Tokenization System

Overview

The ZEUR protocol uses a sophisticated tokenization system to represent user positions and enable composability. All user deposits and debts are tokenized into ERC20-compatible tokens that can be tracked, transferred (where applicable), and integrated with other DeFi protocols.

Token Types

1. ColTokens (Collateral Tokens)

ColTokens represent user deposits of collateral assets. They are minted 1:1 with the underlying collateral and serve as proof of deposit.

ColETH (Collateral ETH)

contract ColToken is ERC20Upgradeable, AccessManagedUpgradeable, UUPSUpgradeable

Characteristics:

  • Minting: 1:1 with deposited ETH

  • Transferable: Yes (freely transferable)

  • Composable: Can be used in other DeFi protocols

  • Yield-bearing: Earns staking rewards automatically

Example:

  • User deposits 5 ETH

  • Receives 5 colETH tokens

  • ETH automatically stakes across LST protocols

  • User earns staking rewards while holding colETH

ColLINK (Collateral LINK)

contract ColToken is ERC20Upgradeable, AccessManagedUpgradeable, UUPSUpgradeable

Characteristics:

  • Minting: 1:1 with deposited LINK

  • Transferable: Yes (freely transferable)

  • Composable: Can be used in other DeFi protocols

  • Yield-bearing: Earns LINK staking rewards

Functions:

function mint(address account, uint256 value) external restricted;
function burn(address account, uint256 value) external restricted;
function decimals() public pure override returns (uint8) { return 18; }

2. DebtEUR (Debt Token)

DebtEUR represents borrowed EUR stablecoins. Unlike ColTokens, DebtTokens are non-transferable to prevent debt assignment.

contract DebtEUR is ERC20Upgradeable, AccessManagedUpgradeable, UUPSUpgradeable

Characteristics:

  • Minting: 1:1 with borrowed EUR amount

  • Non-transferable: Cannot be transferred between users

  • Account-bound: Debt stays with the borrower

  • Decimals: 6 (matches EURC)

Restricted Functions:

function transfer(address to, uint256 amount) public override returns (bool) {
    revert DebtEUR_OperationNotAllowed();
}

function transferFrom(address from, address to, uint256 amount) public override returns (bool) {
    revert DebtEUR_OperationNotAllowed();
}

function approve(address spender, uint256 amount) public override returns (bool) {
    revert DebtEUR_OperationNotAllowed();
}

Example:

  • User borrows 1,000 EURC

  • 1,000 debtEUR tokens are minted to user

  • Tokens cannot be transferred to another address

  • User must repay to burn debtEUR tokens

3. ColEUR (Collateral EUR)

ColEUR is an ERC4626 vault that represents EUR stablecoin deposits. It's used for EUR suppliers who want to earn lending interest.

contract ColEUR is ERC4626Upgradeable, ERC20PermitUpgradeable, AccessManagedUpgradeable, UUPSUpgradeable

Characteristics:

  • Standard: ERC4626 vault token

  • Underlying: EURC (or other EUR stablecoins)

  • Shares: Represent proportional ownership of EUR pool

  • Transferable: Yes (freely transferable)

  • Interest-bearing: Earns interest from borrowers

Key Functions:

function deposit(uint256 assets, address receiver) external returns (uint256 shares);
function withdraw(uint256 assets, address receiver, address owner) external returns (uint256 shares);
function mint(uint256 shares, address receiver) external returns (uint256 assets);
function redeem(uint256 shares, address receiver, address owner) external returns (uint256 assets);
function transferTokenTo(address to, uint256 amount) external; // For Pool contract

Example:

  • User deposits 10,000 EURC

  • Receives ColEUR shares based on current exchange rate

  • Earns interest as borrowers pay back loans

  • Can withdraw EURC + accrued interest anytime

Token Mechanics

1. ColToken Mechanics

Minting Process

function supply(address asset, uint256 amount, address from) external {
    // For ETH/LINK collateral
    if (collateralAssetList.contains(asset)) {
        // Transfer asset to vault
        vault.lockCollateral(from, amount);
        // Mint colToken 1:1
        colToken.mint(from, amount);
    }
}

Burning Process

function withdraw(address asset, uint256 amount, address to) external {
    // Burn colToken from user
    colToken.burn(msg.sender, amount);
    // Unlock collateral from vault
    vault.unlockCollateral(to, amount);
    // Check health factor remains > 1
    require(getUserHealthFactor(msg.sender) >= HEALTH_FACTOR_BASE);
}

Staking Integration

ColTokens automatically earn staking rewards through the vault system:

User Deposit → ColToken Mint → Vault Stakes → LST Rewards → User Benefits

2. DebtEUR Mechanics

Debt Creation

function borrow(address asset, uint256 amount, address to) external {
    // Check borrowing capacity
    require(availableBorrowsValue >= debtValue);
    // Mint debtEUR to track debt
    debtToken.mint(msg.sender, amount);
    // Transfer EUR from ColEUR vault
    colEUR.transferTokenTo(to, amount);
}

Debt Repayment

function repay(address asset, uint256 amount, address from) external {
    // Transfer EUR back to ColEUR vault
    assetToken.safeTransferFrom(msg.sender, colEUR, amount);
    // Burn debtEUR tokens
    debtToken.burn(from, amount);
}

3. ColEUR Vault Mechanics

Share Calculation

ColEUR follows ERC4626 standard for share calculations:

// Shares to assets
function convertToAssets(uint256 shares) public view returns (uint256) {
    return shares * totalAssets() / totalSupply();
}

// Assets to shares
function convertToShares(uint256 assets) public view returns (uint256) {
    return assets * totalSupply() / totalAssets();
}

Interest Accrual

Interest is earned when:

  1. Borrowers pay interest on loans

  2. EUR flows back into the ColEUR vault

  3. Exchange rate improves for ColEUR holders

Access Control

Restricted Functions

Only the Pool contract can call certain functions:

modifier restricted() {
    require(hasRole(MINTER_ROLE, msg.sender), "Unauthorized");
    _;
}

ColToken Restricted:

  • mint() - Only Pool can mint

  • burn() - Only Pool can burn

DebtEUR Restricted:

  • mint() - Only Pool can mint

  • burn() - Only Pool can burn

ColEUR Restricted:

  • deposit() - Only Pool can deposit

  • withdraw() - Only Pool can withdraw

  • transferTokenTo() - Only Pool can transfer underlying

Role Management

// Pool contract has minter role for all tokens
bytes32 public constant MINTER_ROLE = keccak256("MINTER_ROLE");

// Setup in deployment
accessManager.grantRole(MINTER_ROLE, poolAddress);

Token Interactions

Supply Collateral Flow

1. User → Pool.supply(ETH, 5 ether, user)
2. Pool → VaultETH.lockCollateral(user, 5 ether)
3. VaultETH → Stake across LST protocols
4. Pool → ColETH.mint(user, 5 ether)
5. User receives 5 colETH tokens

Borrow Flow

1. User → Pool.borrow(EURC, 3000e6, user)
2. Pool → Check borrowing capacity
3. Pool → DebtEUR.mint(user, 3000e6)
4. Pool → ColEUR.transferTokenTo(user, 3000e6)
5. User receives 3000 EURC, owes 3000 debtEUR

Supply EUR Flow

1. User → Pool.supply(EURC, 10000e6, user)
2. Pool → EURC.transferFrom(user, pool, 10000e6)
3. Pool → ColEUR.deposit(10000e6, user)
4. User receives ColEUR shares

Liquidation Flow

1. Liquidator → Pool.liquidate(ETH, EURC, 2000e6, liquidatedUser)
2. Pool → EURC.transferFrom(liquidator, colEUR, 2000e6)
3. Pool → DebtEUR.burn(liquidatedUser, 2000e6)
4. Pool → ColETH.burn(liquidatedUser, collateralAmount)
5. Pool → VaultETH.unlockCollateral(liquidator, collateralAmount)

Token Standards Compliance

ERC20 Compliance

All tokens follow ERC20 standard with customizations:

  • ColTokens: Full ERC20 with transferability

  • DebtEUR: ERC20 interface but non-transferable

  • ColEUR: ERC20 + ERC4626 vault standard

ERC4626 Compliance

ColEUR fully implements ERC4626 vault standard:

interface IERC4626 {
    function asset() external view returns (address);
    function totalAssets() external view returns (uint256);
    function convertToShares(uint256 assets) external view returns (uint256);
    function convertToAssets(uint256 shares) external view returns (uint256);
    function maxDeposit(address receiver) external view returns (uint256);
    function previewDeposit(uint256 assets) external view returns (uint256);
    function deposit(uint256 assets, address receiver) external returns (uint256);
    // ... other functions
}

Composability

ColToken Composability

ColTokens can be used in other DeFi protocols:

  • Lending: Use colETH as collateral in other protocols

  • DEX Trading: Trade colETH/ETH pairs

  • Yield Farming: Provide colETH/ETH liquidity

  • Derivatives: Create options/futures on colETH

ColEUR Composability

ColEUR shares can be:

  • Traded: colEUR/EURC pairs on DEXes

  • Composed: Used in other yield strategies

  • Collateralized: Used as collateral elsewhere

  • Automated: Integrated into yield aggregators

Decimal Handling

Token Decimals

// ColETH & ColLINK
function decimals() public pure override returns (uint8) {
    return 18;
}

// DebtEUR
function decimals() public pure override returns (uint8) {
    return 6;
}

// ColEUR
function decimals() public view override returns (uint8) {
    return IERC20Metadata(asset()).decimals(); // 6 for EURC
}

Precision Considerations

  • All internal calculations use appropriate precision

  • Cross-decimal conversions handled carefully

  • Rounding errors minimized through proper ordering

Gas Optimization

Efficient Minting/Burning

  • Batch operations where possible

  • Minimal storage writes

  • Optimized approval mechanisms

Vault Efficiency

  • ERC4626 standard optimizations

  • Minimal external calls

  • Efficient share calculations

The tokenization system provides the foundation for all ZEUR protocol operations while maintaining composability and standards compliance.

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