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How to Mint IST with stATOM on Agoric

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Big strides in the ecosystem: the stATOM vault has officially gone live on Inter Protocol, opening up new possibilities for token holders. With this development, users can now mint IST, a decentralized stablecoin powered by Inter Protocol, against their stATOM holdings. By minting IST with stATOM, users can access borrowed IST while still enjoying the benefits of earning staking rewards on their ATOM assets. In a significant milestone, stATOM becomes only the second form of collateral to meet Inter Protocol's rigorous economic and risk standards, joining ATOM as an accepted asset in Inter Protocol Vaults. The unique advantage of backing decentralized stablecoins with LSTs, like stATOM, preserves users' staking rewards, making the prospect of minting stablecoins with LSTs even more attractive in the world of DeFi.

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Use this guide from the Stride Support Lab to aid you as you explore the new stATOM vault!

Table of Contents

A. Depositing Assets to Agoric Chain (to use as Vaults collateral)

Here is a step-by-step guide explaining how to use the IBC transfer feature in the Wallet UI. You must have an Agoric Smart Wallet provisioned. If you have not done it yet, please check this guide. After successfully completing the Agoric Smart Wallet provisioning process, let us begin our first step.

  1. Launch Hit 'Deposit' button for the asset you wish to deposit:
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You may get a Keplr prompt to add 'Cosmos Hub':

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  1. Specify the amount you wish to deposit. Source chain address will default to native token chain (ex. for ATOM this will be Cosmos). Your Agoric chain address should auto-populate. Hit 'Deposit ATOM':
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This will perform an IBC transfer of the asset from the source chain to the Agoric chain. You can similarly use it to withdraw your asset from the Agoric chain to a specified destination chain.

  1. Approve the IBC transfer transaction in the Keplr pop-up:
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When the transaction finishes, your asset balance will update. In this example, you will see your ATOM purse increase by 1 ATOM. This amount will be available to lock up as collateral in Vaults dapp UI.

You're now ready to create a vault!

B. Minting IST - Vaults

What are Vaults?

Vaults are Inter Protocol's flagship product and IST minting mechanism. User's specify how much collateral they wish to lock-up to mint a corresponding amount of IST (subject to vault parameters).

Vaults are over-collateralized upon creation subject to governed parameters as set by the Economic Committee.

Fees

Vaults are subject to both a minting fee and a stability fee. In the event of a liquidation, vault holders are also subject to a liquidation penalty.

  • Minting Fee: This is a once-off fee charged in IST each time you mint and IST amount i.e. upon creation of the fault and when you adjust vault to mint more. This is also a governed parameter set by the Economic Committee.
  • Stability Fee: This is ongoing cost of holding the debt position. It is charged in IST and calculated as % APY. It is added to you IST debt position over time. It is a governed parameter set by the Economic Committee.

Liquidation Penalty

In the event of severe market movements, the value of your collateral may drop below the liquidation ratio. If this occurs and you do not take action to add additional collateral or repay some IST debt to increase your collateralization ratio, your vault will be liquidated in order to repay the outstanding IST debt. In addition to this you will be charged a liquidation penalty, charged in collateral asset type which will be sent to the reserve. This is a governed parameter set by the Economic Committee.

Note: It's important to keep an eye on your collateralization ratio and to avoid liquidation. To reduce the risk of liquidation, it is recommended you keep your collateralization ratio at an adequate level that would weather severe market movements.

Using Assets as Collateral

You will need to IBC transfer assets to the Agoric chain in order to use them as Vaults collateral. You can do this via Agoric's Smart Wallet 'Deposit' feature. More instructions on this and other Vaults actions follow below.

C. Creating a Vault

  1. Navigate to the Vaults dApp UI, https://app.inter.trade/.

  1. Hit 'Connect Wallet' in top right. If you have not created an Agoric Smart Wallet please follow the steps in section A then return and continue from here. The first time you connect your wallet to the Vaults UI Dapp, you may see a 'Read Only' Mode pop-up. This means you haven't yet accepted the dapp connection from your Agoric Smart Wallet. Click the link in the pop-up to navigate to the Agoric Wallet UI where you'll be able to approve Dapp connection. By approving, you are essentially saying 'yes - I agree to let this dapp propose offers'.

Note: you'll be prompted to do this every time there is a new Vaults UI IPFS hash published by the Economic Committee.

  1. Once the dApp connection has been approved, you'll be able to create a vault. Hit 'Add New Vault':
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  1. Review and choose collateral type and parameters (note: we are launching with ATOM collateral type which will be pre-selected).
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You will need to have the collateral you wish to lock-up on the Agoric chain. If you have already done this, you can proceed to step 6 otherwise see 'Depositing assets to Agoric chain (to use as collateral)' to complete this first.

  1. Enter the collateral amount you wish to lock up.

Note: hitting 'Max' button will auto-fill the maximum collateral amount based on your wallet balance.

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  1. Enter the IST amount you wish to receive.

Note: the collateralization percent will be auto-calculated once you enter this amount based on your previously input locked collateral amount. If you wish to mint the maximum amount of IST based on the locked collateral amount and the minimum collateralization ratio - you can hit the 'Max' button. You can always manually configure either field to tweak vault parameters to your specific liking.

  1. Review vault details in the Vault Summary preview pane on the right and hit 'Create Vault' to submit to your Agoric Smart Wallet for approval.
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You will be prompted to navigate to your Agoric Smart Wallet to approve. Clicking 'Go To Wallet' will open a new browser tab of your wallet or bring you to existing wallet tab.

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  1. Hit 'Approve' on offer tile in your Agoric Smart Wallet. Note the long URL is the IPFS hash of the latest referenced Vaults UI.
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  1. Hit 'Approve' when prompted by Keplr pop-up to sign transaction
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Once transaction is successful, your vault is created - congratulations!

Navigate back to the Vaults UI to see your new vault appear under 'My Vaults':

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D. Adjusting a Vault

  1. Select one or multiple actions you wish to take on the vault and enter adjustment amounts.

Note: you may perform a single or multiple vault adjustment actions in the same transaction (ex. deposit more collateral and mint more IST).

These include:

  • Deposit (collateral): Deposit additional collateral into your vault. This increases the collateralization ratio of your vault
  • Withdraw (collateral): Withdraw collateral from your vault to your wallet. This decreases the collateralization ratio of your vault
  • Repay (IST): Reduces your IST debt and increases your collateralization ratio
  • Mint More (IST): Increases your IST debt and reduces your collateralization ratio
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  1. Hit 'Adjust Vault' button in 'Vault Summary' pane on right. You will be prompted to navigate to your Agoric Smart Wallet to approve transaction.
  2. Hit 'Approve' button in Agoric Smart Wallet to send transaction to Keplr for signing.
  3. Sign transaction in Keplr pop-up to transmit transaction to chain.

Your vault will update automatically once transaction is successful.

E. Closing a Vault

  1. From the Vaults dApp UI, click the vault you wish to close.
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  1. Hit 'Close Out Vault' button on bottom left.
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  1. You will be prompted to confirm action which includes a preview of the IST amount you are about to repay and the collateral amount you will receive back. Hit 'Close out Vault' to send to your Agoric Smart Wallet for approval.
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  1. Hit 'Approve' button in Agoric Smart Wallet to send transaction to Keplr for signing.
  2. Sign transaction in Keplr pop-up to transmit transaction to chain.

Your vault will close once the transaction is successful. Note you will be unable to take any further action on this vault once closed.

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