Vat - Detailed Documentation

The Maker Protocol's Core Accounting System

• Contract Name: Vat.sol

• Type/Category: DSS —> Core System Accounting

• Associated MCD System Diagram

• Contract Source

• Etherscan

1. Introduction (Summary)

The Vat is the core Vault engine of dss. It stores Vaults and tracks all the associated Dai and Collateral balances. It also defines the rules by which Vaults and balances can be manipulated. The rules defined in the Vat are immutable, so in some sense, the rules in the Vat can be viewed as the constitution of dss.

2. Contract Details

Glossary (Vat - Vault Engine)

• gem: collateral tokens.

• dai: stablecoin tokens.

• sin: unbacked stablecoin (system debt, not belonging to any urn).

• ilks: a mapping of Ilk types.

• Ilk: a collateral type.

  • Art: total normalized stablecoin debt.

  • rate: stablecoin debt multiplier (accumulated stability fees).

  • spot: collateral price with safety margin, i.e. the maximum stablecoin allowed per unit of collateral.

  • line: the debt ceiling for a specific collateral type.

  • dust: the debt floor for a specific collateral type.

• urns: a mapping of Urn types.

• Urn: a specific Vault.

  • ink: collateral balance.

  • art: normalized outstanding stablecoin debt.

• init: create a new collateral type.

• slip: modify a user's collateral balance.

• flux: transfer collateral between users.

• move: transfer stablecoin between users.

• grab: liquidate a Vault.

• heal: create / destroy equal quantities of stablecoin and system debt (vice).

• fold: modify the debt multiplier, creating / destroying corresponding debt.

• suck: mint unbacked stablecoin (accounted for with vice).

• Line: the total debt ceiling for all collateral types.

• frob: modify a Vault.

  • lock: transfer collateral into a Vault.

  • free: transfer collateral from a Vault.

  • draw: increase Vault debt, creating Dai.

  • wipe: decrease Vault debt, destroying Dai.

  • dink: change in collateral.

  • dart: change in debt.

• fork: to split a Vault - binary approval or splitting/merging Vaults.

  • dink: amount of collateral to exchange.

  • dart: amount of stablecoin debt to exchange.

• wish: check whether an address is allowed to modify another address's gem or dai balance.

  • hope: enable wish for a pair of addresses.

  • nope: disable wish for a pair of addresses.

Note: art and Art represent normalized debt, i.e. a value that when multiplied by the correct rate gives the up-to-date, current stablecoin debt.

Accounting

• debt is the sum of all dai (the total quantity of dai issued).

• vice is the sum of all sin (the total quantity of system debt).

• Ilk.Art the sum of all art in the urns for that Ilk.

• debt is vice plus the sum of Ilk.Art * Ilk.rate across all ilks.

Collateral

• gem can always be transferred to any address by it's owner.

Dai

• dai can only move with the consent of it's owner.

• dai can always be transferred to any address by it's owner.

3. Mechanisms & Concepts

The core Vault, Dai, and collateral state is kept in the Vat. The Vat contract has no external dependencies and maintains the central "Accounting Invariants" of Dai. The core principles that apply to the vat are as follows:

1. Dai cannot exist without collateral:

• An ilk is a particular type of collateral.

• Collateral gem is assigned to users with slip.

• Collateral gem is transferred between users with flux.

2. The Vault data structure is the Urn:

• has ink - encumbered collateral

• has art - encumbered, normalized debt

3. Similarly, a collateral is an Ilk:

• has Art - encumbered, normalized debt

• has rate - debt scaling factor (discussed further below)

• has spot - price with safety margin

• has line - debt ceiling

• has dust - debt floor

Note: Above, when using the term "encumbered", this refers to being "locked in a Vault".

Vault Management

• Vaults are managed via frob(i, u, v, w, dink, dart), which modifies the Vault of user u, using gem from user vand creating dai for user w.

• Vaults are confiscated via grab(i, u, v, w, dink, dart), which modifies the Vault of user u, giving gem to user vand creating sin for user w. grab is the means by which Vaults are liquidated, transferring debt from the Vault to a users sin balance.

• Sin represents "seized" or "bad" debt and can be canceled out with an equal quantity of Dai using heal(uint rad where msg.sender is used as the address for the dai and sin balances.

  • Note: Only the Vow will ever have sin, so only the Vow can successfully call heal. This is because whenever grab and suck are called, the Vow's address is passed as the recipient of sin. Note that this is contingent on the current design and implementation of the system.

  • Note: heal can only be called with a positive number (uint) and will sub(dai[u]) along with subing the sin.

• The quantity dai can be transferred between users with move.

Rate Updates via fold(bytes32 ilk, address u, int rate)

An ilk's rate is the conversion factor between any normalized debt (art) drawn against it and the present value of that debt with accrued fees. The rate parameter to fold is actually the change in the Ilk.rate value, i.e. a difference of scaling factors (new - old). It is a signed integer, and hence current account values may increase or decrease. The quantity Ilk.Art*rate is added to the dai balance of the address u (representing an increase or decrease in system surplus); the debt balances of all Vaults collateralized with the specified Ilk are updated implicitly via the addition of rate to Ilk.rate.

For more information on Rates and System Stabilization, see the Rates Module and System Stabilizer Module documentation below:

• Rates Module

• System Stabilizer

4. Gotchas

The methods in the Vat are written to be as generic as possible and as such have interfaces that can be quite verbose. Care should be taken that you have not mixed the order of parameters.

Any module that is authed against the Vat has full root access, and can therefore steal all collateral in the system. This means that the addition of a new collateral type (and associated adapter) carries considerable risk.

5. Failure Modes

Coding Error

A bug in the Vat could be catastrophic and could lead to the loss (or locking) of all Dai and Collateral in the system. It could become impossible to modify Vault's or to transfer Dai. Auctions could cease to function. Shutdown could fail.

Feeds

The Vat relies upon a set of trusted oracles to provide price data. Should these price feeds fail, it would become possible for unbacked Dai to be minted, or safe Vaults could be unfairly liquidated.

Governance

Governance can authorize new modules against the Vat. This allows them to steal collateral (slip) or mint unbacked Dai (suck / addition of worthless collateral types). Should the cryptoeconomic protections that make doing so prohibitively expensive fail, the system may be vulnerable and left open for bad actors to drain collateral.

Adapters

The Vat relies on external Adapter contracts to ensure that the collateral balances in the Vat represent real external collateral balances. Adapter contracts are authorized to make arbitrary modifications to all collateral balances. A faulty collateral adapter could result in the loss of all collateral in the system.