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Core Concepts for End Users

Essential concepts you must understand before using STRATO DeFi.

Transaction Vouchers

Definition: Free transaction fee credits automatically given when you bridge assets to STRATO.

Key points:

  • 10 vouchers per bridge-in (every time you bridge)
  • Each voucher covers 1 transaction fee
  • Used automatically before USDST
  • After vouchers run out, fees are 0.01 USDST (~$0.01) per transaction

How it works: 

1. Bridge assets to STRATO
2. Receive 10 free vouchers automatically
3. First 10 transactions: FREE (voucher used)
4. After 10 transactions: 0.01 USDST per transaction

Example: 

Bridge 0.5 ETH to STRATO
→ Receive 10 vouchers
→ Do 10 transactions for free
→ Bridge more assets later
→ Receive 10 more vouchers

Getting more vouchers: - Bridge assets again (any amount, any time) - Each bridge-in gives you 10 more vouchers

Wrapped Tokens

Definition: STRATO versions of Ethereum assets that you can use for DeFi operations on STRATO.

Why wrapped tokens?

When you bridge assets from Ethereum to STRATO, they become "wrapped" to work on the STRATO blockchain:

  • On Ethereum: You have ETH, WBTC, Gold, Silver
  • On STRATO: You have ETHST, WBTCST, GOLDST, SILVST (wrapped versions)
  • 1:1 Peg: Always exchangeable 1:1 with the original

How it works:

Bridge ETH from Ethereum → Receive ETHST on STRATO
Use ETHST on STRATO → Bridge back → Receive ETH on Ethereum

Common wrapped tokens:

Original (Ethereum) Wrapped (STRATO) Type
ETH ETHST Wrapped ETH
WBTC WBTCST Wrapped BTC
Gold tokens GOLDST Tokenized Gold
Silver tokens SILVST Tokenized Silver

Key points:

  • ✅ All STRATO operations use wrapped tokens (swaps, lending, collateral, pools)
  • ✅ Bridge operations convert automatically (ETH → ETHST when bridging in)
  • ✅ Always 1:1 - No slippage or conversion fees between original and wrapped
  • ✅ Secure - Backed by locked original assets on Ethereum

Example:

1. You bridge 2 ETH from Ethereum to STRATO
2. You receive 2 ETHST on STRATO
3. You use ETHST to:
   - Supply as collateral
   - Swap for USDST
   - Provide liquidity in ETHST-USDST pool
4. Later, bridge 2 ETHST back to Ethereum
5. You receive 2 ETH on Ethereum

Why this matters:

Throughout the documentation, you'll see: - "Supply ETHST" (not "Supply ETH") - "USDST-ETHST pool" (not "USDST-ETH pool") - "Swap WBTCST → ETHST" (not "Swap WBTC → ETH")

This is because on STRATO, you're working with the wrapped versions!

Collateral

Definition: Assets you deposit to back your borrowing or minting.

Key points:

  • Locked while you have debt outstanding
  • Value determines how much you can borrow/mint
  • Can be liquidated if value drops too much
  • Each asset has different parameters (LTV, liquidation threshold)

Example: 

Deposit: 1 ETHST ($3,000)
Can borrow: Up to ~$2,100 (70% LTV)
If ETHST drops to $2,000: Position at risk

Health Factor (Lending)

Definition: Ratio showing how safe your lending position is.

Formula: 

Health Factor = (Collateral Value × Liquidation Threshold) / Borrowed Amount

Rules:

  • > 2.0: Very safe (recommended)
  • 1.5 - 2.0: Safe with buffer
  • 1.0 - 1.5: Moderate risk
  • < 1.0: LIQUIDATION occurs

Visual Guide:

stateDiagram-v2
    [*] --> VeryHealthy: HF > 2.0
    VeryHealthy --> Healthy: Price drops
    Healthy --> AtRisk: Price drops
    AtRisk --> Liquidated: HF < 1.0

    Liquidated --> [*]: Position closed

    AtRisk --> Healthy: Add collateral / Repay debt
    Healthy --> VeryHealthy: Add collateral / Repay debt

    note right of VeryHealthy: Safe zone<br/>Recommended
    note right of Healthy: Safe with buffer<br/>HF 1.5-2.0
    note right of AtRisk: Moderate risk<br/>HF 1.0-1.5
    note right of Liquidated: Position liquidated<br/>HF < 1.0

Example: 

Collateral: 10 ETHST @ $3,000 = $30,000
Liquidation threshold: 80%
Borrowed: 15,000 USDST

Health Factor = ($30,000 × 0.8) / $15,000 = 1.6
Status: Safe, but watch ETHST price

Collateralization Ratio (CDP)

Definition: Ratio of collateral value to minted USDST (CDP version of health factor).

Formula: 

CR = (Collateral Value / Minted USDST) × 100%

Rules:

  • 200%+: Very safe
  • 150-200%: Moderate risk
  • < 150%: Often liquidated (varies by asset)

Example: 

Collateral: 5 ETHST @ $3,000 = $15,000
Minted: 10,000 USDST

CR = ($15,000 / $10,000) × 100% = 150%
Status: At minimum - risky!

USDST

Definition: STRATO's USD-pegged stablecoin.

Key points:

  • Pegged to $1 USD
  • Can be obtained by borrowing (Lending) or minting (CDP)
  • Used for fees, trading, and as stable value storage
  • Must be repaid/burned to unlock collateral

Uses:

  • Pay transaction fees on STRATO
  • Stable asset for trading
  • Collateral for other DeFi operations
  • Bridge out for USD on other chains

Reward Points

Definition: STRATO's governance and rewards token.

Key points:

  • Earned by participating in DeFi activities
  • Used for governance voting (future)
  • Can be traded or held for value
  • Rewards distributed seasonally

How to earn:

  • Supply collateral to lending pool
  • Borrow USDST
  • Provide liquidity to swap pools
  • Mint USDST via CDP
  • Complete swaps

Liquidation

Definition: Forced closure of your position when collateral value falls too low.

What happens:

  1. Your position health factor < 1.0 (or CR < minimum)
  2. A liquidator repays your debt
  3. Liquidator takes your collateral + bonus (5-10%)
  4. You lose collateral value beyond your debt

Example liquidation: 

Before:

- Collateral: 1 ETHST @ $3,000
- Borrowed: 2,400 USDST
- Health factor: 1.0

ETHST drops to $2,800:

- Health factor: 0.93
- LIQUIDATION TRIGGERED

After:

- Lost: 1 ETHST ($2,800)
- Kept: 2,400 USDST
- Net loss: $400 + liquidation penalty (~$140)
- Total loss: ~$540

How to avoid:

  • Maintain high health factor (2.0+) or CR (200%+)
  • Add collateral when prices drop
  • Repay debt to improve ratio
  • Set price alerts

Impermanent Loss (Liquidity Provision)

Definition: Loss from providing liquidity to swap pools when token prices diverge.

When it happens:

  • You provide liquidity to a pool (e.g., ETH-USDC)
  • Token prices change significantly
  • Pool auto-rebalances
  • You end up with different amounts than if you just held

Example: 

Initial deposit:

- 1 ETHST ($3,000) + 3,000 USDST = $6,000 total

ETH doubles to $6,000:

- Pool rebalances to: 0.707 ETHST + 4,242 USDST
- Pool value: $8,485
- If you just held: 1 ETHST ($6,000) + 3,000 USDST = $9,000
- Impermanent loss: $515 (5.7%)

BUT: Swap fees earned may offset this loss

When it's worth it:

  • High trading volume pools (lots of fees)
  • Stablecoin-stablecoin pairs (minimal price divergence)
  • Short-term price movements (loss is "impermanent")

Slippage

Definition: Difference between expected and actual trade price.

Causes:

  • Pool size too small for your trade
  • Price moves between preview and execution
  • Network congestion delays

Example: 

Expected: Swap 1 ETH for 3,000 USDC
Slippage: 0.5%
Minimum received: 2,985 USDC

If price moves more than 0.5%, transaction reverts

Settings:

  • Low slippage (0.1-0.5%): Safer, may fail in volatile markets
  • High slippage (1-5%): More tolerant, risk of worse price

Quick Reference

Key Metrics to Remember

  • Health Factor > 2.0 (lending) or CR > 200% (CDP) = Safe
  • Always keep reserve USDST for transaction fees
  • Monitor prices daily when you have active positions
  • Set alerts at liquidation prices

Transaction Flow

Typically:

  1. Approve token spending (one-time per token)
  2. Execute main action (supply, borrow, swap, etc.)
  3. Wait for confirmation (~5-10 seconds)
  4. Check transaction success

Available Tokens

STRATO supports various tokens for trading, lending, and collateral.

Understanding Wrapped Tokens

All tokens bridged from Ethereum are automatically wrapped to work on STRATO. See Wrapped Tokens section above for details.

Native & Wrapped Assets

ETHST (Wrapped ETH):

  • Bridged from Ethereum mainnet
  • 1:1 peg with ETH
  • Primary trading and collateral asset

WBTCST (Wrapped BTC):

  • Bridged from Ethereum (WBTC)
  • Represents Bitcoin value
  • High-value collateral

Stablecoins

USDST (STRATO USD):

  • Protocol stablecoin (described above)
  • Minted via CDP or borrowed from lending pool
  • Pegged to 1 USD
  • Used for fees and trading

Commodity Tokens

GOLDST (Gold):

  • Represents gold value
  • Commodity-backed
  • Trading and collateral

SILVST (Silver):

  • Represents silver value
  • Commodity-backed
  • Trading pair with GOLDST

Governance

Reward Points:

  • STRATO governance token (described above)
  • Earned through DeFi activities
  • Used for voting and governance

Getting Tokens

Most tokens are obtained by bridging from Ethereum. USDST and Reward Points are earned/minted on STRATO directly.

Next Steps

Now that you understand the core concepts: