This repository contains the core smart contract code for Multi Collateral Dai. This is a high level description of the system, assuming familiarity with the basic economic mechanics as described in the whitepaper.
dss is also documented in the wiki and in DEVELOPING.md
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Token agnostic
- system doesn't care about the implementation of external tokens
- can operate entirely independently of other systems, provided an authority assigns initial collateral to users in the system and provides price data.
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Verifiable
- designed from the bottom up to be amenable to formal verification
- the core cdp and balance database makes no external calls and contains no precision loss (i.e. no division)
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Modular
- multi contract core system is made to be very adaptable to changing requirements.
- allows for implementations of e.g. auctions, liquidation, CDP risk conditions, to be altered on a live system.
- allows for the addition of novel collateral types (e.g. whitelisting)
Collateral is the foundation of Dai and Dai creation is not possible without it. There are many potential candidates for collateral, whether native ether, ERC20 tokens, other fungible token standards like ERC777, non-fungible tokens, or any number of other financial instruments.
Token wrappers are one solution to the need to standardise collateral behaviour in Dai. Inconsistent decimals and transfer semantics are reasons for wrapping. For example, the WETH token is an ERC20 wrapper around native ether.
In MCD, we abstract all of these different token behaviours away behind Adapters.
Adapters manipulate a single core system function: slip, which
modifies user collateral balances.
Adapters should be very small and well defined contracts. Adapters are
very powerful and should be carefully vetted by MKR holders. Some
examples are given in join.sol. Note that the adapter is the only
connection between a given collateral type and the concrete on-chain
token that it represents.
There can be a multitude of adapters for each collateral type, for different requirements. For example, ETH collateral could have an adapter for native ether and also for WETH.
The fundamental state of a Dai balance is given by the balance in the
core (vat.dai, sometimes referred to as D).
Given this, there are a number of ways to implement the Dai that is used outside of the system, with different trade offs.
Fundamentally, "Dai" is any token that is directly fungible with the core.
In the Kovan deployment, "Dai" is represented by an ERC20 DSToken.
After interacting with CDPs and auctions, users must exit from the
system to gain a balance of this token, which can then be used in Oasis
etc.
It is possible to have multiple fungible Dai tokens, allowing for the
adoption of new token standards. This needs careful consideration from a
UX perspective, with the notion of a canonical token address becoming
increasingly restrictive. In the future, cross-chain communication and
scalable sidechains will likely lead to a proliferation of multiple Dai
tokens. Users of the core could exit into a Plasma sidechain, an
Ethereum shard, or a different blockchain entirely via e.g. the Cosmos
Hub.
Price feeds are a crucial part of the Dai system. The code here assumes that there are working price feeds and that their values are being pushed to the contracts.
Specifically, the price that is required is the highest acceptable quantity of CDP Dai debt per unit of collateral.
An important difference between SCD and MCD is the switch from fixed price sell offs to auctions as the means of liquidating collateral.
The auctions implemented here are simple and expect liquidations to occur in fixed size lots (say 10,000 ETH).
Another important difference between SCD and MCD is in the handling of System Debt. System Debt is debt that has been taken from risky CDPs. In SCD this is covered by diluting the collateral pool via the PETH mechanism. In MCD this is covered by dilution of an external token, namely MKR.
As in collateral liquidation, this dilution occurs by an auction
(flop), using a fixed-size lot.
In order to reduce the collateral intensity of large CDP liquidations, MKR dilution is delayed by a configurable period (e.g 1 week).
Similarly, System Surplus is handled by an auction (flap), which sells
off Dai surplus in return for the highest bidder in MKR.
The contracts here use a very simple multi-owner authentication system, where a contract totally trusts multiple other contracts to call its functions and configure it.
It is expected that modification of this state will be via an interface that is used by the Governance layer.