# Introduction

## About Kokoa Finance

Kokoa Finance is a crypto-asset-backed stablecoin platform where users can borrow KSD stablecoin against crypto assets without paying any nominal cost.

### Introduction

Kokoa Finance adopts a two-token system: KSD and Kokoa.

**KSD** is a crypto-collateralized decentralized stablecoin. Minting KSD requires the deposits of the collaterals in CDP worth more than the value of the minted KSD. The LTV(Loan-to-Value) ratio of a CDP must be lower than the Maximum LTV Limit set by the governance, which will initially be 45%, and if the ratio exceeds the Minimum Liquidation Threshold, say 60%, the collateral assets in the CDP will be liquidated. Through this mechanism, the system can maintain the value of each KSD.

**Kokoa** is a governance token for the Kokoa DAO. Kokoa DAO is a decentralized organization whose mission is to manage the sustainability and soundness of the KSD monetary system. By staking Kokoa, users can participate in Kokoa DAO's decision-making process and earn governance rewards.

### Benefits

**Borrow - Get Free Loan and Earn Kokoa Reward**

Users are able to borrow KSD by staking Klay without paying any interest. In fact, during the first four years, there's liquidity mining reward for KSD borrowers. This means borrowers can actually "earn" rewards by getting a free loan from Kokoa!

**Earn - Stay 100% Liquid and Earn 20% APY**

Users are able to earn 20% yearly interest simply by depositing their KSDs into Kokoa's KSD Savings Account and are able to withdraw funds anytime without any lock-up period or expiration date. Interest will be accrued to your account in real-time!

(Important Disclaimer: Please note that the above APY is not guaranteed by Kokoa Finance, Kokoa DAO, or any party. It is subject to changes due to the market condition, protocol variable updates, Kokoa DAO's decision-making, and so on. The 20% APY is just an example for the initial policy target)

**Govern**

Users can participate in the Kokoa DAO's decentralized governance by staking their Kokoa. The profits that the DAO earned will be distributed to the participants as a governance reward. For the stability of the system, a lock-up period of 9 days is applied when unstaking KOKOA.


# Kokoa Finance 101

##


# Simple Version

#### Borrow - Kokoa CDP(aka Kokoa Vault)

Users can open a CDP(Collateralized Debt Position) at Kokoa by depositing Klay as collateral. With the collateral assets, users can borrow KSD at 0% interest. There is no fixed duration for the loan, so users may repay the KSD on their preferred date. Users can withdraw the collateral assets after the repayment.

#### Earn - KSD Savings Rate

KSD Savings Rate is a risk-free base interest rate of the Kokoa money system. Users can earn this yield by simply depositing their KSD into the Kokoa Savings Account.

(**Important Disclaimer** - The term 'risk-free rate' does **NOT** mean that there is no risk, and no party is guaranteeing such property. The term is a financial terminology that refers to the expected yield of a very safe investment such as a 3-month US government Treasury bill. Because KSD is backed securely by the collateral assets and the KSD Savings maintains a 100% reserve rate, the KSD Savings theoretically has a relatively low risk, and this property is what the term 'risk-free' refers to in this document)

#### KSD - Decentralized Stablecoin of Kokoa

KSD is a cryptoasset-backed stablecoin, and the value of which is soft-pegged to USD. Every KSD is backed by collateral assets, and the sum of the dollar value of the collaterals should exceed the amounts of KSD issued. This way, the Kokoa Money System secures the value of KSD.

#### Price Stability of KSD

When the demand for KSD increases, the price of KSD may rise over its peg price in the short term. Since anyone can mint new KSD through Kokoa CDP, arbitragers would have incentives to mint new KSDs and sell them on premium. Through this mechanism, the price of KSD will return to its peg.

On the other hand, if the demand for KSD decreases, the price of KSD may fall under its peg price in the short term. In such cases, those who borrowed KSD will have incentives to buy KSD and pay back their debt. This way, the price of KSD will again return to its peg.

#### Kokoa Treasury Fund

Kokoa Treasury Fund is a treasury fund governed by the Kokoa DAO, the purpose of which is to maintain the stability of the KSD Money System. The treasury fund can mint non-collateralized KSD — aka ‘Naked KSD’ — under certain conditions predetermined by its ‘policy.’ Note that this ‘Naked KSD’ is not backed by the collaterals in the CDPs, it is still backed by other stablecoins and high-quality assets, so this does not undermine the soundness of the KSD money system at all.


# Detailed Version

![](/files/-MkwczKvg0NJ5ndFwsx4)

### Borrow - Kokoa CDP (aka Kokoa Vault)

Users can open a new CDP by depositing Klay as collateral. After opening a CDP, users will be able to borrow KSD from it. When users borrow KSD from their CDP, it mints new KSD out of thin air. The KSD minted is accounted as 'debt.' The debt must not exceed the value of the provided collaterals. Specifically, we track LTV(Loan-to-value) ratio to manage the risk levels of each CDP. Initially, the maximum LTV ratio under which users can mint KSD will be limited to 45%, and if the ratio exceeds 60%, the CDP will get liquidated.

### **Managing Debt**

Users may borrow more KSD from their existing CDPs as long as the LTV ratio does not exceed the limit. Of course, they may repay part of their debt too. Borrowers are always responsible for borrowing and repaying activities.

### **Liquidation**

When a CDP's LTV ratio exceeds the liquidation threshold, it is subject to liquidation. During liquidation, collateral assets in the CDPs are sold through a dutch auction to cover their KSD debt. The remaining collaterals will be returned to the user. Please be aware that there is a penalty for liquidation, which means that you will have to repay more than your actual KSD debt. The liquidation penalty rates are as below:

* Volatile Assets (KLAY, BTC, KLAY-USDT LP, ... ): 10%
* Stablecoins (USDT, USDT-DAI LP, ... ): 2%

Liquidation Auction is publicly accessible. To participate in the liquidation auction, please refer to this [GitHub repository](https://github.com/kokoa-finance/kokoa-liquidation-guide)

#### Why do we need a Dutch auction?

Selling collaterals using DEX directly from the vault contract may leave users vulnerable to various attacks. Attackers can, with a fixed liquidation target in mind, first distort the DEX price beforehand with a large sell order, wait for the automated liquidation to sell the collateral at the low price, and repurchase the collateral right after. In this way, the target asset can be acquired by the attacker much more cheaply. In such attack, the “collateral damage” stretches to the protocol’s soundness also. Borrow vault’s KSD debt that was not repaid even after the full liquidation process, due to excessively low price created by the attack, gives rise to ‘Unbacked KSD.’ This seriously damages the stability and reliability of the KSD monetary system.

#### Why is the liquidation penalty necessary?

The liquidation penalty is a device to incentivize vault users to monitor their debt status responsibly. The stability of the KSD monetary system may be compromised if the debt status is not well managed, opening up possibilities of dangerous, serial liquidation. It is also a safeguard against ‘unbacked KSD’ that may occur in extreme situations. In extreme market environments(e.g. when the collateral value plummets, or when some vaults experience bankruptcy--being unable to repay KSD debt even after liquidation--due to serial liquidation), the system burns the accumulated liquidation penalties that are normally reserved as KSD. In this way bankrupt vaults become solvent, ensuring a healthy monetary system.

### **Managing Collateral**

To keep their collateral assets safe from the risk of liquidation and also to manage the capital efficiency of their portfolio, users may add more collaterals into their existing CDP or withdraw part of the collaterals from it. Users may do so as long as the LTV ratio is kept under the limit. One thing to note is that withdrawing KLAY from a CDP requires an unstaking period of 7 days.

### **Calculation of LTV Ratio**

The price of KSD is always considered as 1$ when calculating the LTV ratio. For example, suppose a user deposited $1,000 worth of KLAY in a CDP and borrowed 400 KSD from it. In this case, the LTV ratio of your CDP is 40%, even if the market price of KSD is higher or lower than $1. This is why the aforementioned 'arbitrage' can happen when the price of KSD deviates from its peg.

### Price Stability of KSD

Due to the nature of the over-collateralized stablecoin model itself, users should not worry too much about the KSD price falling under its peg because each KSD is always backed by collateral worth more than $1. Users who have borrowed KSD have strong incentives to repurchase it in such cases because they must repay their debt to withdraw their collateral from their CDPs. With that in mind, users only need to worry about 'upside' volatility.

Additionally, the price cannot stay over 1 \* (1/MAX\_LTV) dollar for a meaningful period because in such cases, anyone can deposit Klay into CDP and mint KSD, the value of which is equal to or larger than the deposited collateral. For example, suppose the LTV limit is 45%, and KSD is traded at $2.5. By depositing $1,000 worth of Klay into the CDP, one can mint 450 KSD and exchange it for a $1,125 value of KLAY, redeposit those Klay and mint 506 KSD and sell it to 1265$ value of Klay;... Users can do this until the price of KSD returns to its peg - this is basically a money-printing opportunity for everyone.

So the instances users should focus on are the ones in which the KSD price stays above $1 and below $(1\*(1/MAX\_LTV)), and since the initial MAX\_LTV would be 45%, that becomes $2.22.

Under most circumstances, users will be incentivized to borrow more KSD when it is being traded at a premium because that's an opportunity to sell a dollar for more than a dollar. At the same time, they will also be disincentivized to purchase KSD or repay the debt because they need to pay more USD value than they borrowed. With these two combined, the natural market forces will adjust the price towards its peg.

If KSD is somehow still traded at a premium for a meaningful amount of time nevertheless, Kokoa DAO can adjust protocol variables in order to bring the price back to its peg. One of them is the KSD Savings Rate. By adjusting this rate, the system can manage the market demand for KSD. Another one is the (negative) Borrowing Rate for the CDPs. The Borrowing Rate is set to 0% in most situations. However, if the system needs to increase the supply of KSD, it may provide a negative interest rate to the CDPs. As the name suggests, users who borrow KSD from Kokoa CDP will 'receive,' not pay, interest as a reward for minting KSD. This way, we can manage both supply-side and demand-side market pressure. In addition, there will be many other levers that will be implemented in Kokoa for stability management, so please stay tuned!

### PSM(Price Stability Module)

Although in the long term, the natural market forces will push the price of KSD back to its peg price when it rises, it does not necessarily mean that it will ‘always’ keep it at $1. The price of KSD can still stay above its peg in the short term. This can be inconvenient — or even unreliable — not only for the users who want to use KSD as a medium of exchange but also for those who want to borrow KSD from CDP — because the KSD price might rise when they want to repay their debt.

Usually, in a more mature market, arbitragers fill this gap between the long-term price and the short-term price using advanced financial instruments such as margin, futures, options, and so on. Our team also aims to build such an ecosystem around Kokoa.

Nevertheless, we still need a somewhat more direct device to manage the mid-short-term price deviance. This is the primary purpose of PSM(Price Stability Module).

When KSD is traded at a premium, PSM can mint KSD against other stablecoins such as USDT, DAI, or USDC. When KSD is under-pegged, PSM will buy back and burn KSD with its assets.


# Lever-easy Vaults

## Overview

Lever-easy is our new leveraged position service using Kokoa vault’s KSD lending.

Currently, Kokoa users need to go through the following process in order to create a leveraged position.

(Example)

1. Borrow 250 KSD by depositing $1,000 worth KLAY collateral (LTV ratio: 25%)
2. Buy $250 worth of KLAY with 250 KSD
3. Borrow another 62.5 KSD with $250 worth KLAY collateral (LTV ratio: 25%)
4. Buy $62.5 worth of KLAY with 62.5 KSD
5. ... (repeat)

Repeating this process infinitely, the user ultimately borrows 333 KSD with 1,333 KLAY as collateral(LTV ratio: 25%). From a “leveraged position multiple” perspective, the user has created a $1,333 KLAY long position with only $1,000 worth KLAY, ending up with a 1.33x leveraged position.

**Lever-easy will allow users to easily create such leveraged positions without such a tiresome process.** Lever-easy utilizes the “Flash Mint” mechanism internally. Unlike the original method of borrowing KSD **after** the collateralization, Flash Mint creates new KSDs **before** the corresponding collateralization. Lever-easy vault first uses the newly minted KSD to buy the KLAY necessary, then collateralizes them along with user-deposited KLAY to create the leveraged position in just one click. **(However, all actions including minting new KSD and collateralization happen in one transaction, so all KSD are still minted based on tangible collaterals)**.

The new process can be described as in the following order:

1. User collateralizes $1000 worth KLAY and mints 333 KSD with Flash Mint
2. 333 KSD is used to buy $333 worth KLAY
3. $1,000 worth KLAY from step 1 and $333 worth KLAY from step 1 are aggregated ($1,333 KLAY) to be finally collateralized for the 333 KSD that was Flash Minted. (LTV ratio: 25%, Multiple: 1.33x)

**Step 1 to 3 all happens in a single transaction, so from the user’s perspective it seems as if:**

1. $1,000 worth KLAY is deposited to create 1.33x multiple lever-easy vaults

In the end, the user owns a $1,333 worth KLAY position(Debt: 333 KSD, LTV ratio: 25%, Multiple: 1.33x).

## Risk Management

#### Leveraged Vault’s LTV(Loan-To-Value) Ratio

Lever-easy is a function suited for users with more active strategies. Thus, Lever-easy vaults carry higher LTV ratios than normal vaults. A higher LTV ratio implies that when liquidation occurs, there is a higher risk that the liquidated collateral is insufficient to pay back the original debt position. To prevent risks of such occasions, Lever-easy’s vault collaterals should maintain a higher level of liquidity. For example, KLAY Lever-easy vaults’ collaterals are not staked in the Klaytn nodes. This is because (1) unstaking staked KLAY requires 1 week and (2) selling AKLAY instead could lead to over-depreciation of AKLAY compared to KLAY.

#### Stability Fee

Lever-easy vault collaterals thus require a higher stability fee than normal vaults. This is because, in order to keep liquidity levels high, these collateral assets have more restrictions in terms of utilizing for further operations. Nonetheless, in cases where the collateral is an asset that in itself bears future revenue (such as LP tokens) or where higher liquidity doesn’t necessarily restrict yield generation of the vault, higher stability fees may not be required.

#### Position Status Check

Lever-easy Vault positions can be summarized using these 5 pieces of information.

1. Total Position
2. KSD Debt
3. Net Value (of the Vault)
4. Multiple
5. LTV ratio

Let’s take an example of creating a 2x leveraged position using 1,000 KLAY (at $10). This vault can be summarized using these 5 numbers:

1. Total Position: 2,000 KLAY
2. KSD Debt: 10,000 KSD
3. Net Value = 10,000 KSD
4. Multiple: 2x
5. LTV ratio: 50%

Since it’s a 2x position from 1,000 KLAY, the total position would be 2,000 KLAY which is fully collateralized to the vault. Of the 2,000 KLAY, the newly added 1,000 KLAY was purchased with 10,000 KSD borrowed from the vault. The vault’s total position here is 2,000 KLAY(=20,000 KSD), KSD Debt 10,000 KSD, Net Value 10,000 KSD(=20,000 KSD - 10,000 KSD), and LTV 50%(=10,000/20,000). Lastly, multiple would be 2x since the user used a net value of only 10,000 KSD to create a position worth 20,000 KSD. Thus, Multiple-LTV ratio relationship can be explained as:

`Multiple = 1 / (1 - LTV)`

#### Position Management

There are two ways to alter your Lever-easy vault positions. The first is by **changing the multiple**. For the example right above, we can newly mint 5,000 KSD and add another 2,500 KLAY long position, thereby raising 2x multiple to 2.5x. (LTV: 50% → 60%). Conversely, lowering your KLAY position by 500 and paying back 5,000 could lower the multiple down to 1.5x. (LTV: 50% → 33%).

The second is by additionally depositing or withdrawing your collateral. Again from the above example of 2,000 KLAY leveraged position, adding another 1,000 KLAY to the vault will change the total position from 2,000 KLAY to 3,000, the net value from 10,000 KSD to 20,000, and the multiple from 2.0x to 1.5x(LTV ratio: 50% → 33%). Conversely, withdrawing 500 KLAY from the vault will bring the total position down to 1,500 KLAY, net value down to 5,000 KSD, and the multiple up to 3.0x(LTV ratio: 50% → 67%).


# How to Use Kokoa

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# How to Earn KOKOA

Liquidity Mining Program for the Early Users

## Borrow KSD from Kokoa Vault

![](/files/-Mkv_mAoFmjC7NUiL-qX)

By minting KSD from Kokoa Vault, you can earn KOKOA tokens as a reward.

## Provide Liquidity on KlaySwap or i4i Finance

![](/files/0GSCX9cpOsgAeg2SjlIz)

By staking the following LP tokens, users can earn KOKOA.

* KlaySwap KLAY-KOKOA LP Token
* KlaySwap AKLAY-KOKOA LP Token
* i4i Finance KLAYiKSD LP Token (KLAY-KSD)
* i4i Finance AKLAYiKSD LP Token (AKLAY-KSD)
* i4i Finance KSD4EYE LP Token (KSD-oUSDT-kDAI-oUSDC)

## Stake Kokoa

![](/files/-Mkv_xJGSL23tkUkcrDj)

Users can participate in the governance by staking Kokoa, and they can earn the governance reward and some extra Kokoa reward from our liquidity mining reward program.


# KOKOA Token

#### Tokenomics

The maximum supply of KOKOA is 999,998,845, and they will be released over the next four years since the launch. Five hundred million tokens will be allocated to the liquidity mining reward pool to bootstrap the platform's early liquidity. There's an ecosystem pool that will be used to assist with Kokoa Finance's growth and adoption. The detailed tokenomics is as below:

* Liquidity Mining: 500,000,000
* Ecosystem Fund: 129,630,000
* Early Backers: 169,369,645
* Team: 199,999,200
* Initial LP: 1,000,000

#### Token Release Schedule

The allocated tokens will be released as below. To incentivize the early participants even further, the liquidity mining reward is higher in the beginning and slowly decreases over time. The early backers and the team will have a 3-month lock-up, and the vesting schedules - which is designed to be 'slower' than the liquidity mining reward - will be applied. This token distribution model incentivizes early participants to contribute to the ecosystem in a long run.

![](/files/-MkvdbKiHVqWy7F_VhAB)


# Logo Image

## Main Logo

![](/files/-MlJ-x_6MPMon0kRvxPS)

![](/files/-MlJ0DIc1DFOj4DbNOH8)

## KOKOA Token

![](/files/-MlJ-_kjjf9S8TetGZMe)

## KSD Token

![](/files/-MlJ-oSu8VU2ZJ1suxQp)