How It Works

Users can bridge assets into the Citizen Reserve ecosystem through 3rd party bridge providers like Synapse or Gravity, or through IBC routes.

Users can mint the ZUSD stablecoin by depositing eligible collateral into a Citizen Bank smart contract and withdrawing ZUSD as a loan against that collateral. These Bank contracts hold the collateral, allow users to withdraw ZUSD as a loan, and risk-manage the loan. Users pay an upfront fee of .5% on the ZUSD that they withdraw, and an interest rate on their loan overtime. Citizen requires that Bank contracts maintain a collateralization ratio of at least 110%. This means that the dollar value of the collateral assets in the Bank contract must always be greater than 110% of the value of the ZUSD loan outstanding.

Eligible collateral types are determined by the Citizen validators and CTZ stakeholders. At genesis, Citizen will accept ETH, tBTC, stETH, cbETH, rETH. The protocol forbids the minting of ZUSD against tokens native to the Citizen Ecosystem, which includes CTZ and ZUSD.

If a Bank contract becomes undercollateralized, where the collateralization ratio has fallen below the minimum collateralization ratio of 110%, the Bank assets will be liquidated. This can happen from a decrease in the price of the collateral assets, or from the accrual of unpaid interest. The collateral will be exchanged for ZUSD to cover the balance of the loan outstanding. Efficient liquidations ensure that the supply of ZUSD is always overcollateralized. Citizen incorporates 3 sequential liquidation mechanisms to enforce liquidations.