Background on Vault v1
NUMA is a utility token designed to mint synthetics through a burn and mint mechanism. To ensure all synthetics are fully collateralized, each NUMA token is backed by a vault of rETH. This means NUMA can always be redeemed for rETH at the floor price. Likewise, NUMA can also be minted from the vault by adding more rETH.
As NUMA is bought or sold into the vault, the rETH-backing of each NUMA token increases, leading NUMA to appreciate against rETH.
Improved Vault 2.0 is coming!
The team are excited to announce the numa vault will soon be upgraded to include a native lending feature. The lending feature will allow users to lock their NUMA to borrow the rETH backing with no interest.
This means that rather than selling their NUMA back into the vault to redeem the rETH, users can just borrow its rETH backing at no cost.
Users will therefore be able to maintain full exposure to NUMA’s appreciating price floor, while accessing the underlying capital for other purposes. For example, this borrowed capital can be used to buy more NUMA, then added as collateral to borrow even more rETH—creating additional leverage in the system.
Natural system leverage
Once synthetics are live (expected late Q2), users will be able to burn NUMA to mint their chosen synthetics. Since not all NUMA will ever be burned for synthetics, this means synthetics are always intrinsically over-collateralized at the time they are minted.
The price of circulating NUMA is proportional to the present value of synthetics compared to the value of the rETH vault. When the ratio of synthetics is high, a small relative change between the two metrics will have a leveraged impact on the price of Numa. The more synthetics are minted, the greater this native leverage becomes. This means holding NUMA becomes akin to a funding-free, non-liquidatable leverage long position on ETH.
Why is additional leverage beneficial?
Allowing users to leverage NUMA, which itself is a non-liquidatable leveraged long position, creates a never-seen-before, funding-free, highly-leveraged, perpetual ETH primitive for DeFi.
Leverage trading is one of the largest use cases in crypto. Numa’s goal to offer the lowest-cost, highest-leverage ETH offering should attract significant capital to the numa protocol, which expands vault commitments, and allows more synthetic debt to be minted.
As NUMA itself is priced in the rETH, this leveraged position can only be liquidated when the synthetic debt outperforms the rETH vault, causing the value of outstanding NUMA to drop.
In a liquidation event, the rETH debt is repaid into the vault, and the NUMA collateral is liquidated back into the vault. This increases both the rETH/synthetic collateral factor and also raises the floor price of remaining NUMA—thereby protecting the entire system.
That is, upon a liquidation event, the rETH-backing of the NUMA token increases and the health of the numa protocol improves.
This makes liquidation events beneficial to the protocol, creating forced liquidity events that improve the vault's collateral position in times of stress. The more speculators that are attracted to the system, the more robust the system becomes. Also, as the backing of NUMA tokens increases after each sell into the vault, liquidation cascades are prevented. This makes using leverage within the numa ecosystem extremely safe, and it alleviates the typical risks of leverage systems incurring or maintaining bad debt.
What does vault 2.0 mean for YOU?
You will soon be able to borrow rETH back from the vault, at high leverage (just below the vault retire price), at no cost. Free up your capital, while maintaining full exposure to the future growth of our platform.
Simply supply NUMA tokens to the lending contract, and borrow the rETH backing from the vault. No fees. No interest. High leverage.
Vault 2.0 represents a significant step forward in our journey to become the safest and most widely adopted synthetics platform in DeFi.
What’s the timeline?
We don’t have a hard deadline, but we’re expecting development of Vault 2.0 to take a few weeks. And then we expect to complete security checks after this. We will have more updates on the timeline as we get going.
As always, please join our Telegram and be part of the discussion!
