Introduction to Elena protocol

As Elena protocol is a 100% fair launch project, there was no VC, or pre-sale to raise capital for the expansion of the project, everything was self-funded by the founders. We have set up an eco-system vault for further development of ELENA.

We are introducing Elena Protocol and USE Stablecoin. The goal of USE is to peg to 1 USD. In the Genesis period, we will use DAI as collateral, 1 USE is 100% backed by 1 DAI. We are inspired by many outstanding algorithmic stablecoin projects, i.e. FEI, FRAX, FLOAT, and UST. With the combination of the best elements from those projects, we have created Elena protocol.

We will be using the core structure from FRAX, in the genesis period, 100% of USE is minted from DAI. In order to encourage liquidity providers in the early stage, providing and staking USE/DAI LP will receive ELENA, and this is the only method to obtain ELENA. Due to 1 USE is backed by 1 DAI in the early stage, the liquidity mining has close to 0 Impermanent Loss. After the genesis, the collateral ratio will be lowered and ELENA will play an important role to back USE’s peg.

At the moment, FRAX’s collateral rate is at around 85% to 90%. In an ideal situation, it should reach 0%, meaning that 100% of FRAX is minted by FXS. In this model, it is close to UST, as UST is 100% minted and redeemed from LUNA, which is the ultimate goal of USE.

The core structure of Elena protocol is inspired by FRAX, as the stability of FRAX is verified by the market. However, the collateral ratio of FRAX is not as good as it originally planned, as we can see it stayed at the range of 85%-90% for some time now. The main reason is that the volatility risk has been transferred to FXS, while FXS’s price at the moment is 100% decided by the market. There are many factors that are uncertain, including the volatility of the whole crypto market, as well as the emotion of the investors, this will still be impacted by the “bad weather”. Protocol Controlled Value (PCV) introduced by FEI, is a “visible hand” when the market is acting extremely, instead of exposure to 100% market risk, it is a more reasonable and better protocol to protect the whole system. This will achieve the goal to maximize the value and size of ELENA, for the investors, there is less worried about impairment loss by providing liquidity to USE/DAI. Compare with FRAX, 100% of the reward will be provided to USE/DAI liquidity pool, and ELENA’s liquidity is controlled by PCV. This makes Elena protocol potentially the highest APY in stablecoin mining.

We have implemented the “Oasis Vault” inspired by the design of Float Protocol. When USE is greater than 1 DAI, there are opportunities for arbitrage, the DAI used for minting USE will be saved in the Oasis Vault. This helps the efficiency of PCV, whereas having a direct impact on the liquidity of ELENA. In theory, the bigger the vault, the more stable the system, the better the liquidity of ELENA. When there is enough liquidity of ELENA, Oasis Vault + PCV will lower the collateral ratio, towards its ultimate goal, 0% collateral ratio.

In the future roadmap of Elena protocol, we will release a few products which use USE as stablecoin. Including synthetic assets, which creating more use cases for USE.

USE holders benefit from the mechanisms designed to create a high-fidelity peg and liquid exchange.

Protocol Design

As shown in the chart below, Elena protocol includes the following core units: USE Stablecoin, Oasis Vault, PCV, USE Pools, Staking, Incentive, ELENA Governance Token, and DAO.

USE Stablecoin

USE Token is an ERC20 Token with unlimited supply, adjusted by the market demand. USE as a stablecoin can be used in different use cases, i.e. exchange, store value, synthetic assets, lending, yield aggregators, etc.

Oasis Vault

Oasis Vault is the core module of Elena protocol, anyone can mint or redeem USE fixed at 1 DAI per USE. There is room for arbitrage due to the movement in the price of USE/DAI on Uniswap. i.e. When USE/DAI price is 0.9, you can purchase USE in Uniswap, and redeem it in the vault. Or if USE/DAI is trading at 1.1, you can mint USE with 1 DAI and sell it in Uniswap.


Vault can mint USE depends on the current collateral ratio. I.e. if the current collateral ratio is 99%, investors will need to provide 0.99 DAI and $0.01 worth of ELENA (assuming the price of ELENA is $10, then investors need to provide 0.001 ELENA), to mint 1 USE.


Investors can redeem USE from the vault. If the current collateral ratio is 99%, after redemption, investors will get 0.99 DAI and $0.01 worth of ELENA(assuming the price of ELENA is $10, then investors will get 0.001 ELENA).

Please note that redemption will be closed if the reserve ratio falls below the threshold. When this happens, the investors can only sell their position of USE on Uniswap. When there is enough reserve, the redemption function will be available again. Through the activate/deactivate redemption function, the system is more stable and better protected from unexpected events.

Collateral Ratio

Collateral Ratio means when minting, the percentage of DAI required. The ratio will be adjusted periodically. When USE/DAI is greater than 1, means that there is more demand for USE in the market and investors have faith in the project. The collateral ratio will be adjusted to a lower number. In contrast, if USE/DAI is less than 1, meaning that there is less demand in the market, the collateral ratio will be adjusted higher.

At Genesis, the collateral ratio is set to 100%, meaning that to mint 1 USE, you will need to deposit 1 DAI to the vault. In the fractional period, the collateral ratio will be moving in between 100%, and 0%. If we reach uncollateral period, the collateral ratio will be 0%.

Reserve Ratio

When USE/DAI is trading above or below 1, the vault will still mint or redeem at 1, there are opportunities for arbitrage, when doing so, the price is pushed back to 1. When the price is below 1, the result of arbitrage is the reduction of the reserve. We define reserve ratio as:

vaultReserve: the number of DAI in the vault.

swapPoolReserve: the value of liquidity pool, i.e. the number of DAI in USE/DAI pool in Uniswap

The reserve ratio is an indicator of whether the protocol can survive in a massive dump. If the ratio is too small, meaning it is under-reserved. In most cases, the protocol should have enough reserve, as mentioned above, there is a policy to stop redemption when the reserve is too low, as well as other designs to protect USE peg to 1 DAI in the long term.

USE Pools

There are two pools on Uniswap, USE/DAI, and USE/ELENA. We will support more tokens in the vault and will have different pools on Uniswap. In order to incentivize investors providing liquidity, we will be running a liquidity mining program for USE/DAI. USE/ELENA’s liquidity will be provided and controlled by PCV, ensure the pool has better liquidity and reduced slippage.


The price control system of the Elena protocol has two parts: Oasis Vault, and USE/ELENA liquidity pool. The vault aims to ensure the pegging system works in the long term. USE/ELENA is controlled by PCV, the goal of PCV is to maintain a highly stable, deep liquidity stablecoin system, which benefits investors in the long term.

Price Oracle

We will use Uniswap TWAP Oracle Price to determine the current price of USE and ELENA.

Eco-system Vault

The vault will allocate an additional 2.5% ELENA to the vault when minting and redeeming. As well as 20% on the profit generated to liquidity providers. Please note that the allocation will not be minted directly, it will only happen when a payment is needed. This is the maximum percentage that can be minted, the actual number to be minted can be smaller than the maximum planned.

The fund from the vault will be used in the following areas:

  1. Marketing
  2. Advisors
  3. Developers’ Salary
  4. Airdrop
  5. Strategic Partners


The governance for a fair launch project is crucial. We use ELENA as governance tokens, the holders of ELENA are able to participate in the governance.

Including but not limited to:

  1. New tokens in the vault
  2. Adjust PCV’s target and rules
  3. Adjust reward
  4. Upcoming synthetic assets
  5. Airdrops


Compare with Frax, which charges up to 0.45% for minting and redeeming, USE charges 0 fees for both activities.


Off Peg

The key point of whether USE can peg to 1 DAI is if arbitrage works. If when the price USE deviates from 1 DAI, if there is enough room for profit. This requires the vault to have enough reserve. When there is not enough reserve in the vault, it is likely that the protocol enters a death spiral.

Reserve Ratio is an indicator of whether the current reserve is sufficient, as well as if it is in a balanced position with its liquidity. In most cases, the reserve ratio will increase over time. When the collateral ratio is 100%, its sell-off pressure is as follows:

s: the percentage of sell-off, i.e. if 0.2 means there is 20% USE sell orders to USE/DAI pool
rr: reserve ratio

As can be seen above, it is a sub-linear curve, when s increases, its underlying reserve decreases, but it is smaller than a linear model.

When the collateral ratio is below 80%, things get a bit more complicated. As the reserve ratio is 80% (less than 100%), after the first sell-off doing arbitrage, the seller needs to sell 20% worth of ELENA, which makes the 2nd sell-off. After the 2nd sell-off repricing, there will be the 3rd sell-off, the arbitrager keeps doing so until there is no profit for doing so.

Based on this, we have a new generalized formula

Based on the formulas above, we studied the relationship between sell-off pressure in different collateral ratio and reserve ratio. This helps DAO better in terms of evaluating the risk level of the current system.

As always, we welcome you to join the Elena community — share any questions and comments on Twitter, and Telegram 🌞





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