Technical Overview

Core Mechanics

At its heart, Zhenglong operates as a decentralized platform for creating and trading synthetic assets - tokens that mirror the value of real-world or digital assets without needing direct custody of those assets. The protocol functions as a single, system-wide collateralized debt position (CDP) with 100% collateral efficiency:

• Collateral: Users deposit assets (like stETH) into the market's collateral pool
• Debt (ZHE Tokens): Synthetic pegged tokens that track currencies, cryptocurrencies, stocks, or anything with a reliable price feed
• Equity (STEAMED Tokens): Leverage tokens that absorb volatility between collateral and pegged tokens, offering a long position on collateral vs the pegged token
• Health: Stability pools automatically rebalance the protocol, maintaining system solvency without reliance on off-chain liquidators

This novel three-token model allows users to:

1. Mint stable, pegged assets (zheTokens) against the shared collateral pool
2. Gain leveraged exposure through STEAMED tokens with liquidation protection
3. Earn real yield by providing stability through Stability Pools

Protocol Architecture

Zhenglong implements a sophisticated 3-token system designed for capital efficiency and stability:

1. Collateral Token

• Users deposit approved yield bearing collateral (e.g., stETH, or sDAI) into Zhenglong's shared collateral pool
• Collateral is collectively managed by the protocol, not tied to individual users
• The protocol maintains a global minimum collateralization ratio (e.g., 130%) to ensure system solvency
• Yield-bearing collateral (like stETH) generates real returns distributed to Stability Pool participants and STEAM stakers, who also enjoy mint and redeem fees.

2. ZHE Tokens (Pegged Assets)

• Synthetic assets pegged 1:1 to a reference price using reliable oracle feeds
• Examples include:
  • zheUSD — pegged to USD
  • zheBTC — pegged to Bitcoin
  • zheTSLA — pegged to Tesla stock price
• Freely usable across DeFi platforms
• Redeemable against collateral
• Designed to maintain a tight peg through arbitrage and protocol rebalancing

3. STEAMED Tokens (Leverage Tokens)

• Variable leverage tokens representing the residual claim on the collateral after accounting for issued pegged tokens
• Similar to holding a liquidation-protected leveraged long position on the collateral versus the peg
• As collateral appreciates relative to the pegged token, STEAMED tokens rise faster than the collateral itself
• If collateral depreciates, STEAMED tokens absorb losses first, protecting zheToken holders
• Rebalanced automatically by the protocol during market stress via Stability Pools
• Protection from liquidations - value fluctuates dynamically without sudden margin calls

Rebalancing Mechanism

The protocol employs automated Stability Pools that trigger rebalances when the system-wide collateral ratio falls below a threshold (e.g., 130%):

Process

1. When global collateralization ratio falls below the safety threshold, the protocol enters stability mode
2. A rebalance transaction becomes executable by MEV searchers who are economically incentivized to execute it
3. The transaction swaps zheTokens from the Stability Pool for either collateral or steamedTokens (depending on pool type)
4. This improves the collateral ratio and maintains system solvency

Types of Stability Pools

• Collateral Stability Pools: Pegged tokens deposited here are used to redeem real collateral assets at 1:1 value based on the oracle price
• Steamed Stability Pools: Pegged tokens deposited here are swapped for steamedTokens during rebalancing, allowing accumulation of leveraged exposure

Benefits

• Maintains system solvency without auctions or external liquidators
• Generates organic yield for pool participants through collateral yield and STEAM rewards
• Ensures peg stability and protocol health
• Transforms market downturns into opportunities for Stability Pool participants

Protocol Workflow

1. Minting Process

   • User interacts with the global collateral pool
   • Mints zheTokens or steamedTokens with 100% collateral efficiency

2. Stability Pool Participation

   • Deposit zheTokens into stability pools
   • Earn yield from collateral and STEAM rewards
   • Provide protocol security
   • Choose between Collateral or Steamed Stability Pools based on risk preference

3. Leverage Trading

   • Users acquire STEAMED tokens
   • Gain protected leverage exposure
   • No funding fees, margin calls, or liquidation risk

4. Automated Rebalancing

   • System monitors collateral ratios
   • MEV searchers execute rebalancing when triggered
   • Maintains peg stability and system health

STEAM Token Utilities

STEAM serves as the protocol's governance, incentive, and revenue-sharing token:

Core Functions

• Lock for veSTEAM to participate in governance
• Vote on emissions and direct incentives
• Boost rewards in Stability & Liquidity Pools
• Earn protocol revenue
• Participate in gauge voting systems

Token Allocation

The total supply of 100,000,000 STEAM tokens is allocated as follows:

Allocation	Percentage	Purpose
Bao Treasury	25%	Permanently locked as veSTEAM; controlled by veBAO governance
Initial Liquidity	1%	Combined with IDO funds to seed initial DEX liquidity pools
Aladdin DAO	3%	Incentives for technical collaboration and strategic alignment
Treasury Reserve	10%	Reserved for future initiatives, new market launches
Initial Dex Offering	6%	Fundraising for audits, protocol-owned liquidity, development
Genesis Participation	2%	Distributed to participants in the first Genesis Vaults
Community Boosters	3%	Allocated for marketing, content creation, community efforts
Founders and Contributors	6%	Allocated to early builders, subject to vesting
Protocol Incentives	39%	Distributed over time to Stability Pools, liquidity providers
veBAO Holders	5%	Distributed through airdrops to veBAO lockers

Emission Design

• 100-year emission curve for sustainable, long-term incentives
• Gauge voting to dynamically adjust where emissions flow
• No hidden unlocks or vesting surprises