Fort Canning Go-Live: 15. November 2021
Fort Canning: An Overview
It is confirmed – on November 15th the long awaited Fort Canning update will find its way to the DeFiChain mainnet. With this next big update after Eunos Paya in August, many new features will find their way into DeFiChain and especially into the wallets of the end users. While Eunos Paya introduced many background improvements and features such as 5y and 10y masternode freezers, Fort Canning now includes exciting DeFi features for end users of the DeFiChain ecosystem in particular.
The following features are implemented with Fort Canning:
- Oracles
Even though price oracles were already possible before Fort Canning, they find a real application for the first time with Fort Canning. With the help of price oracles, current prices for various assets (shares, ETFs, precious metals, FIAT exchange rates, etc.) are written natively to the DeFiChain blockchain every hour. These prices are then used to create and verify decentralized loans. Without the price oracles, no “values” could be calculated to be deposited as collateral for loans. - Loans
With Fort Canning, it will be possible to take out loans that are secured with cryptocurrencies / tokens. For this purpose, individual tokens (e.g. DFI, dBTC, dETH) must be placed in a vault and cannot be used or sent for other functions for the time being. Afterwards, the value of all tokens in the Vault can be calculated and used as collateral for a credit. The flexible credit amount can then be paid out in various tokens. When the loan amount is paid back, the user finally regains access to the tokens in the Vault. For the time being, loans will only be available in the Mobile Wallet (iOS, Android). More information can be found under “What are decentralized loans? - Stock Tokens
Also with the Fort Canning update, decentralized share tokens (dShares) will find their way onto the DeFiChain. The dShares will not be backed by real shares, but will be generated and traded natively via the blockchain. The generation of new dShares takes place exclusively through the use of loans. Accordingly, tokens are deposited as collateral and new dAktien are disbursed as a loan amount. Subsequently, these shares can either be held, sold or used for liquidity mining (liquidity pools of DEX). For the liquidity pools, only pools in the pattern dShare <> dUSD are traded. For the end user there are two possibilities to buy dShares: 1. by taking out a loan or 2. by buying the dShares with dUSD via DEX. For more info, see “What are decentralized shares (stock tokens)”. - Composite Swap
Another new feature for DeFiChain is the “Composite Swap”. With this, it will finally be possible to perform an exchange of tokens directly across multiple liquidity pools. This allows e.g. a direct swap from dBTC to dETH without having to take a detour via DFI. This cumbersome detour is now performed automatically in the background. - Technical Improvements
In addition to the core updates described above, Fort Canning will again include many technical improvements, especially for easier and safer operation of masternodes. For example, it will now be possible to change the operator address of a masternode after the masternode has been created.
Some of these features will be introduced with Fort Canning on November 15, but will be unlocked a bit later or will only be available on specific wallet types. The term dUSD can also be represented as dDUSD or DUSD and means the tokenized version of the US dollar currency. There are more details in the next sections.
What are decentralized Loans?
As already described in the overview, decentralized loans involve the generation of new tokens for which other tokens have previously been deposited as collateral. Collateral is deposited by moving certain tokens (initially only DFI, dBTC, dETH and dUSD) into a virtual vault. For each vault, a total value of all deposited collateral can be calculated in US dollars using the price oracles (the current prices can also be viewed here: https://defiscan.live/prices).
As soon as the collateral has been deposited in the Vault, the owner of the Vault can have a flexible credit amount paid out. The credit amount can be paid out in any token (DFI, dUSD, dBTC or even share tokens). The maximum credit amount is only a fraction of the stored collateral and depends on the selected credit interest rate. The selected annual interest rate is calculated pro rata for the duration of the loan and is due at the end of the loan together with the repayment of the loan amount. The loan interest rate, the loan amount and the deposited collateral can be flexibly adjusted at any time.
To close a loan, there are two options:
- Repayment
The first option is to repay the loan amount in full. To do this, the same tokens and the same number of tokens that were previously generated for the loan must be “burned” again. Afterwards, the owner of the vault can access the deposited tokens again, which served as collateral for the loan. - Auction/Liquidation
The second option is the auction of the loan. This occurs if the deposited collateral no longer provides sufficient security for the loan. For example, if 100 DFIs are deposited at a price of 2.50 USD per DFI (total value: 250 USD) and a loan amount of 120 USD has been disbursed (loan to collateral ratio: 250/120 = 2.083), the loan is well secured for the time being (the necessary “loan to collateral” ratio depends on the selected loan interest rate).
However, if the price of DFI falls to e.g. 1 USD, then the value of all deposited collateral (in this example 100 DFI) is only 100 USD and thus below the disbursed loan amount. Because the loan is now no longer sufficiently collateralized, it is liquidated by releasing it for auction among all other DeFiChain users. The highest bidder then becomes the owner of the vault and can withdraw the assets. The borrower and former owner of the Vault loses that Vault and thus access to his deposited collateral. Instead, he keeps the disbursed loan amount.
For illustration purposes, a reduction in the value of the collateral below the value of the loan amount was assumed. In reality, however, loans are already put up for auction at the latest when they fall below a collateralization level of 150% of the loan amount. This collateral limit (here of 150%) depends on the selected loan interest rate. The lower the interest rate, the higher the minimum collateralization.
By creating loans, you can also take short positions (betting on a price drop instead of a price increase) and leveraged trades, among other things. You can find more information about this here in the linked videos.
Procedure of a loan:
- Creation of a new Vault incl. choice of loan interest rate (also called loan scheme).
- Moving tokens (DFI, dBTC, dETH, dUSD) to the Vault as security
- Taking the loan by means of creating new tokens (any tokens including DFI, dUSD and stock tokens).
- Closing the loan
- Repayment
- Auction / Liquidation
- Withdrawal of the tokens used as security
- Deletion of the vault
What are decentralized Stock Token?
Also as already introduced in the overview, decentralized share tokens (dShares) will find their way onto the DeFiChain with Fort Canning Update. The dShares are not backed by real shares, but are generated and traded natively via the blockchain. The generation of new shares takes place by means of loans based on price oracles as explained above. This means that no real shares are deposited for share tokens traded on the DeFiChain. The collateralization of the dShares takes place exclusively via other tokens/cryptocurrencies on the DeFiChain. This has the enormous advantage that dShares are only considered as tokens and do not have to be considered as shares.
This bypasses some regulations, is treated differently for tax purposes and could become a central part of the DeFi ecosystem of the future. In Germany, for example, it would currently (in 2021) be possible to hold a dShare beyond one year, which would make it possible to sell the dShares tax-free after the holding period. On the other hand, of course, the investor has no voting rights as well as no access to a dividend, since he does not own a real share. In addition, dShares are always associated with the risk that the price of the dShares, e.g. on DeFiChain, does not reflect the price of real shares on stock exchanges.
dShares can be obtained in two ways:
- Creation of new dShares via a loan
As described above, loan amounts can be disbursed in any token, including stock tokens. - Purchase of dShares via the decentralized exchange (DEX)
All dShares will receive their own liquidity pool with dUSD as exchange currency. Each user can therefore buy a dAshare via the DEX.
The creation as well as the purchase of dAktien is possible thereby also in smallest fractions.
In order to be able to use the DEX liquidity pools, many users must of course provide their liquidity (in the form of dShares and dUSD). For this – as also for existing pools e.g. DFI-BTC – high rewards (so-called block rewards) are given to the providers of liquidity. Especially in the first weeks and months, very high returns are expected for liquidity providers.
Which wallet gets which functions?
Currently, not all wallet types support all features introduced with Fort Canning. You can find an overview of the function availability in the following table:
Wallet | Kredite - | Kredite - | Aktien Token - | Aktien Token - | |
Desktop Wallet | |||||
Kommandozeile (DeFiCain CLI) | |||||
Mobile Wallet (iOS, Android) | (End of Dec 21) | ||||
Saiive.live Mobile Wallet |
More information & instructions
In addition to the information described here, there are of course many other details about the Fort Canning Update that cannot be summarized on one web page. Therefore, you will find an overview of further information sources here:
- More information about loans on DeFiChain
- Video-Tutorials
- Long & Short with Shares: https://www.youtube.com/watch?v=R2uzYOjh9BI
- Liquidity Mining with Shares: https://www.youtube.com/watch?v=xQveATDFb0k
- Leveraged Trading: https://www.youtube.com/watch?v=qePflwYBAOk
