FAQs
Operator Control and Restrictions
Q: Do operators have full control over collateral once disbursed? Are there restrictions on how funds can be used? A: Operators have specific tasks they are entrusted to do by restakers, similar to validators in EigenDA or zk co-processors in LaGrange. The agreement between restakers and operators details specific strategies.
CAP is working with a financial institution to whitelist operator addresses, collaborating with major market makers, HFT firms, and several large private equity/credit funds.
Both operators and restakers operate on EigenLayer. CAP's role is to verify that rules are being followed and monitor whether operators make or lose tokens.
Loan Security and Risk Mitigation
Q: Are loans to operators unsecured in the traditional sense? What risk mitigants exist for restakers beyond reputational considerations? A: From a stablecoin holder's perspective, all loans are collateralized. This system is similar to Aave, unlike hedge fund stablecoins or T-Bill wrappers where users have unsecured deposits.
Collateral Asset Lending Caps
Q: Are there caps on what percentage of collateral assets can be lent to operators? A: Caps are determined by two factors:
Nominal limits set in partnership with the financial institution
Restakers' willingness to back each operator
Long-term operator centralization is unlikely since no single operator or strategy can consistently meet the hurdle rate in all market conditions. CAP's primary concern is ensuring all strategies are covered to maintain safety.
Overcollateralization Requirements
Q: Does the protocol impose minimum overcollateralization requirements on restakers? A: Yes, the protocol implements requirements similar to those used by Aave, Compound, and Morpho.
Slashing Mechanics
Q: Do slashed funds cover stablecoin insolvency? A: Slashed funds cover operator activities, like any other AVS. The operators are large HFTs or private credit funds whose performance capability can be reliably modeled.
USDC and USDT are used to collateralize cUSD 1:1.
Value Drop Scenarios
Q: What happens when restaked value drops below cUSD collateral value? Is there an incentive for operators to not repay the USDC? A: The system uses mechanics similar to Aave, Morpho, and Compound. Delegations must always remain above USDC used. With a nearly 2:1 ratio, historical price movements would not put these positions underwater. The incentive to repay are similar to that of major institutions like Ceffu returning custodied funds or GSR returning market-making tokens.
Restake Withdrawal Process
Q: What happens if restakers withdraw their restake? How does CAP handle operators invested in illiquid assets? A: There is a partnership between delegators and operators that includes prior notification of delegation removal to allow for position unwinding. While contracts enforce rules where removal of delegation can trigger a slashing event if funds aren't returned, there is a built-in delay before delegation can be removed. This approach is similar to other AVS systems.
Premium Structure
Q: How do premiums work in relation to EigenLayer's security model? A: Restakers charge a fixed rate on borrows for the operators they delegate to.
What is Mega Mafia & how is CAP involved?
The mafia is a select group of projects building completely new applications in collaboration with MegaETH. The application process is very stringent, with few teams being accepted.
Once in the mafia, teams work together to maximize synergies between project designs. For CAP, that entails building around other DeFi protocols, and integrating CAP stablecoins with all native applications on MegaETH.
From Berlin to Chiang Mai, Mega Mafia teams have worked in person to foster a tightknit community. Mentors and advisors have continually participated in the ideation and building process. These include EigenLayer team members, Vitalik Buterin, and others.
What is MegaETH?
MegaETH is a real-time blockchain built on top of Ethereum as an L2. It is Ethereum's answer to Solana performance. The team is made up of the academics from MIT & Stanford, as well as crypto OGs from Consensys. For more information, check out MegaETH's website.
Where is CAP deployed?
CAP will be deployed on Ethereum L1, where EigenLayer is deployed. This removes the need to interact with shared security marketplaces across blockchains. Automations will allow users to mint and redeem CAP stablecoins from MegaETH.
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