Chain Risk

Introduction

QiDao is the most crosschain decentralized stablecoin protocol. It allows users of many blockchains to choose what collaterals to mint with and what chains to operate on. There is no preference for any chain or blockchain ecosystem. Chains and assets are onboarded on their individual merits via DAO proposals.
Having deployments on different chains allows QiDao to diversify its ecosystem-specific risk. However, this crosschain existence also comes with added risks associated with each chain. These include varying liquidity concentration risks, validator risk, and other risks.
To mitigate these risks, QiDao has developed a chain risk mitigation strategy.

Goals

  1. 1.
    Mitigate the risk associated with holding MAI (QiDao's stablecoin) on any particular blockchain.
  2. 2.
    Enable users to manage the risk of their stablecoin holdings by selecting which chain to hold MAI on.
  3. 3.
    Protect the overall protocol from any force majeure events.
  4. 4.
    Allow new chain deployments to grow before connecting them to the rest of the protocol.

Actions

  • Maintain the ratio between the circulating supply and the total debt on a chain within a given range. This containment approach ensures that any major events on one chain have a limited impact on the entire protocol. Limiting bridge liquidity between chains through bridge pools will achieve the desired ratio.
  • Pause bridging between certain chains by removing liquidity from bridge pools.
  • Deployments on new chains may be isolated for an initial period to allow for the project to scale and stabilize before being connected to other live chains.

Parameters

New chain deployments must have the following specifications chosen by DAO governance:
  1. 1.
    minimum CTD ratio
  2. 2.
    maximum CTD ratio
  3. 3.
    term of parameters
  4. 4.
    renewal requirements
Circulating supply to chain debt (CTD) ratio
The goal of this parameter is to limit the inflow and outflow of MAI debt from each chain deployment.
circulating supply to chain debt (CTD) ratio = [circulating supply in a chain] / [total chain debt]
Minimum CTD ratio sets a ceiling for how much MAI debt can be bridged to other chains. 100% min CTD ratio limits the outflow of MAI debt to 0 MAI. The lower the min CTD ratio, the greater the share of MAI debt that can leave a chain.
Maximum CTD ratio sets a ceiling for how much MAI debt can be bridged into a chain from other chains. 100% max CTD ratio limits the inflow of MAI debt to 0 MAI. The higher the max CTD ratio, the greater the share of MAI debt that can enter a chain from other chains.
Chain Debt
Calculated as the aggregate debt from all vaults on a given chain
total chain debt = sum of total debt from vault contracts in a chain
Circulating MAI supply
Calculated as the difference between the MAI token supply and the aggregate of the following: MAI in bridge pools, unminted MAI handlers, and vault contracts, burn addresses.
MAI circulating supply = total token supply - MAI balance in bridge pools, unminted MAI handlers, vault contracts, and burn addresses
Term of parameters
This refers to how long parameter decisions last. Having terms for parameters creates a predictable experience for users.
Renewal requirements
Given term limits, parameters must have requirements on how these can be extended or updated after terms are reached.

Terms

Deployments: QiDao functions as separate protocols on each blockchain it is deployed on. Users can mint and repay MAI using approved collaterals on each chain. Minted MAI is fungible across all chains and can be used to repay debt on any chain.
Bridging: MAI can be bridged across multiple chains. However, only the protocol, not any bridge, can mint MAI. This design mitigates cross-chain messaging risks. For more details on MAI bridging, refer to the bridge page in this documentation.
Live Chains: These are active chains in QiDao where users can mint, repay MAI, and bridge MAI to and from other live chains.
Isolated Chains: Deployments on isolated chains are still functional but separated from existing deployments. Users can mint and repay MAI on isolated chains, but they cannot bridge MAI out of the chain.
Frozen Chains: Deployments on frozen chains have no live protocol functions.