address. Addresses in Cardano are split into three parts: a network ID, a payment address, and a staking address. The payment address is used to designate which wallet or smart contract has access to spend the funds. The staking address is used to designate who should receive ADA staking rewards from the Cardano Network for the funds locked at that address. ### You can see an example address below:
Indigo utilizes this particular feature when opening a CDP by sending the funds to the CDP contract but applying the userโ€™s staking address to those funds. This means that the CDP contract has control of the constraints in which the CDP funds can be spent while allowing the user to accrue ADA staking rewards from the ADA locked in their CDP. ## How to Use CDP Liquid Staking ๐Ÿ’ธ To use liquid staking, you must first have your Cardano wallet staked to your preferred stake pool. The Indigo Web App automatically attaches your staking key when creating a CDP. All ADA deposited into that CDP will continue to earn staking rewards based on your chosen stake pool and will still also be usable as voting power in Catalyst Funding rounds. ## What if I change stake pools? Will I still earn staking rewards? Yes. If you delegate your wallet to a new stake pool after creating the CDP, the ADA collateral in the CDP will automatically earn rewards from the new stake pool at turn on the new epoch.
# Stability Pools ## Overview ๐ŸŒ ### Purpose of Stability Pools Stability Pools play a pivotal role in maintaining iAsset solvency by providing liquidity to repay debts from liquidated CDPs, ensuring all minted iAsset supply remains overcollateralized. Each iAsset, such as iBTC, has its dedicated Stability Pool, composed of iAssets deposited by users, also known as "Stability Providers." ## Functionality ๐Ÿ”„ ### Liquidation and Compensation When CDPs become undercollateralized and are liquidated, iAssets in the corresponding Stability Pool are burned to repay the CDP's debt. Stability Providers lose a pro-rata share of their iAsset deposits but gain a pro-rata share of the liquidated CDP's collateral. In [Indigo Protocol V3](/readme/indigo-protocol-v3), liquidation payouts can include multi-asset rewards โ€” Stability Providers earn the collateral asset type backing the liquidated CDP (ADA or CNT), not just ADA. ## Depositing iAssets ๐Ÿ’ผ #### How to Deposit If you own iAssets, either through opening a CDP and minting iAssets or purchasing them from a DEX, you can deposit your iAssets into the corresponding Stability Pool and earn rewards from liquidations and interest revenue. #### Reward In addition to receiving a pro-rata share of a liquidated CDP's collateral, Stability Providers earn rewards from interest revenue distribution (40% of collected interest is allocated to Stability Pool depositors in V3) and INDY staking rewards where applicable. ## Balance Changes ๐Ÿ“‰ ### Why the Shrinkage? A reduced iAsset balance in the Stability Pool indicates that liquidations have occurred, burning a portion of your iAsset deposit. In return, you receive a pro-rata share of the liquidated CDP's collateral in the asset type backing that CDP. ## **Fees ๐Ÿ’ธ** In Indigo Protocol V3, the fees associated with Stability Pools have been updated: * **Initial Deposit Fee:** A 5 ADA fee is charged when depositing iAssets into a Stability Pool for the first time. This fee is redistributed to all Stability Pool providers as a reward for their participation. * **Withdrawal Fee:** A 0.5% fee applies when withdrawing iAssets from a Stability Pool. This fee is designed to discourage opportunistic behavior and is redistributed among Stability Pool depositors as a loyalty bonus. * **Account Adjustment Cooldown:** A cooldown period ensures an account cannot continuously perform actions against the Stability Pool. This replaces the account adjustment fee, which is removed in V3. * **Transaction Fee:** A 1 ADA fee applies for each transaction involving deposits, withdrawals, or claiming rewards. This fee is redistributed to all Stability Pool providers. * **Reward Fee:** A 2% fee is taken from the total ADA rewards owed to a user and redistributed to INDY Stakers. This fee can be adjusted by the DAO to align with protocol requirements and community feedback. # Redemptions ## Overview ๐ŸŒ ### Understanding Redemptions Redemptions are a critical mechanism in Indigo Protocol that help maintain the stability of iAssets by providing an opportunity for users to exchange iAssets for underlying collateral. This process helps correct market imbalances and ensures that the price pegs of iAssets are maintained. In [Indigo Protocol V3](/readme/indigo-protocol-v3), redemption capacity is also provided through the Indigo OrderBook and Peg Stabilization Module (PSM), in addition to direct loan redemptions. ## Redemption Process โ›“๏ธ ### Loan Redemptions The redemption process for CDPs involves two main steps: 1. **Redemption:** Users redeem by exchanging their iAssets for a portion of the underlying collateral when a CDP is below the Redemption Margin Ratio (RMR). In V3, the collateral returned matches the collateral type backing the loan (ADA or a CNT). 2. **Collateral Transfer:** Upon successful redemption, the redeemed CDP will have a Collateral Ratio equal to RMR, and the redeemed iAsset amount will be burned. At V3 launch, the Indigo Foundation controls loan redemptions through an optional protocol-configurable redeemer signer. When a signer is applied, the partial loan redemption fee is removed. ### Indigo OrderBook The Indigo OrderBook (formerly ROB) supports bi-directional orders: * **Buy orders:** Position owner deposits collateral to purchase iAssets (collateral โ†’ iAsset). * **Sell orders:** Position owner deposits iAssets to sell for collateral (iAsset โ†’ collateral). Sell orders can accept multiple collateral assets with individually configured limit prices. The reimbursement fee is applied on the redeemed amount and credited to the position owner in the asset supplied by the redeemer. ### Peg Stabilization Module (PSM) The PSM provides 1:1 swaps between approved iAssets and paired stable-value collateral assets (e.g., iUSD/USDCx). Users can mint iAssets by depositing stablecoins or redeem iAssets for stablecoins, subject to available PSM liquidity and direction-specific enablement by the DAO. ## Incentive to Redeem ๐Ÿ“ˆ ### Why Redeem? Redemptions are incentivized as they provide users with an arbitrage opportunity in the presence of price discrepancies between the iAssets oracle price and their DEX trading price. When iAssets trade below their peg, users can buy them at a discount on the market and redeem them for a higher value in collateral, thereby stabilizing the asset's price. ## Redemption Margin Ratio (RMR) ๐Ÿ’น The Redemption Margin Ratio is a critical parameter that dictates the level of over-collateralization required to be exempt from the possibility of redemption. RMR varies per iAsset and per collateral type. Each iAsset/collateral pair has its own LR, MR, and RMR values configured through governance. ## Fees ๐Ÿ’ธ In V3, redemption fees are structured as follows: 1. **Loan Redemption Processing Fee:** Paid to the Treasury in the collateral asset of the loan. 2. **Loan Redemption Reimbursement Fee:** Returns a percentage of the collateral back to the loan from the total value returned from redemption. 3. **PSM fees:** Optional minting and redemption fees per PSM pair, configurable by the DAO. 4. **OrderBook reimbursement fee:** Applied on the redeemed amount and credited to the position owner in the asset supplied by the redeemer. By implementing these fees and maintaining Redemption Margin Ratios per collateral pair, Indigo Protocol ensures a balanced approach to maintaining iAsset stability while providing consistent revenue streams for the protocol and its participants. # Liquidations ## **Overview ๐ŸŒ** #### Understanding Liquidations Liquidations occur when Collateralized Debt Positions (CDPs) become undercollateralized. This process ensures the stability and solvency of the protocol. In [Indigo Protocol V3](/readme/indigo-protocol-v3), liquidations apply to CDPs backed by any whitelisted collateral type (ADA or CNT). Payouts to Stability Pool depositors are made in the collateral asset of the liquidated CDP. ## **Liquidation Process โš™๏ธ** Two-Step Procedure: Liquidations in the Indigo Protocol are automated by bots but the actual two-step process is as follows. * **Freeze the CDP:** Once frozen, the CDP is inaccessible to its former owner, who forfeits all access and rights to it. * **Liquidate the CDP:** The CDP's debt is settled by burning iAssets from a Stability Pool, and its collateral is proportionally distributed to Stability Pool stakers in the collateral asset type backing the loan. ## **Incentive to Liquidate ๐Ÿ“ˆ** Stability Pool stakers are motivated to participate in Stability Pools as they can earn a share of the CDP's collateral. Typically, the value of the earned collateral may exceed the value of the canceled debt, especially when a liquidated CDP has a collateral value above 100% of the iAsset value. ## **Fees ๐Ÿ’ธ** * **Liquidation Processing Fee:** A percentage of the collateral that would be paid to the Stability Pool is taken and paid to the Treasury. The fee is capped to prevent Stability Pool providers from incurring a net loss (except for ADA network fees). * **Interest settlement:** Upon liquidation, interest is minted into the interest collection script, increasing its principal. The Stability Pool then burns principal debt. # iAssets ## **Overview ๐ŸŒ** #### Defining iAssets iAssets, or "Indigo Assets," are synthetic assets created within the Indigo Protocol. Unlike wrapped assets, protocol prices for iAssets are derived from tracked assets using price oracles (migrated to Pyth in [Indigo Protocol V3](/readme/indigo-protocol-v3)), not requiring a bridge to deposit on another chain. These prices are used for liquidations, redemption, and interest settlements. ## **Available iAssets** * Upon launch, iBTC and iUSD were available for minting within the Indigo Protocol, offering users immediate access to synthetic versions of Bitcoin and a USD-pegged stablecoin. iETH followed after DAO approval, providing exposure to Ethereum's price dynamics within the Cardano ecosystem. * With Indigo V3 and the Indigo Limitless rollout, additional iAssets such as iJPY and iEUR are being introduced through DAO governance, alongside expanded collateral markets and PSM pools. ## **Minting iAssets** iAssets can be minted by: 1. Opening a CDP with ADA or a whitelisted CNT as collateral 2. Swapping through a Peg Stabilization Module (PSM) using paired stable-value assets (e.g., USDCx โ†’ iUSD) 3. Trading on the Indigo OrderBook or DEXs Each iAsset can be backed by multiple collateral types. Each iAsset/collateral pair has its own loan parameters (LR, MR, RMR), interest rate oracle, price oracle, and minimum collateral amount. ## **Creating New iAssets ๐Ÿ› ๏ธ** #### Asset Potential Any asset with a real-world price can be transformed into an iAsset with the Indigo Protocol so long as there is a viable price feed for the proposed iAsset. #### DAO Member Responsibility The addition of new iAssets is overseen by DAO Members. If you wish to propose new iAssets, visit our Governance Forum to initiate a temperature check and engage in the discussion. ## # Governance & INDY Staking ## **Overview ๐ŸŒ** The Indigo DAO Token (โ€œINDYโ€) is a Cardano native asset that can be owned, held, or transferred by any user. INDY serves as Indigoโ€™s utility token, with one of its key purposes being to allow on-chain voting on DAO proposals (a โ€œproposalโ€). The total supply of INDY is capped at 25,000,000 under [Indigo Protocol V3](/readme/indigo-protocol-v3) (previously 35M), with a 6 decimal precision. INDYโ€™s monetary policy disallows future minting and burning, therefore making the total supply constant and unchanging. Indigo is undergoing a Fair Launch, therefore there has been no pre-sale nor private distribution to investors prior to launch. ### Empowering Decentralization Indigo Protocol is deeply rooted in decentralized principles, empowering its community through a governance model that allows INDY token holders to steer the protocolโ€™s development and future. ## **Governance ๐Ÿ›๏ธ** ### DAO and Decision Making * The Indigo Decentralized Autonomous Organization (DAO) is a collective that makes pivotal decisions about the protocol. From introducing new iAssets and collateral types to adjusting protocol parameters and PSM pools, DAO members utilize their INDY tokens to vote on proposals and guide the protocolโ€™s evolution. ### Proposing Changes * Community members are encouraged to propose changes and new features. To initiate a proposal or engage in ongoing discussions, members can visit the Governance Forum, ensuring a collaborative and inclusive multi-step decision-making process. ## **INDY Staking** ### Staking and Dual Rewards * INDY token holders can stake their tokens to participate in the protocolโ€™s Fee Sharing Mechanism. By staking INDY, participants receive INDY rewards and protocol revenue from activities like minting, liquidations, redemptions, and interest collection. In V3, staker revenue is converted from iAsset(s) in the Treasury to INDY via open market orders on a monthly distribution schedule. This aligns incentives between the protocol's growth and its users. ### Governance Participation * Stakers are not only rewarded but are also encouraged to participate in governance, ensuring that those who have a stake in the protocol have a say in its direction. To continue receiving INDY rewards, a user must participate in at least 1 governance vote every 90 days. ## **Security & Transparency ๐Ÿ›ก๏ธ** #### Secure Participation * Indigo Protocol prioritizes security and transparency, ensuring that governance and staking processes are not only user-friendly but also secure, safeguarding the interests and assets of its community. # AQB & Minimum Quorum One of the most important aspects when designing a governance system is to specify under which circumstances a proposal can pass. Intuitively, a vote will pass when there are more voters in favor of the proposal than voters against it. But how many yes votes are needed? The simplest option would be to tag a proposal as passed whenever there are more yes votes than no votes. However, this approach would not take the level of participation, or quorum, into consideration. In the case of a low voter turnout, the legitimacy of the result could be questioned. The immediate solution is to impose a minimum quorum threshold. This mechanism imposes a minimum level of participation, such that proposals with a level of participation below the quorum threshold would be automatically marked as failed. Although the minimum quorum threshold effectively prevents proposals that lack sufficient support from passing, it lacks flexibility. For impactful DAO decisions, a substantial voter turnout is essential, and thus, setting a high minimum quorum is justified. Conversely, imposing a high quorum for less impactful proposals could hinder their approval due to lower voter interest and participation. ## Introducing AQB The Adaptive Quorum Biasing mechanism, or AQB, excels in providing flexibility for voting processes. AQB sets a dynamic threshold for the number of affirmative votes required for a proposal to pass. This threshold adjusts based on voter participation levels, lowering the threshold as voter turnout increases to enhance the vote's legitimacy. The exact threshold depends on three factors: the number of yes votes, the number of no votes and the number of possible votes (also called electorate). Specifically, it is controlled by the following relationship: $$ q = \frac{yes}{ \sqrt{electorate} } - \frac{no}{ \sqrt{yes+no} } $$ In the formula above, the value of q represents whether a proposal has passed or not. A positive q indicates that the proposal passed, while failing proposals result in a negative q. Let us illustrate the working mechanism of AQB by providing a series of examples. For the sake of simplicity, in these examples, we will assume that there are 100 people entitled to vote, all with equal voting power. **Scenario A: 40 yes votes, 20 no votes, 40 not voting** In this first scenario, we can see that there were double the amount of yes votes than no votes. Also, there was a healthy 60% voter participation, this should likely result in the proposal passing. Now to input these numbers into the AQB formula: $$ \frac{40}{ \sqrt{100} } - \frac{20}{ \sqrt{40+20} } = 1.418 $$ As expected, the formula yields a positive value and a passed proposal.
**Scenario B: 20 yes votes, 10 no votes, 70 not voting** Note that in this second scenario, there are also double the amount of yes votes than no votes. However, only 30% of the eligible voters participated in this poll. This result has less legitimacy than the previous one, as the opinion of a majority of voters is unknown. Should this proposal pass? The AQB formula can assist us here. $$ \frac{20}{ \sqrt{100} } - \frac{10}{ \sqrt{20+10} } = 0.174 $$ The proposal has been approved, but we are approaching the critical threshold. Consider the scenario where 6 out of these 30 voters had neglected to cast their votes.
**Scenario C: 16 yes votes, 8 no votes, 76 not voting** The engagement in this poll has declined noticeably. Only 24% of the electorate participated. $$ \frac{16}{ \sqrt{100} } - \frac{8}{ \sqrt{16+8} } = -0.032 $$ This proposal will not be passed. Despite receiving twice as many yes votes as no votes, the low level of participation undermines the legitimacy of the voting outcome. As we have seen, this proposal failed even if there were 66.6% of yes votes. But as indicated by the very small negative q number (-0.032), it was close to the AQB threshold. In fact, if just a single of the voters who voted no had voted yes, the outcome of the proposal would have been different: $$ \frac{17}{ \sqrt{100} } - \frac{7}{ \sqrt{17+7} } = 0.27 $$ This means that with 24% of participation, the effective threshold for a proposal to pass is higher than 66.66% at 67.11%. Considering these scenarios, one might be curious about the extremes. Let's look at a few. **Scenario D: 100% Participation** In the case where all the electorate had shown up to vote, the intuitive expectation is that the proposal would pass if there were more yes votes than no. A quick look at the formula confirms this expectation: $$ \frac{x}{ \sqrt{100} } - \frac{100-x}{ \sqrt{100} } \Rightarrow x = 50 $$ **Scenario E: 5% Participation** On the other hand, in the event that the voter turnout is poor, the intuitive expectation is that the proposal would pass if there is full consensus among the participants. Again, a quick look at the formula confirms this expectation: $$ \frac{x}{ \sqrt{100} } - \frac{5-x}{ \sqrt{5} } \Rightarrow x > 4 $$ ## Indigoโ€™s hybrid approach Scenario E described above makes it clear that with 5 participants or less, a full consensus among the participants would be needed. However, it also uncovers a valid concern. What if, for whatever reason, voter turnout was low in a mission-critical proposal? Should a single voter be able to make a decision on behalf of the whole electorate? The AQB formula indicates that if there is only one voter, a single yes vote would suffice for a proposal to pass. At Indigo, we find this insufficient, recognizing several valid reasons why a proposal might not receive votes from interested parties. For instance, the website from which most people vote could be down after only a few votes have been casted. This could result in a very unfair outcome for the proposal. This is why Indigo adopts a hybrid strategy that blends the minimum quorum with AQB. For a proposal to be approved, it must satisfy two criteria: the AQB formula must produce a positive q number, and the minimum quorum requirement must be fulfilled. Thanks to the effectiveness of AQB, the minimum quorum can be maintained at a relatively low level, serving primarily as a safeguard against unforeseen circumstances. Once this security threshold is met, the AQB takes the lead in determining whether a proposal is approved. With great power comes great responsibility! ## V3 Electorate Change In [Indigo Protocol V3](https://github.com/IndigoProtocol/indigo-documentation/blob/main/readme/governance-and-indy-staking/indigo-protocol-v3.md), the V2.1 electorate calculation used by AQB is replaced with a static electorate value that can be modified through Protocol Parameters. **V3 Launch Electorate: 25,000,000 INDY** This change supports the migration toward zero INDY emissions and a fixed maximum INDY supply of 25,000,000.
# How To Vote ## ## What is the Policy ID and Fingerprint of the INDY token on Mainnet? Policy ID: **533bb94a8850ee3ccbe483106489399112b74c905342cb1792a797a0** Asset Fingerpint: **asset1u8caujpkc0km4vlwxnd8f954lxphrc8l55ef3j** ## How does voting work? See the Indigo [DAO Voting Procedures document](https://forum.indigoprotocol.io/uploads/short-url/iYdEJXNHMCIIfRrV8roqHTtG87G.pdf), that was ratified by the community in our Governance Forum. ## How do I vote on-chain? In order to vote, you first need to have some INDY. Those INDY will then need to be staked in the protocol. Your voting power is set to the total amount of INDY staked at the time of voting, for example if you had staked 10 INDY and then voted on a proposal, those 10 INDY will correspond as your voting power. After voting on a proposal, your staked INDY are locked until that proposal's Voting Period has concluded. Let's go over a few scenarios. **Scenario 1** * Violet stakes 10 INDY. * Violet votes on Proposal A, which ends on January 2, 2022 at 10:00 pm UTC. * Violet's 10 INDY are locked until the Proposal A ends. * Violet votes on another, say Proposal B, which ends on January 4, 2022 at 10:00 pm UTC. * Violet's 10 INDY are locked until Proposal B ends. **Scenario 2** * Violet stakes 10 INDY. * Violet votes on Proposal A, which ends on January 2, 2022 at 10:00 pm UTC. * Violet's 10 INDY are locked until the Proposal A ends. * Violet's stakes 20 INDY. Violet can unstake her 20 INDY at anytime. * Violet votes on another, say Proposal B, which ends on January 4, 2022 at 10:00 pm UTC. * Violet's 30 INDY are locked until Proposal B ends. ## How do I change my vote? Votes cannot be changed. We may offer this option in a future release of the protocol. ## What is the cost of submitting a proposal on-chain? DAO members that wish to submit on-chain proposals will need to deposit 100 INDY. This deposit will be returned to the proposal owner if the proposal successfully passes; if not, the deposit will be sent to the DAO Treasury. # Tokenomics ## **Indigo Protocol Tokenomics ๐Ÿ”„** Distribution Breakdown * Indigo Protocolโ€™s tokenomics ensures a balanced and sustainable economic model, distributing the INDY token across various sectors to incentivize participation, reward users, and fund ongoing development over a 5-year span. Hereโ€™s a breakdown of the INDY token distribution: * 54.13% DAO Rewards * 13.87% DAO Treasury * 5% Governance Participation * 1% Protocol Owned Liquidity * 1% Launch Airdrop * 25% Team & Labs Treasury **Detailed Token Allocation ๐Ÿ“œ** * INDY tokenomics are strategically designed to support the ecosystem's growth, governance, and operational efficiency. A significant majority, 54.13%, is allocated to DAO Rewards, ensuring that users who participate actively in the ecosystem are incentivized. The Team & Labs Treasury receives 25%, a share that funded initial development and operational support by the core team behind Indigo. An additional 13.87% is reserved for the DAO Treasury, which funds future initiatives, development, and proposals approved by the community. Governance participation is encouraged with a dedicated 5% of tokens rewarding users for engaging in the protocol's decision-making processes. To ensure token trading liquidity post-launch, 1% of INDY tokens were designated as Protocol Owned Liquidity. Finally, to distribute tokens widely and engage a broad user base, 1% was allocated for the Launch Airdrop in 2022, promoting initial liquidity and adoption. INDY is set to reach its total supply cap of 25,000,000 under [Indigo Protocol V3](/readme/indigo-protocol-v3), supporting the migration toward zero INDY emissions. ## **V3 Token Supply & Zero Emissions** With [Indigo Protocol V3](/readme/indigo-protocol-v3), the protocol migrates toward a zero INDY emissions system: * **V3 Launch Electorate and INDY Token Max Supply: 25,000,000 INDY** * An estimated 11.4M INDY will remain undistributed from the Rewards allocation * 10M INDY is reserved for a potential future burn upon DAO approval * The remaining undistributed amount is redirected to the DAO Treasury Revenue directed to INDY Stakers is converted from iAsset(s) in the Treasury to INDY via open market orders, ensuring distributions are non-inflationary and maximize value accrual for INDY stakeholders. # Public Testnet ## Is there a Public Testnet? Yes, Indigo is deployed on **Cardano's Preview Network**. You can explore all functionalities of the protocol by following this link: [Indigo Preview Testnet](https://preview.indigoprotocol.io/). ## Which wallet can I use? Currently, only Nami and Eternl wallets are supported on the Preview Network. ## How can I connect to the Preview Network? Using Nami wallet, follow the steps below. * Click on your wallet icon, then select "Settings". ![](/files/C4Ze7oQrnQoKyP7OWz1Z) * Then, select "Network". ![](/files/6DSjmEjPRLzF1fnUvyZA) * In the drop-down list, select "Preview". ![](/files/aK7hssrHGoXgXHZ5TBYf) * You're done! To confirm, you should now see the word "Preview" in the bottom left corner. ![](/files/QmoW9hr91ZaOZLwBGVLW) ## Why do I get "transaction failed" error? If you are using Nami, it is very likely that you have not set a collateral amount; for more info, see [this article](https://docs.cardano.org/plutus/collateral-mechanism). You can also follow these steps to fix the issue. * Click on your wallet icon, then select "Collateral". ![](/files/uqWCl3IuT792eC4n2ok9) * Then, enter your wallet password and press "Submit". ![](/files/Wx3NN9MqYdwbj4DmpUDT) * That's it! To confirm, you should see a pop-up stating that collateral was added to your wallet. ![](/files/U9ihJpwW6lXsLmD2OqaA) ## How can I get tADA, and tINDY? For tADA, you may go the [Cardano testnet faucet](https://docs.cardano.org/cardano-testnet/tools/faucet), select the Preview Network and provide your wallet address (make sure it is a Preview Network address); to receive 10,000 tADA per day. For tINDY, you may go to the [Sundaeswap DEX](https://testnet.sundaeswap.finance/), and swap your tADA for tINDY (Policy ID: fa3eff2047fdf9293c5feef4dc85ce58097ea1c6da4845a351535183). # Wallets ## Which wallet can I use? See the table below for a list of compatible wallets.
WalletOut of the box+ Ledger (Hardware Wallet)+ Trezor (Hardware Wallet)
Namiโœ…โœ…โœ…
Eternlโœ…โœ…โœ…
Geroโœ…โŒโŒ
NuFiโœ…โœ…โœ… (via Eternl emulate)
Flintโœ…โŒโŒ
Lodeโœ…โŒโŒ
If you are using a hardware wallet, make sure it is up to date. For Ledger users, please follow [this guide](https://support.ledger.com/hc/en-us/articles/7294217589277-Cardano-v5-app-Plutus-?docs=true). For Trezor users, please see [this article](https://trezor.io/learn/a/trezor-device-firmware-update-august-2022). ## What is wallet fragmentation? ADA and other Cardano Native Assets such as NFTs that you see in your wallet are locked in UTXOs. The more you interact with the blockchain (e.g.: use DEXs, buy NFTs), the likelier these assets are locked across a large number of UTXOs, resulting in what we call **wallet fragmentation.** Users with fragmented wallets may see their transactions fail, due to Plutus scripts having to traverse all UTXOs, causing the Plutus Execution Unit Limit to be exceeded. Therefore, we recommend users to create a new wallet when interacting with Indigo Protocol. # Guides Learn how to use Indigo Protocol's features. {% hint style="warning" %} Content in the following sections is NOT financial advice and should not be relied upon to make financial decisions. {% endhint %} # CDP ## Opening a CDP In this section, you will learn how to open a CDP, via the web application. {% hint style="info" %} A wallet can only have one CDP opened for a given type of iAsset. For example, **Wallet A** can only open 1 iUSD CDP and 1 iBTC CDP. {% endhint %} ### Summary Opening a CDP requires to: (1) deposit some amount of ADA collateral and (2) input a collateral ratio. In exchange, some amount of iAsset will be minted (e.g.: opening a CDP for iBTC requires depositing ADA, in exchange the user will receive iBTC). {% hint style="info" %} The collateral ratio influences: (1) the amount of iAsset that will be minted, and (2) the risk of liquidation. The higher the collateral ratio, the fewer iAsset minted, but the lower the risk of liquidation is. On the contrary, the lower the collateral ratio, the more iAsset minted, but the higher the risk of liquidation. {% endhint %} ### Detail {% hint style="info" %} Ratios to know:\ Redemption Ratio: The ratio at which a CDP under this value is available for redemption.\ \ Maintenance Ratio: The ratio at which a user can open their CDP and the minimum CR that a user can have to mint tokens or adjust their position.\ \ Liquidation Ratio: The ratio at which a CDP is available for liquidation. {% endhint %} 1\. From the Dashboard page, click on the **Open Position** button.

Indigo Web App - Dashboard - Open Position

2\. In the Open Position page you can either: * Option A: let the web app choose for you the amount of iAsset to be minted; or * Option B: choose the amount of iAsset to be minted. {% tabs %} {% tab title="Option A" %} * Input a collateral amount or click on one of the button below to pre-fill the input field based on the ADA balance of the connected wallet. * Input a collateral ratio or select one of the pre-defined value. This will result in the amount of iAsset to be automatically computed. {% endtab %} {% tab title="Option B" %} * Input a collateral ratio or select one of the pre-defined value. * Input an iAsset amount This will result in the collateral amount to be automatically computed. {% endtab %} {% endtabs %}

Indigo Web App - Open Position

3\. Tick the checkbox, and click on the **Open Position** button. You will be prompted to sign the transaction. Once the transaction is validated on the blockchain, you will receive the minted iAssets in your wallet.

Indigo Web App - Open Position - Sign Transaction

## Depositing Collateral In this section, you will learn how to deposit collateral to an existing CDP, via the web application. ### Summary Once we have opened a CDP, you can interact with it in different ways; one of which is to deposit more collateral. {% hint style="info" %} Depositing more collateral into a CDP will increase its collateral ratio; this helps to keep the CDP healthy and lowers the risk of the CDP being liquidated. {% endhint %} ### Detail 1\. From the Dashboard page, click on the **Manage** button.

Indigo Web App - Dashboard - Manage Position

2\. Input the collateral amount you wish to deposit or click on one of the button below to pre-fill the input field based on the ADA balance of the connected wallet. {% hint style="info" %} Inputting different amount of collateral will automatically update the Collateral Ratio and Total Collateral values in the **Result** section. These values can be compared with the ones displayed in the **Current Position** section on the right side of the web page. {% endhint %} 3\. Tick the checkbox, and click on the **Deposit Collateral** button. You will be prompted to sign the transaction. Once the transaction is validated on the blockchain, your CDP will have a higher ADA collateral amount, and its collateral ratio will have increased.

Indigo Web App - Deposit Collateral

## Withdrawing Collateral In this section, we will learn how to withdraw collateral from an existing CDP, via the web application. ### Summary Withdrawing collateral from a CDP means that you will take out a portion of the collateral that was deposited in the CDP. {% hint style="info" %} Withdrawing collateral from a CDP will decrease its collateral ratio, which in turn will increase the risk of the CDP being liquidated. A Protocol Fee of 2% is incurred when withdrawing collateral, which is computed according to the amount of collateral to be withdrawn. {% endhint %} ### Detail 1\. From the Dashboard page, click on the **Manage** button.

Indigo Web App - Dashboard

2\. Input the collateral amount you wish to withdraw or click on one of the button below to pre-fill the input field based on the ADA balance of the connected wallet. {% hint style="info" %} Inputting different amount of collateral will automatically update the **Collateral Ratio** and **Total Collateral** values in the **Result** section. These values can be compared with the ones displayed in the **Current Position** section on the right side of the web page. {% endhint %} 3\. Tick the checkbox, and click on the **Withdraw Collateral** button. You will be prompted to sign the transaction. Once the transaction is validated on the blockchain, your CDP will have a lower ADA collateral amount, and its collateral ratio will have decreased.

Indigo Web App - Withdraw Collateral

## Minting iAssets In this section, you will learn how to mint additional iAssets from an existing CDP, via the web application. ### Summary Minting iAssets allows you to obtain more iAssets from an existing CDP. The amount of iAssets that can be minted depends on the current amount of collateral deposited in the CDP. {% hint style="info" %} Minting iAssets from a CDP will decrease its collateral ratio, which in turn will increase the risk of the CDP being liquidated. {% endhint %} ### Detail 1\. From the Dashboard page, click on the **Manage** button.

Indigo Web App - Dashboard

2\. Input the amount of iAssets you wish to mint or click on one of the button below to pre-fill the input field based on the current amount of collateral deposited in the CDP. {% hint style="info" %} Inputting different amount of iAssets will automatically update the **Collateral Ratio** and **Total Debt** values in the **Result** section. These values can be compared with the ones displayed in the **Current Position** section on the right side of the web page. {% endhint %} 3\. Tick the checkbox, and click on the **Mint iAsset** button. You will be prompted to sign the transaction. Once the transaction is validated on the blockchain, you will receive the requested amount of iAssets, and your CDP will have a lower collateral ratio.

Indigo Web App - Mint iAssets

## Burning an iAsset In this section, you will learn how to burn iAssets from an existing CDP, via the web application. ### Summary Burning iAssets allows you to repay your debt. The amount of iAssets that can be burnt depends on the amount of iAssets you minted under the CDP. {% hint style="info" %} Burning iAssets from a CDP will increase its collateral ratio; this helps to keep the CDP healthy and lowers the risk of the CDP being liquidated. {% endhint %} ### Detail 1\. From the Dashboard page, click on the **Manage** button.

Indigo Web App - Dashboard

2\. Input the amount of iAssets you wish to burn or click on one of the button below to pre-fill the input field based on total amount of debt you owe (i.e.: the total amount of iAssets you minted under the CDP). {% hint style="info" %} Inputting different amount of iAssets will automatically update the **Collateral Ratio** and **Total Debt** values in the **Result** section. These values can be compared with the ones displayed in the **Current Position** section on the right side of the web page. {% endhint %} 3\. Tick the checkbox, and click on the **Burn iAsset** button. You will be prompted to sign the transaction. Once the transaction is validated on the blockchain, you will have fewer iAssets in your wallet and your CDP will have a higher collateral ratio.

Indigo Web App - Burn iAssets

## Closing a CDP In this section, you will learn how to close a CDP, via the web application. ### Summary Closing a CDP allows you repay your debt in full and retrieve the total amount of collateral deposited under the CDP. Closing a CDP is final. If you wish to mint more iAssets, you will need to re-open a CDP. {% hint style="info" %} A Protocol Fee of 2% is incurred when closing a CDP, which is computed according to the total amount of collateral in the CDP. The collected fee will be distributed to INDY stakers. If you do not have enough iAssets to close your CDP, you can buy more iAssets on a DEX. {% endhint %} ### Detail 1\. From the Dashboard page, click on the **Manage** button.

Indigo Web App - Dashboard

2\. Input the total amount of iAssets you had minted, or click on the **100%** button below to automatically fill the input field. {% hint style="info" %} The **Result** section will automatically update and state that you are closing your CDP. {% endhint %} 3\. Tick the checkbox, and click on the **Close CDP** button. You will be prompted to sign the transaction. Once the transaction is validated on the blockchain, you will have repaid your debt and will have received the total amount of collateral you had deposited.

Indigo Web App - Close CDP

# Stability Pools ## Opening a Stability Pool account In this section, you will learn how to open a Stability Pool account, via the web application. {% hint style="info" %} Opening a Stability Pool account has risks. As CDP liquidation occurs, some of your deposited iAssets will be burned. In exchange, you will receive a pro-rata share of ADA collateral from each liquidated CDP, which will be claimed as rewards automatically. {% endhint %} ### Summary Opening a Stability Pool account corresponds to depositing iAssets in a Stability Pool for the first time. {% hint style="info" %} Opening a Stability Pool account incurs a 5 ADA fee that will be redistributed to Stability Pool providers. {% endhint %} ### Detail 1\. From the Stability Pool page, click on the **Open Account** button.

Indigo Web App - Stability Pool

2\. Input the amount of iAsset you wish to deposit or click on one of the button below to pre-fill the input field based on the iAsset balance of the connected wallet. 3\. Tick the checkbox, and click on the **Open Account** button. You will be prompted to sign the transaction. Once the transaction is validated on the blockchain, your iAssets will be deposited into the Stability Pool.

Indigo Web App - Stability Pool - Open Account

## Depositing iAssets In this section, you will learn how to deposit iAssets into a Stability Pool, via the web application. {% hint style="info" %} Depositing iAssets in a Stability Pool has risks. As CDP liquidation occurs, some of your deposited iAssets will be burned. In exchange, you will receive a pro-rata share of ADA collateral from each liquidated CDP, which will be claimed as rewards automatically. {% endhint %} ### Summary Depositing iAssets to an existing Stability Pool incurs several fees listed below. {% hint style="info" %} * A Stability Pool account adjustment fee of 1 ADA that will be redistributed to all Stability Pool providers. * A 2% protocol fee taken from the total amount of ADA rewards you are owed (corresponding to your pro-rata share of seized collateral from liquidated CDPs), which will be redistributed to INDY stakers. {% endhint %} ### Detail 1\. From the Stability Pool page, click on the **Manage** button.

Indigo Web App - Stability Pool - Manage

2\. Input the amount of iAsset you wish to deposit or click on one of the button below to pre-fill the input field based on the iAsset balance of the connected wallet. {% hint style="info" %} The ADA collateral seized from liquidated CDPs that you are owed will be automatically sent to your wallet. The amount you are owed depends on how many shares of the Stability Pool you own (i.e.: how many iAssets you have deposited versus how many total iAssets are in the Stability Pool). {% endhint %} 3\. Tick the checkbox, and click on the **Deposit** button. You will be prompted to sign the transaction. Once the transaction is validated on the blockchain, your iAssets will be deposited into the Stability Pool.

Indigo Web App - Stability Pool - Deposit iAssets

## Withdrawing iAssets In this section, you will learn how to withdraw iAssets from a Stability Pool, via the web application. {% hint style="info" %} Seeing fewer iAssets than originally deposited? As CDP liquidation occurs, some of your deposited iAssets will be burned. In exchange, you will receive a pro-rata share of ADA collateral from each liquidated CDP. {% endhint %} ### Summary There could be 2 scenarios when withdrawing iAssets in a Stability Pool: * Scenario A: Partial withdrawal of iAssets * Scenario B: Total withdrawal of iAssets (corresponds to closing your Stability Pool account) {% tabs %} {% tab title="Scenario A" %} The partial withdrawal of iAssets incurs several fees listed below. {% hint style="info" %} * A Stability Pool account adjustment fee of 1 ADA that will be redistributed to all Stability Pool providers. * A 2% protocol fee taken from the total amount of ADA rewards you are owed (corresponding to your pro-rata share of seized collateral from liquidated CDPs), which will be redistributed to INDY stakers. {% endhint %} {% endtab %} {% tab title="Scenario B" %} The closing of your Stability Pool account incurs a fee listed below. {% hint style="info" %} A 2% protocol fee taken from the total amount of ADA rewards you are owed (corresponding to your pro-rata share of seized collateral from liquidated CDPs), which will be redistributed to INDY stakers. {% endhint %} {% endtab %} {% endtabs %} ### Detail - Scenario A 1\. From the Stability Pool page, click on the **Manage** button.

Indigo Web App - Stability Pool - Manage

2\. Input the amount of iAsset you wish to withdraw or click on one of the button below to pre-fill the input field based on the amount of iAssets you have deposited in the Stability Pool. 3\. Tick the checkbox, and click on the **Withdraw** button. You will be prompted to sign the transaction. Once the transaction is validated on the blockchain, your iAssets will be sent to your wallet.

Indigo Web App - Stability Pool - Withdraw

### Detail - Scenario B 1\. From the Stability Pool page, click on the **Manage** button.

Indigo Web App - Stability Pool - Manage

2\. Input the total amount of iAssets you currently have in the Stability Pool or click on the **100%** button below to automatically fill the input field. 3\. Tick the checkbox, and click on the **Close Account** button. You will be prompted to sign the transaction. Once the transaction is validated on the blockchain, the iAssets will be sent to your wallet.

Indigo Web App - Stability Pool - Close Account

# Resources # Audit Following are audit documentation for the Indigo Protocol. ## Tweag - October 2021 An audit summary can be found by following [this link](https://indigoprotocol1.medium.com/indigo-protocol-tweag-security-audit-report-949b3c359f17). ## MLabs - November 2022 {% file src="/files/kyOlVDQASrXSBkw6HWhH" %} # Socials, Interviews & Others ## Social Platforms * [Twitter](https://twitter.com/Indigo_protocol) * [Youtube channel](https://www.youtube.com/c/IndigoLabs1) ## Interviews * [Cardano With Paul - March 2022](https://www.youtube.com/watch?v=l0OMgNNlS7c) * [Big Pey - April 2022](https://www.youtube.com/watch?v=zua5NeT0nrA) * [Cardano With Paul - August 2022](https://www.youtube.com/watch?v=cJB_3OEiV3s) # Protocol Statistics # Month in Review Past Performance and Key Metrics of Indigo Protocol. {% hint style="warning" %} The content below is provided for educational and informational purposes. Any past performance is historical and not indicative of future results. Any use of decentralized finance involves various significant financial risks; always Do Your Own Research (DYOR). {% endhint %} ## 2023 ### February
### January
## 2022 ### December
# APR / APY calculations {% hint style="warning" %} The formulas below are provided for educational and informational purposes. Any past performance is historical and not indicative of future results. Any use of decentralized finance involves various significant financial risks; always Do Your Own Research (DYOR). {% endhint %} ## Stability Pool staking ### **APR for INDY rewards** *Averaged over the prior epoch* #### **Formula** $$ APR\_t = \frac{c\_{t-1} \* d\_{t-1}}{a\_{t-1} \* b\_{t-1}} \* 365 \* 100 $$ Where * `t` is the day at which the calculation is performed * `a` is the amount of a given iAsset staked in a Stability Pool * `b` is a given iAsset price at daily close, denominated in ADA * `c` is the daily amount of INDY awarded to a given iAssetโ€™s Stability Pool * `d` is the INDY price at daily close, denominated in ADA ### **APR for ADA rewards** *Averaged over a period of last 3 months or over a period spanning from the day of iAsset launch till the day of reward calculation, whichever is shorter.* #### Formula $$ v = a - b \* c $$ $$ \mu = \frac{\sum\_{i=1}^nx\_i}{n} $$ $$ APR = \frac{\sum\_{i=1}^{|n|}v\_i}{\mu} \* \frac{365}{n} \* 100 $$ Where * `n` is min\[90, number of days from iAsset launch to the day of calculation] * `v` is a set comprising values gained from liquidated CDPs over โ€˜nโ€™ days, denominated in ADA * `a` is the amount of collateral from a liquidated CDP, denominated in ADA * `b` is amount of iAsset burned from a liquidated CDP * `c` is the Oracle Price of the iAsset from a liquidated CDP taken at the time of liquidation, denominated in ADA * `ฮผ` is the average value staked in the iAssetโ€™s Stability Pool over `n` days, denominated in ADA * `x` is a collection of total value staked in an iAsset Stability Pool, denominated in ADA and covering a period of n days ## Liquidity Pool Tokens staking ### **APR for INDY rewards** *Averaged over the latest epoch* #### Formula $$ APR\_t = \frac{c\_{t-1} \* d\_{t-1}}{2\*a\_{t-1} \* b\_{t-1}} \* 365 \* 100 $$ Where * `t` is the day at which the calculation is performed * `a` is the amount of a given iAsset locked across all DEXs * `b` is the iAsset price at daily close, denominated in ADA * `c` is the daily amount of INDY awarded to LP stakers of a particular iAsset * `d` is the INDY price at daily close, denominated in ADA ## INDY staking ### **APR for INDY rewards** ***Based on the latest epoch*** #### Formula $$ APR = \frac{b}{a} \* y \* 100 $$ Where * `a` is the amount of INDY staked at a particular epoch * `b` is the amount of INDY awarded to INDY stakers at a particular epoch * `y` is a constant representing the number of Cardano epochs in a year (fixed at 73) #### Considerations The APR value can only be computed once per epoch (every 5 days), given the amount of INDY awarded to INDY stakers can only be determined at the end of an epoch. ### **APY for INDY rewards** ***Based on latest epoch*** #### Formula $$ APY = ((1 + \frac{APR}{y\*100})^y - 1) \* 100 $$ Where * `APR` is the estimated annualized return for INDY stakers * `y` is a constant representing the number of Cardano epochs in a year (fixed at 73) ### **APR for ADA rewards** *Based on last 30 days* #### Formula $$ v = a \* (\frac{b}{c}) $$ $$ APR = \frac{\sum\_{i=1}^{|v|}\*v\_i}{s} \* 12 \* 100 $$ Where * `v` is a set comprising the value of ADA distributed in a day, over a period of the last 30 days and denominated in INDY * `a` is the amount of ADA distributed in a day * `b` is the daily close price of ADA, denominated in USD * `c` is the daily close price of INDY, denominated in USD * `s` is the average amount of INDY staked for the last 30 days