Q: The ISSUAA protocol – what does it offer to its users?
A:The ISSUAA protocol is designed to tokenize real world and crypto assets such as stocks or stock indices, commodities or crypto currencies on a public blockchain. Investors and traders can trade such various tokenized assets on the ISSUAA marketplace - seamlessly out of their metamask wallet and without the need of a bank account and KYC procedures. On the other hand, ISSUAA is especially attractive for investors who act as liquidity providers in the ISSUAA Asset pools, as LPs profit from best in class low risk yield farming and rewards to be received in the ISSUAA protocol token, which offers outstanding, investor oriented tokenomics.
Q: What was the original idea behind ISSUAA?
A: In 2017 we discovered Etherdelta, an early decentralized exchange on which anyone with an ethereum wallet could trade many different tokens. Despite its flaws and the fact that most of the tokens that were traded there were worthless, we realized that decentralized exchanges will be the marketplaces of the future, not only for crypto tokens but also for tokens that represent real world assets such as stocks, stock indices or commodities. It was then that we developed the first protocol ideas, which have then later been polished and finally put into code.
Meanwhile other protocols started to tokenize real world assets as well, but they were in our view far from perfect. They were lacking capital efficiency or were not fully decentralised. These were the issues which we addressed when we developed ISSUAA, which was then set up as a Decentralized Autonomous Organization (DAO) - fully decentralized and without any central counterparty.
Q: That´s a very interesting point. Can you tell a bit more regarding the governance of ISSUAA?
A: The ISSUAA protocol was set-up as DAO from day one in order to not only provide decentralized technology but also decentralized governance. After the main launch on Polygon, there are no special rights and no masterkeys or similar privileges for anybody. Governance decisions will solely be taken after ISSUAA DAO governance votes of the holders of the ISSUAA Protocol Token (IPT).
Q: What makes the ISSUAA protocol special compared to existing synthetic asset protocols?
A: The one significant benefit is the way new assets are created on ISSUAA. If you mint new synthetic assets you need to make sure that there is always enough collateral in the pool to be able to pay out the investor who owns these assets. The problem is, that the price of the collateral and the price of the asset you are mirroring as a synthetic asset fluctuate in value. So in order to make sure that there is always enough collateral in the pool, other protocols typically require you to pay in much more than the actual value of the asset in order to have a safety cushion. Still, if the price of one of the two assets fluctuates too much, you might be liquidated when providing liquidity in such protocols´ pools.
In the ISSUAA protocol this is solved differently with a novel approach. New assets are minted always as pairs of a long and a short token. Users pay exactly the value of the two tokens and there is no need for overcollateralization. This is possible as stable coins (USDC) are used as collateral, so there is no volatility on that side. Additionally, if the asset goes up in price, the long token will gain value, but the short token will lose the same amount of value, which means that the sum of the two assets remains the same at all times. Therefore, the ISSUAA protocol does not force liquidity providers to over-collateralize and there is no risk of liquiditation.
Q: So if there´s no liquidation risk, that is indeed a major benefit, especially in turbulent markets. How about the impermanent loss risk investors typically face when providing liquidity in other AMM protocols´ pools?
A: The fact that ISSUAA uses two tokens - long and short - has another positive side effect. As an investor who wants to earn yield by providing liquidity, you normally face a significant risk of impermanent loss if the original price of the token changes. However, as the ISSUAA protocol has long and short tokens, you can provide liquidity to the long and to the short token pool. In case the price of the asset goes up, you lose on the short pool, but you win on the long pool. This balances out pretty much and even in case of a 50% price move the impact on the LP provider is just about 3%. So you get the attractive yield from our token rewards and trading fees while facing a very limited price risk.
Q: Can you describe what the characteristics and use cases of the ISSUAA Protocol Token are?
A: First of all the IPT is decisive in all governance decisions of the ISSUAA DAO. In governance votings, on staked IPT stands for one vote. The DAO votes on asset prices at the time of their expiry and if an asset price has breached its upper limit, which will freeze the asset. Also, the DAO can decide about new assets, which are added to the platform as well as on grants for contributors which add value to the protocol.
Besides its pure governance function, the IPT is linked to the cash flows that are generated on the plattform. 0.005% of all trading volume will accrue for the token holders and can be redeemed if they decide to burn their tokens.
Q: Is there an ICO planned, so users can buy the token, and how will the IPT token be distributed?
A: There is no “classic” ICO or token sale envisaged. Besides an initial ISSUAA DAO angel seed round, which was sponsored by early supporters of the ISSUAA protocol, the majority of IPT tokens will be rewarded to users of the ISSUAA protocol, engaging as liquidity providers and participating in ISSUAA DAO governance votes. Hence, users who add value to the ISSUAA protocol will be rewarded.
Q: So how can users become holders of the IPT via the rewards scheme, then?
A: 60% of the total IPT supply (i.e. to 60m IPT tokens) will be rewarded weekly to participants in the ISSUAA protocol. The majority of this amount (80%) will go to liquidity providers, which help to make the ISSUAA assets liquid and thus investible for investors. The remaining 20% will go to people that participate in the voting processes, thus incentivizing active participation in the DAO governance. Additionally, 10% of the tokens are managed by the DAO contract and can be given out as grants if such a proposal reaches a majority vote.
Q: With this attractive and investor friendly rewards scheme, who will be the typical user of the ISSUAA protocol and …
A: We have mainly two different audiences, which we target with ISSUAA. On the one hand there are investors, which want to invest in real world assets such as stocks or commodities directly on the blockchain. There are many reasons why the classical banking system is not well suited for these investors - costs, the availability of such products and the opportunity to invest 24/7 are just some of these. On the other hand we target investors, which want to earn yield from trading fees and from receiving rewards tokens. The offer we can make to these investors is not only high rewards, but also a relatively low price risk.
Q: To attract experienced and professional DeFi investors and liquidity providers, which security measures were taken and how is the integrity of the protocol secured?
A: First of all, there is no need to trust the early developers and contributors of ISSUAA as there are no special rights or masterkeys, which would allow us to do any harm to the system. Additionally, in order to make this transparent to our users and also to make sure that the protocol does not have any unintended flaws, we decided to let Obelisk audit our project.
