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Minting Process Flow

This document describes the process of minting leveraged and pegged tokens in Harbor Protocol.

Overview​

Users can mint two types of tokens:

  1. Leveraged Tokens: Provide leveraged exposure to the underlying asset
  2. Pegged Tokens: Provide 1:1 exposure to the underlying asset

Minting Leveraged Tokens​

Step-by-Step Process​

  1. User Initiates Mint

    • User calls mintLeveragedToken(amount) on the Minter contract
    • Provides collateral (e.g., wstETH)

  2. Price Oracle Query

    • Minter queries the price oracle for current collateral and asset prices
    • Calculates exchange rate based on current prices

  3. Fee Calculation

    • Protocol fees are calculated based on the mint amount
    • Fees are sent to the fee receiver contract

  4. Reserve Pool Update

    • A portion of collateral is allocated to the reserve pool
    • Reserve pool balance is updated

  5. Token Minting

    • Leveraged tokens are minted to the user
    • Amount minted = (collateral amount - fees - reserve) × leverage ratio / asset price

  6. Event Emission

    • LeveragedTokenMinted event is emitted with details

Example Flow​

User deposits 10 wstETH
↓
Price Oracle: 1 wstETH = $3000, 1 ETH = $3000
↓
Fees: 0.5% = 0.05 wstETH → Fee Receiver
Reserve: 1% = 0.1 wstETH → Reserve Pool
Net: 9.85 wstETH
↓
Leverage: 3x
Minted: (9.85 × 3) / 1 = 29.55 leveraged tokens

Minting Pegged Tokens​

Step-by-Step Process​

  1. User Initiates Mint

    • User calls mintPeggedToken(amount) on the Minter contract
    • Provides collateral (e.g., wstETH)

  2. Price Oracle Query

    • Minter queries price oracle for current prices
    • Calculates 1:1 exchange rate

  3. Fee Calculation

    • Protocol fees are calculated
    • Fees sent to fee receiver

  4. Reserve Pool Update

    • Reserve allocation is made

  5. Token Minting

    • Pegged tokens are minted 1:1 with collateral value
    • Amount minted = (collateral amount - fees - reserve) / asset price

  6. Event Emission

    • PeggedTokenMinted event is emitted

Example Flow​

User deposits 10 wstETH
↓
Price Oracle: 1 wstETH = $3000, 1 ETH = $3000
↓
Fees: 0.5% = 0.05 wstETH → Fee Receiver
Reserve: 1% = 0.1 wstETH → Reserve Pool
Net: 9.85 wstETH
↓
Minted: 9.85 pegged tokens (1:1 ratio)

Requirements​

Pre-Minting Checks​

  • Sufficient collateral balance
  • Protocol is not paused
  • Price oracle is not stale
  • Minimum mint amount requirements met
  • Maximum leverage limits not exceeded

Post-Minting State​

  • User receives minted tokens
  • Fees distributed to fee receiver
  • Reserve pool updated
  • Protocol state updated

Burning Tokens​

The reverse process (burning) follows similar steps:

  1. User calls burnLeveragedToken(amount) or burnPeggedToken(amount)
  2. Tokens are burned
  3. Collateral is calculated based on current prices
  4. Fees are deducted
  5. Remaining collateral is returned to user

Gas Considerations​

  • Minting operations require multiple contract calls
  • Price oracle updates may be needed
  • Multiple token transfers occur
  • Gas costs vary based on network conditions