Changes: CRAB <> xRING liquidity pool swap

[hackfisher]

History

• When Darwinia mainnet launches, it reserved 40M RING in CrabBacking Account

https://github.com/darwinia-network/darwinia-common/blob/c387ba1c7303e1bad26aa612f232afcbcfd891ae/frame/bridge/crab/backing/src/lib.rs#L62

Corresponding Mapped RINGs were issued and recorded in Crab Network's Issuing module on Crab network.

https://github.com/darwinia-network/darwinia-common/blob/c387ba1c7303e1bad26aa612f232afcbcfd891ae/frame/bridge/crab/issuing/src/lib.rs#L82

• Before Darwinia mainnet, there was a genesis cross-chain activity for CRAB using to swap 100 CRAB to 1 Mapped RING and redeem that 1 Mapped RING into Darwinia genesis(burn in Crab side, and unlock from CrabBacking to user).

https://github.com/darwinia-network/darwinia-common/blob/45c85a84750c42bef91637507d706bf40dbdb5fe/frame/bridge/crab/issuing/src/lib.rs#L132

The CRAB used to swap for Mapped RING are locked in the module account now.

Motivation

The backing assets(Mapped RING) are allocated to Crab Network to make it serve as a canary network having real economic incentives and massive gaming theory testing, not just working a testnet.

Problems

1. With CRAB get listed in outside exchanges, its price is unpegged from ratio 100:1, and the original ratio becomes unreasonable, which will make the constant swap not work anymore. A liquidation pool like uniswap is more reasonable.

2. The original backing amount is not enough cover all future CRAB cap(10,000M) in whole lifetime.

3. Mapped RING was recorded in CrabIssuing pallet because sub-sub bridge is not ready and MappingTokenFactory(based on DVM) is not ready.

Changes

1. Migrate Mapped RING recorded in CrabIssuing pallet to ERC-20 mapping tokens in a reserve evm account controlled by Crab Module Account(Treasury/Council?), after sub-sub bridge being built between Darwinia and Crab.

Note: all mapped tokens are managed using EVM by design, and controlled by Issuing module and relative MappingTokenFactory.

2. Add liquidity of Mapped_RING/CRAB into Uniswap alike pool from above reserve account and Crab Issuing Account. Note: the CRAB currently locked in Crab Issuing module may not enough(/too much) to match outside price. The imbalance part will go from(/to) Treasury.

Summary

• CRAB and Mapped RING no longer follow the 100:1 swap ratio, which already happen in off-chain exchanges with most liquidation.
• The original backing assets(Mapped RING) will give up its control to Crab Treasury(/Council), and Crab Treasury can use these backing asset to bootstrapping an liquidation pool for long-term running CRAB<>Mapped_RING trade pair. This changes can also satisfy original motivation(Canary Net with real econmics).

[boundless-forest]

Here are some code snippets that might help understand.

1. backed_ring genesis setting: https://github.com/darwinia-network/darwinia/pull/553/files#diff-292a131483a432bb2352be1af3f2421027cc368f9a1dc63ec5fc567ecc85b0c3L393

[hackfisher]

https://uniswap.org/whitepaper.pdf

[xiaoch05]

1. CRING: CrabIssuing => Treasury, Native Token
2. Create Ring Token Contract（or Register Mapping Ring Contract by bridge）
3. Mint TotalMappedRing(about 3000w+) to DVM account controlled by treasury（or cross transfer from darwinia backing to this DVM account）
4. add liquidity to subswap，the ratio is from outer exchange. called by proposal.
5. there may be some cring left in the treasury account.

[hackfisher]

@1022ranji @xiaoch05 The migrations and steps before add liquidity is finished, and the remaining part is more about ecosystem collaboration and articles if need.

For docs and articles, I'll transfer this issue to crab-docs repo. @robinwei-itering @1022ranji

[robinwei-itering]

Edited version of key points

Some users wonder whether the RING-to-CRAB exchange rate is fixed, or how the exchange rate evolves. This article will clarify some questions around this topic.

History

We reserved 40M RING in CrabBacking Account in the launch of Darwinia Network, and the corresponding mapped(wrapped) RINGs were issued and recorded in Crab Network's Issuing module on Crab network. xRING denotes mapped RING in the rest part of this article.

Before Darwinia mainnet, there was a genesis cross-chain event during which uses could convert CRAB into xRING at the rate of **100 CRAB = 1 xRING ** and redeem that 1 xRING into Darwinia genesis(burned in Crab side, and unlocked from CrabBacking to user).
The CRAB used to swap for xRING is currently locked in the module account.

Rationale

The backing assets(xRING) are allocated to Crab Network to make it a canary network with real economic incentives and massive gaming theory testing other than a testnet.

Problems

Once the two networks have started evolving independently, the exchange rate of 100:1 between CRAB and RING no longer applies. There is no such pegging mechanism inherently. The evaluation of two assets(RING & CRAB) should be market-driven and relatively independent.

The total supply of CRAB would be 10,000M, which requires a liquidity pool of larger volume. The amount currently locked in the backing account is far from sufficient.

xRING was recorded in CrabIssuing pallet because sub-sub bridge is not ready and MappingTokenFactory(based on DVM) is not ready.

Proposals

We plan to migrate xRING recorded in the CrabIssuing pallet to ERC-20 mapped tokens in a reserved EVM account controlled by Crab Module Account(Treasury/Council) after a Substrate-to-Substrate bridge between Darwinia and Crab networks. All mapped tokens are managed using EVM by design, and controlled by the Issuing module and relative MappingTokenFactory.

We will use tokens from the above reserved account and the Crab Issuing Account to create a UNISW-like liquidity pool to increase the liquidity of both tokens. It is possible that that the amount of CRAB currently locked in the Crab Issuing module does match the outside price, but the shortfall or surplus can be addressed by Treasuary.

Summary

CRAB and xRING no longer follow the 100:1 swap ratio, which has already happened in off-chain exchanges with most liquidation. The original backing assets(xRING) will be transferred to Crab Treasury(/Council), and Crab Treasury can use these backing assets to create a liquidity pool for the long-term running of the CRAB/xRING trade pair. These changes conform to the positioning of Crab as a Canary network of Darwinia with real economic value.