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What is CNYT?

CNYT is a Renminbi-pegged stablecoin incubated by Jiaozhi Finance. It uses ETH overcollateralization with a minimum collateral ratio of 110%, targeting 1 CNYT = 1 CNY. CNYT is designed to be fully decentralized:

  • Backed only by crypto assets (no custody of real-world assets or centralized actors)

  • Immutable to collateral changes and protocol upgrades (non-upgradable)

  • Directly redeemable (always redeemable quickly with deep liquidity)

About the contracts

This project is a minimal fork of Liquity v1: the core borrowing, liquidation, Stability Pool, and redemption modules remain unchanged (non-upgradable, weak governance, no admin keys). The main changes localize the price oracle (PriceFeed.sol) to support ETH/CNY pricing and risk control; core cash flows and risk logic are not altered.

Motivation

Stable-value assets are essential in Ethereum applications, with total value in the tens of billions of USD. However, most of this value exists as fiat-collateralized stablecoins such as Tether and USDC. Decentralized stablecoins like DAI and sUSD comprise only a small fraction of total supply, meaning the majority of stablecoins are centralized.

Truly decentralized CNY stablecoins are nearly nonexistent. CNYT aims to fill this gap. Goal: usher in a decentralized era for CNY and facilitate global circulation of real-world assets.

Key advantages

  • 0% interest: borrowers do not accrue ongoing interest.

  • Minimum collateral ratio 110%: more efficient use of deposited ETH.

  • Weak governance: operations are algorithmic and automated; parameters are set at deployment.

  • Direct redemption: CNYT can be redeemed at par for the underlying collateral at any time.

  • Fully decentralized: no admin keys, non-upgradable; smart contract code is immutable and censorship-resistant.

Decentralized front ends

Any team can run its own front end (as in Liquity) and receive rewards per algorithmic rules (subject to deployment parameters), enhancing CNYT’s censorship resistance.

Main use cases

  • Borrow CNYT by opening a Trove (ETH as collateral)

  • Deposit CNYT into the Stability Pool to earn rewards (liquidation proceeds and JIAOZI incentives)

  • Stake JIAOZI to earn CNYT/ETH revenue from borrowing and redemption fees

  • When CNYT trades below the peg, redeem ETH at par using CNYT

Fees

There is a one-time fee on both borrowing CNYT and redeeming CNYT:

  • Borrowing fee: a percentage of the CNYT amount drawn.

  • Redemption fee: charged on the ETH value paid out to the user when exchanging CNYT for ETH. Note redemption is distinct from repaying debt; repayment is free. Both fees depend on redemption activity: each redemption increases the base rate, and the base rate decays over time when there are no redemptions. The intent is to discourage large instantaneous redemptions by increasing fees, and directly limit new borrowing after heavy redemption. Cooling ensures low fees for borrowers and redeemers when redemption activity is low. Specific bounds and Recovery Mode effects are determined algorithmically by the contracts.

How does CNYT maintain the CNY peg?

The stability band is ensured by two mechanisms:

  • Hard peg:

    • Redeemability: 1 CNYT can be redeemed for ETH worth 1 CNY at par.

    • Collateral constraint: minimum collateral ratio 110% and the liquidation mechanism provide a safety boundary and arbitrage basis.

  • Soft peg:

    • Dynamic fees: when CNYT < 1 CNY, redemption activity rises and minting costs increase, reducing the appeal of new debt and curbing further devaluation. These mechanisms are driven by user-led market arbitrage, keeping price near par.

What is redemption?

Redemption is the process of exchanging CNYT for ETH at par, i.e., 1 CNYT is worth exactly 1 CNY. If you pay x CNYT, you receive ETH worth x CNY in return. Users can redeem CNYT for ETH at any time. However, the contract may charge a redemption fee on the redeemed amount. For example, if the current redemption fee is 1%, ETH price is $500, and you redeem 100 CNYT, you receive 0.198 ETH (0.2 ETH minus 0.002 ETH fee). Note the base rate accounts for the redemption amount in the current transaction. For large amounts, the redemption itself may impact the fee. Redemption is independent of debt repayment. Unlike repayment, redemption does not adjust a borrower’s Trove debt or collateral—repayment does. Under normal operation, redemption fee = base rate × redeemed ETH.

How is the base rate calculated?

Redemption fees are based on a “base rate” state variable in the contracts. This variable updates dynamically: each redemption increases the base rate; the longer since the last fee event (redemption or CNYT issuance), the greater the decay.

On each redemption:

  • The base rate decays according to time elapsed since the last fee event.

  • The base rate increase is proportional to redeemed CNYT relative to total supply.

  • Redemption fee = base rate × ETH taken out.

As a borrower, do I lose money if I’m redeemed? How to avoid it?

You do not suffer a net loss if your Trove is redeemed; however, you lose some ETH position. After redemption, your Trove’s collateral ratio increases. The best way to avoid redemption is to keep a relatively high collateral ratio compared to other vaults in the system. Remember: during redemption, the riskiest vaults (lowest collateralized) are targeted first.

JIAOZI tokenomics

JIAOZI is the token that incentivizes the CNYT ecosystem, with a hard-cap total supply of 100,000,000. Staking JIAOZI earns a proportional share of protocol borrowing fees (in CNYT) and redemption fees (in ETH), rewarding early adopters, front-end users, and LPs, and promoting community-driven growth.

Economics and genesis distribution (the entire supply is minted and allocated automatically on token contract deployment):

  • 32% (32,000,000): to the CommunityIssuance contract, algorithmically rewarding Stability Pool depositors (CNYT depositors) and front ends that facilitate deposits.

  • 1.33% (1,330,000): to the LP rewards contract (Unipool), for CNYT:ETH Uniswap V2 LPs (valid for the first 6 weeks only).

  • 12% (12,000,000): to bounty, hackathon, or airdrop addresses to encourage early participation.

  • 54.67% (54,670,000): to the multisig address, first-year lock (transfers only to registered lockup contracts; minimum lockup 1 year; not stakeable during the first year).

This distribution emphasizes community alignment: the earlier you participate, the more you earn; algorithmic issuance accumulates automatically, ensuring fairness and incentives.

How to earn rewards

  • Stability Pool deposits: deposit CNYT to the pool and earn liquidation proceeds (in ETH) + 32% (32,000,000) JIAOZI rewards.

  • Liquidity provision: provide liquidity to the CNYT:ETH Uniswap V2 pool to earn 1.33% (1,330,000) of total JIAOZI supply (first 6 weeks).

  • Staking: stake JIAOZI to earn shares of borrowing fees (CNYT) and redemption fees (ETH).

  • Front-end facilitation: through your front end, route deposits to the Stability Pool to earn CommunityIssuance rewards.

  • Early adoption: participate in hackathons, airdrops, or other programs to earn from the 12% JIAOZI allocation.

What is Recovery Mode?

Recovery Mode activates when the system Total Collateral Ratio (TCR) falls below 150%. In Recovery Mode, vaults with collateral ratios below TCR (up to 150% in the worst case) can be liquidated. System restrictions limit operations that further reduce TCR; new CNYT can only be minted by increasing existing vault collateralization or opening new vaults with collateral ratio ≥ 150%. Generally, existing vaults can only reduce their collateral ratio when TCR > 150%. For more, see: https://docs.liquity.org/liquity-v1/faq/recovery-mode

Risk disclosure

As a non-custodial system, all tokens sent to the protocol are held and managed algorithmically, without intervention by any individual or legal entity. Your funds are governed solely by smart-contract rules (core architecture derived from Liquity v1, validated long-term and audited).

Two situations may lead to losses:

  • Borrowers (Trove owners): when collateral ratio falls below 110%, ETH collateral may be liquidated. Borrowed CNYT remains yours, but the Trove is closed and collateral compensates Stability Pool depositors.

  • Stability Pool depositors: your deposited CNYT repays liquidated debt. You typically receive more ETH, but if ETH price falls and you keep exposure, your total deposit value can decline.

Note that CNYT is not perfectly volatility-free; in some market conditions, small deviations from the peg can occur. Although Liquity has undergone serious audits and long-term mainnet validation, losses due to hacks or unknown vulnerabilities cannot be completely ruled out (see disclaimer).

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