Our primary inspiration for ImPACT comes from MakerDAO's approach to decentralized collateralized assets. We wanted to build a similar mechanism but eliminate reliance on price oracles to create a more decentralized and secure system.
ImPACT is a decentralized collateralized token system that introduces mirrored Layer 1 assets at Layer 2. The protocol allows users to lock collateral and issue debt tokens (IOU tokens), maintaining a soft peg to the underlying asset without the need for external price oracles.
We built ImPACT using Typescript, leveraging smart contracts that handle IOU collateralized debt positions (CDPs) on multiple chains. The system utilizes challenge mechanisms to maintain over-collateralization and ensure the value of issued tokens, without needing price oracles.
One of the biggest challenges we encountered was designing a mechanism that avoids the need for a price oracle. Oracles are often centralized and susceptible to manipulation, so we focused on creating a system that relies on market-driven challenge mechanisms to determine collateral levels.
We are particularly proud of the mechanism we designed to replace traditional price oracles. The challenge mechanism incentivizes market participants to maintain the system’s security by allowing them to challenge under-collateralized positions, which in turn keeps the protocol decentralized and secure.
Throughout this process, we learned that decentralized systems can function effectively without reliance on centralized oracles if designed correctly. By leveraging market-driven incentives and building robust collateralization mechanisms, we were able to maintain system stability while keeping it decentralized.
Next, we aim to build a governance framework that allows the community to participate in protocol decisions. We plan to involve stakeholders in determining system upgrades, collateralization levels, and future features(whitepaper).
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