The problem Autonomint Protocol solves

Current liquidation processes are stressful and inefficient for users and protocols. Borrowers must overcollateralize loans by more than 2X and face liquidations at higher prices, causing anxiety and deterring businesses from borrowing stablecoins as working capital due to fear of getting liquidated at periods of high crypto market volatility. Currently, protocols depend on Keeper networks for handling liquidations that fail during high volatility, leading to cascading liquidations and crypto flash crashes.

Our new mechanism, Decentralized Credit Default Swaps (dCDS), improves liquidation handling by 80% and can also double down as a leverage solution by offering low-risk 5X-10X leverage with stablecoin fee rewards. For the first time, users can pay for liquidations with different tokens, while our derivatives hedge crypto collateral volatility. This solution will significantly enhance the capital efficiency of current designs as users can now borrow stablecoins at 100% synthetic LTV, hedging against volatility, and using collateral to earn yields. dCDS can also integrate with existing lending protocols, enabling derivatives for everyday crypto applications like lending, stablecoin minting, and liquidity provisioning through LPs.

Another application is for Leverage seekers/Traders, who can now post collateral that generates yield.

Challenges we ran into

Challenges

1. Tracking settlements while prices, amounts, and the number of users keep changing - We faced challenges with settling transactions as users entered at different times, with varying crypto prices and amounts. This created issues when matching them against stablecoin borrowers who also had differing entry prices, durations, and deposits. We solved this by creating a single formula that normalizes these changes by discounting everything back to the protocol's genesis. We tracked global variables that change with each transaction and offloaded much of the tracking off-chain to standardize calculations without compromising decentralization. This made the smart contract light

2. Interdependencies among code modules - Our codebase had interdependencies requiring global updates across all bridged chains when a user adds TVL. While manageable with 2 chains, we aimed for scalability and gas optimization. This issue arised as we added LayerZero code to each contract, leading to global variable updates across chains. We tackled this by creating a separate LayerZero contract for this which reduced contract size, improved gas efficiency, and lowered latency. This now allows TVL bridging from other chains to the Base chain, enhancing liquidation protection for cross-chain lending and borrowing protocols.

3. Tracing 'Colored Dollar' across chains - We wanted minted stablecoins to have unique metadata, enabling traceability across chains and linkage back to the source without losing their fungibility. This also allows us to share yields with participants based on their contributions for enabling primary markets. But this was a lossy mechanism leading to O(N) complexity so tackled this by changing the ERC20 metadata architecture in a way so that it re-colors the stablecoin whenever a new transfer happens and this reduced the complexity to O(1) and helped serve our purpose.