# Central Backed Digital INR (CBDI)

### Abstract :
We have come up with central backed Digital INR which proposes to give a facilitative framework for central backed digital currencies. We have envisaged to extend a similar framework to capture and maintain information about point of sales(PoS) terminals and other payment system touch points while in the meantime this framework also ensures that the central idea of Blockchain and the facilities that it provides are also in comprehension.

### 1.1 CBDI framework and CBDI tokens:
The central idea is that RBI will hold control over a blockchain system i.e they will be validators of the coins so mined ( DigiINR ) and also token administartors. Mining shall be done using the MINT block protocol which shall be discussed in this paper. The banks that are going to be a part of this system shall be token regulators. Tokens are derived forms of currencies that are built on existing blockchains. It has an underlying ledger of its own.
Using this property of a token we can establish a blockchain system where all the banks regulate the demand and supply of tokens and RBI has the central validating control of the blockchain. In other words the central blockchain shall be of DigiINR and there shall be derived blockchains (CBDI tokens) represented by tokens.Both DigiINR and the DigiINR tokens together is CBDI framework. Since tokens are an already existing feature of blockchain thus this system allows decentralized transactions to happen where Banks and RBI shall be the validators and not contollers. This further implies that if any financial body i.e banks fail in this system the people will not be impoverished. Furthermore banks and governments being the validators shall validate every transaction and thus have the transaction fees. They shall also have the user details because every user shall undergo revised user verification process before being part of this framework.

digraph blockchain {
    layout=circo;
    
    RBI [shape=circle, xlabel="Digital INR"]
    HDFC[xlabel="Insurance"]
    SBI[xlabel="Loan"]
    ICICI[xlabel="Digital Token"]
    PNB[xlabel="Validator"]
    Axis[xlabel="Vault"]
    YES[xlabel="Mutual Fund"]
  
    RBI -> HDFC [style=dashed, color=black]
    RBI -> SBI [style=dashed, color=black]
    RBI -> ICICI [style=dashed, color=black]
    RBI -> YES [style=dashed, color=black]
    RBI -> PNB [style=dashed, color=black]
    RBI -> Axis [style=dashed, color=black]
}

### 1.2 Revised user verification system :
Every user under this system must have KYC and pancard verification so that the government of India is able to maintain proper survellience over the transactions that are. taking place in blockchain.

### 1.3 Mint-Block :
RBI being the token adminstrators shall be responsible whenever a new token is being registered/assigned to a bank. This procedure shall be conducted by the Mint block protocol. There shall be 5 nodes represented by 5 members issued by the RBI where every node shall be digitally signing a token creation request. When that request gains full majority then that token shall be created and assigned to the respected bank and furthermore that token cannot be re-created or assigned to a different bank.

### 2.1 VAAYU Loan :
Instant Cryptocurrency loan services shall be provided to users based on the TDA(Trading ability) score by a decentralised finance pool of people(DEFI).People in this DEFI pool shall be depositing a certain amount which in turn will be used as loan by the users applying for Trading Loan, in return the DEFI users will be getting monthly interest. The DEFI users will have their wallets locked for 1 year i.e they cannot withdraw their assets before 1 year after registering for DEFI pool. By offering the Service, Triunits provides its Users with solutions to hold and make use of specific cryptocurrencies and other Digital Assets and requires the Users to provide 30% of the corresponding digital- asset deposits (the “Collateral”) as a prerequisite for the loan offered by Triunits. The digital crypto assets thus mentioned shall be shall be CBDI tokens.
TDA Score : All users trading in testnet platforms or live trading platforms shall be maintaining a TDA score. This score as the name suggests calculates a traders trading ability. The range of TDA score shall be between 0 to 100. Traders having TDA score above 80 shall be considered as "high level traders"(HLT's), traders having TDA score less than 80 and more than 60 shall be considered "medium level traders"(MLT's) and users having TDA's below 60 shall be considered "Low level traders"(LLT's).
LLT's shall be provided small loans.
HLT's shall be provided higher loans and
MLT's shall be provided loans of moderate amount.
All the loans so provided are in accordance with 30% collateral against the loan amount.

Vaayu is a DeFi platform for lending and borrowing assets. In the traditional finance world, lending and borrowing often involves a third party such as a bank, but Aave changes this process. Because the protocol is decentralised, no third party is involved, and it’s permissionless — anyone can participate.

### 2.2 DEFI staking?
DeFi (Decentralized Finance) is a way of providing financial services to users through smart contracts. Existing DeFi projects aim to provide higher annualized earnings for specific currencies.
There's a relatively high threshold for users of DeFi products. Triunits DeFi Staking acts on behalf of users to participate in certain DeFi products, obtains and distributes realized earnings, and helps users to participate in DeFi products with a single click.

### 2.3 After one participates in DeFi Staking, how will the earnings cycle be calculated?

Once funds are successfully allocated to Locked Staking, earnings are calculated beginning at 00:00 (IST) the following day. The minimum earnings calculation period is one day; earnings for a period of less than one day will not be included in the earnings distribution.

### 2.4 How is the interest calculated?
Interest is calculated daily, and less than one day is calculated as one day. The interest rate is determined by the date you make the loan. The interest rate is Dynamic in nature with a minimum interest rate to be maintained by Triunits.
### 2.5 Interest Rates
Monthly interest rates shall be deducted from the users (loanee) against the profit so generated by them or if the asset value increases due to price hike.

The premiums that the loanee's will be giving shall depend on what their TDA score is. The higher their TDA score the lower shall be their interest rates.

### 2.6 Decentralised Finance Damage control sub-pool ( DEFI DCSP)
It shall be noted that multiple loans shall not be provided to any user. Once the ongoing loan is cleared then the next loan shall be sanctioned depending on whether that loanee has appropriate TDA score.
Since only 30 % collateral is locked while issuing a loan. Thus any loanee's trade order which will hit 25% loss against the loan amount shall be liquidated. The remaining 5% shall be distributed among the defi damage control sub-pool ( DEFI DCSP ). DEFI DCSP shall be permanent nodes inside the DFEI pool which shall be directly under Triunits Exchange. These will be damage control units which is responsible to maintain the minimum interest rate for users inside the DEFI pool. In case of an unexpected number of loan defaulters the users inside the DEFI pool might not be getting their minimum monthly premiums, thus DEFI DCSP ensures that such situation shall be taken care of.

### 2.7 Loan defaulters rights :-
The loanees shall be given a warning message when they are at 15% loss of their loan amount.
Once they hit the 25% loss mark all their remaining assests shall be liquidated and distributed among the users at the DEFI pool and DEFI DCSP.

### 2.8 Borrowing and lending in Vaayu :-
Borrowers can withdraw funds from the liquidity pools by providing collateral. This must exceed the amount that they borrow by a set ratio, otherwise they face the risk of liquidation. Borrowers also receive interest-bearing aTokens to represent the equivalent amount of the underlying asset.
In each market, borrowers pay a higher APR (annual percentage rate) than the APY (annual percentage yield) lenders receive. The rates are calculated by smart contracts according to the liquidity in the pool (i.e. supply), and demand for the asset.
Borrowers can also choose between two interest rates: stable or variable. While the variable rate is based on the usage of the pool, the stable rate is calculated from the average of the last 30 days.
If they become undercollateralised, borrowers face liquidation. In each pool, a loan-to-value ratio is set to determine how much the borrower can withdraw relative to their collateral. If the liquidation threshold is met, arbitrageurs have a chance to buy the asset at a discount rate and pay the borrower minus a liquidation penalty. They can then sell the asset on the open market and profit from the price difference.

Lending :-
Lenders deposit funds to liquidity pools, creating what’s known as a liquidity market. Lenders send their tokens to a smart contract on the blockchain, and in return, they receive vTokens — assets that can be redeemed for the deposited token plus interest.

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### 3.0 Introduction to VAAYU Protocol
#### 3.1 Basic Concepts
The birth of the VAAYU protocol marks a relationship between lenders and borrowers to a pool-based strategy. Lenders provide liquidity by depositing cryptocurrencies in a pool contract. Simultaneously, in the same contract, the pooled funds can be borrowed by placing a collateral. Loans do not need to be individually matched, instead they rely on the pooled funds, as well as the amounts borrowed and their collateral. This enables instant loans with characteristics based on the state of the pool.
The interest rate for both borrowers and lenders is decided algorithmically:
• For borrowers, it depends on the cost of money - the amount of funds available in the pool at a specific time. As funds are borrowed from the pool, the amount of funds available decreases which raises the interest rate. The sanctioning of the loan will also depend upon TDA(Trading ability ) score.
• For lenders, this interest rate corresponds to the earn rate, with the algorithm safeguarding a liquidity reserve to guarantee withdrawals at any time.

At the heart of a lending pool is the concept of reserve: every pool holds reserves in multiple currencies, with
the total amount in DigiINR defined as total liquidity. A reserve accepts deposits from lenders.

Users can borrow these funds, granted that they have permittable TDA score and also that they deposit 30% of the collateral against the amount that they are going to borrow, which backs the borrow position. Specific currencies in the pooled reserves can be configured as collateral or not for borrow positions, only low risk tokens should be considered. The amount one can borrow depends on the currencies deposited still available in the reserves. Every reserve has a specific Loan-To-Value (LTV), calculated as the weighted average of the different LTVs of the currencies composing the collateral, where the weight for each LTV is the equivalent amount of the collateral in DigiINR.

Every borrow position can be opened with a stable or variable rate. Borrows have infinite duration, and there is no repayment schedule: partial or full repayments can be made anytime.

In case of price fluctuations, a borrow position might be liquidated. A liquidation event happens when the price of the collateral drops below the threshold, LQ, called liquidation threshold. Reaching this ratio channels a liquidation bonus, which incentivizes liquidators to buy the collateral at a discounted price. Every reserve has a specific liquidation threshold, following the same approach as for the LTV. Calculation of the average liquidation threshold LaQ is performed dynamically, using the weighted average of the liquidation thresholds of the collateral’s underlying assets.
At any point in time, a borrow position is characterized by its health factor H~f~, a function for the total col- lateral and the total borrows which determines if a loan is undercollateralized:
H~f~ = (TotalCollateralDigiINR∗L~Q~^a^)/(TotalBorrowsDigiINR+TotalFeesDigiINR)
when H~f~ < 1, a loan is considered undercollateralized and can be liquidated
Further details on liquidation can be found in section XXX

### 3.2 Lending Pool Core
The LendingPoolCore contract is the center of the protocol, it:
• holds the state of every reserve and all the assets deposited,
• handles the basic logic (cumulation of the indexes, calculation of the interest rates...).

### 3.3 Lending Pool Data Provider
The LendingPoolDataProvider contract performs calculations on a higher layer of abstraction than the DEFIPoolCore and provides data for the DEFIPool; specifically:
• Calculates the DigiINR equivalent a user’s balances (Borrow Balance, Collateral Balance, Liquidity Balance) to assess how much a user is allowed to borrow and the health factor.
• Aggregates data from the LendingPoolCore to provide high level information to the LendingPool.
• Calculate of the Average Loan to Value and Average Liquidation Ratio.

### 3.4 The lending Pool :-
The lending Pool contract uses the LendingPoolCore and LendingPoolDataProvider to interact with the reserves through the actions:
• Deposit • Borrow • Rate swap • Vaayu loan • Redeem • Repay • Liquidation
One of the advanced features implemented in the DEFIPool contract is the tokenization of the lending position. When a user deposits in a specific reserve, he receives a corresponding amount of Vtokens, tokens that map the liquidity deposited and accrue the interests of the deposited underlying assets. VTokens are minted upon deposit, their value increases until they are burned on redeem or liquidated. Whenever a user opens a borrow position, the tokens used as collateral are locked and cannot be transferred. Further details on the tokenization are in section XXXX.

### 3.5 Lending Pool Configurator
The LendingPoolConfigurator provides main configuration functions for LendingPool and LendingPoolCore: • Reserve initialization
• Reserve configuration
• Enable/disable borrowing on a reserve
• Enable/disable the usage of a specific reserve as collateral.

The LendingPoolConfigurator contract will be integrated in Vaayu Protocol governance.

### 3.6 The Interest Rate Strategy
The InterestRateStrategy contract holds the information needed to update the interest rates of a specific reserve and implements the update of the interest rates. Every reserve has a specific InterestRateStrategy contract. Specifically, within the base strategy contract DefaultReserveInterestRateStrategy the following are defined:

• Base variable borrow rate R~v0~
• Interest rate slope below optimal utilisation R~slope1~ • Interest rate slope beyond optimal utilisation R~slope2~

The current variable borrow rate is:
R~v~ = R~v0~ + U*R~slope1~/(U~optimal~), if U ≤ U~optimal~
R~v~ = R~v0~ + R~slope1~ + (U - U~optimal~)*R~slope2~/1−U~optimal~ , if U > U~optimal~
This interest rate model allows for calibration of key interest rates:
• At U = 0, R~v~ = R~v0~
• At U = U~optimal~, R~v~ = R~v0~ + R~slope1~
• Above U~optimal~, the interest rate rises sharply to take into account the cost of capital. The stable borrow rate follows the same model described in section XXX.

### 3.7 Lending Rate Oracle
The first component to be integrated into the Protocol protocol is a Lending Rate Oracle, which will provide information to the contracts on the actual market rates that other lending platforms, both centralized and decentralized, are providing. The average market lending rate Mr is defined for i platforms with Pri the lending rate and Pvi the borrowing volume:

The market rate will be updated daily, initially by Triunits.

### 3.8 Current Stable Borrow Rate
The current stable borrow rate is calculated as follows:


With:
- Mr the average market lending rate.
- Rslope1 the interest rate slope below Uoptimal, increases the rate as U increases.
- Rslope2 the interest rate slope beyond Uoptimal, increases as the difference between U and Uoptimal increases. - U is the utilization rate.
Note: Rs does NOT impact existing stable rates positions – this is applied only to new opened positions.

### 4.1 VAAYU V2 plans :
1) Governance in VAAYU protocol is being planned and plotted where users in the DEFI community will be able to propose changes and if majority of people votes for that inclusion then it is going to be implemented in the architecture.

2) Micro-finance : Plans are being made so that the under priviledged and people with no bank accounts will be able to apply for a loan without any collateral.We are trying to incorporate the already existing micro-finance framework in the blockchain system.

### 5.1 Buisness-Model( final phase ) :
After tokens are created by RBI and issued by the banks people will need a platform to buy and sell those tokens. DigiINR and DigiINR tokens also falls in that list. That platform shall be provided by our crypto exchange platform i.e Triunits Exchange.
Fees per buy or sell order is proposed to be 0.002%.
Where 0.001% shall be given to the bank under which that token is issued. The remaining 0.001% shall remain with Triunits Exchange.
Blockchain transaction fees for every DigiINR coin and DigiINR token shall be set by the bank under which that token is registered.
The full blockchain transaction fees thus deducted shall be issued to the respected bank.

### 5.2 Buisness-Model ( pilot phase ) :
Circulation of a bank's token.
The Lending Pool can is a decentralised liquidity pool where lenders can deposit fund and borrowers can borrow fund ( over-collateralised loan only ).
The circulation of a bank's token can be such that the Bank can borrow funds from this liquidity pool like any other DEFI user in this platform by using their own Token. In return they will be getting fiat currencies.
The borrowers of those respected banks can be asked to pay their loan amount using tokens in return they shall can be peoposed an incentive so decided by the bank. This entails the token value to increase as users would need to buy token from the market which in return would increase the token's value, which directly profits the banks.
This is how a new bank's token can be circulated in the market.

### 6.1 Vault Market -
In a blockchain system every user has his own secret key. Now in case of misplaced or purloining of the secret key the user shall be demarcated from using any of its digital token assets.
So there arises a oppurtunity of vault market where the banks can propose people to provide service of maintaining their secret keys in return banks can demand fees as remuneration.

### 7.1 Token Insurance market :
Smart contracts offer significant potential across the insurance sector, in speeding up and streamlining the claims process. A simple example could be in the case of life insurance. The policy terms would be encoded into the smart contract. In the event of a passing, the notarized death certificate would be provided as the input trigger for the smart contract to release the payment to the named beneficiaries.
This can be extended across different types of insurance, providing that the insurer can find a suitable oracle for the input of external data in the event of a claim. For example, in the case of travel disruption, an insurer could use flight data provided by the airlines to serve as a smart contract trigger.
Using a smart contract the insurance market can be fully automated. Whenever the user fails to pay the premium then the smart contract gets invalid and thus Insurance contract gets over.

### 8.1 Trading leaderboard system :
There shall be leaderboards in Triunits Exchange platform. Where traders shall be ranked in accordance with their TDA scores. New traders or non traders will have the facility to choose any trader from the leaderboard and deposit their assets into a joint wallet. Profit sharing shall occur between these two parties. The profit sharing ratio shall be set by the trader. Once the traders generate the said profit the people who deposited their assets shall get their return via a smart contract embedded into the joint wallet.
It shall be noted that this type of investments are always subject to market risks.

## External Resources
{%youtube Qrx_FnjRnfI %}