FAQ

1. What is Wand?

Wand is a structured asset protocol that maximizes asset utilization by introducing a pooled CDP model, enhancing liquidity in the DeFi space.

2. Can you further explain pooled CDP?

Unlike traditional CDP models where each user's CDP causes over-collateralized values to vary, Wand introduces a pooled CDP model. Everyone shares a common CDP, making over-collateralized values uniform and enhancing liquidity across the board.

3. How to maximize the utilization?

In a traditional CDP model, for example, MakerDao, when a user deposits ETH as collateral, they can borrow stablecoins up to a certain percentage of the collateral’s value to achieve liquidity, leaving the over-collateralized portion idle and unused. Wand innovatively allows users to mint the over-collateralized part into a margin token, ensuring that 100% of the collateralized value is brought into circulation and maximizing liquidity. This ensures that not only the borrowed stablecoins but also the over-collateralized portion are put to productive use in the DeFi ecosystem, enhancing overall asset utilization and efficiency.

4. Can I withdraw my ETH?

Yes, you can redeem your ETH. Within the Wand, a redemption mechanism allows you to convert your assets (such as USB and xToken) back into collateral, which in this case is ETH.

5. What assets does Wand support?

Initially, Wand supports ETH and USDB. Additionally, we plan to introduce more assets in the future such as WBTC.

6. How does Wand manage risks, especially when collateral prices drop?

Pooled CDPs also encounter risks when collateral prices fall. To manage this, we use the Asset Adequacy Ratio (AAR) to assess the vault's health. A high AAR lowers the leverage ratio of Margin Tokens, whereas a low AAR suggests a risk of debt repayment for USB. Thus, maintaining the AAR balance is crucial.

Unlike traditional lending protocols, Wand does not enforce liquidations. Instead, it introduces an Adjustment mode, Price Trigger Yield, and Discount offer mechanism to dynamically adjust the AAR. This allows anyone to participate and potentially earn arbitrage profits, ensuring the Vault's health.

7. Can I trade ETHx?

Yes, assets generated by Wand Protocol, including the over-collateralization which is minted into a margin token, can be traded as they conform to the ERC-20 standard, ensuring they are interoperable with various DeFi platforms.

8. Will my open position change?

Your held margin tokens represent your open position in the vault. When the Vault is in Stability Mode, maintaining the same number of your margin tokens will keep your position unchanged.

However, when the Vault is in Adjustment Mode, your position may experience slight variations. If you wish to maintain a constant position, you can actively manage it during the adjustment period by buying or selling margin tokens to keep your position stable.