This article is reproduced from the Medium account of Stable++, and the original article link is: https://medium.com/@Stablepp/stable - 掠影 - 扭转潮流的协议 - 92ecae9e21f7
Stable++ is the first decentralized, permissionless, over-collateralized stablecoin protocol based on BTC and CKB. It has also issued the first Bitcoin ecosystem stablecoin RUSD based on RGB++. This article focuses on the mechanisms and characteristics behind this protocol, revealing the secrets of its core design.
RGB++ Protocol, the Foundation#
The uniqueness of the CKB solution and the Stable++ protocol lies in the design of the RGB++ protocol.
Naturally Integrated
The RGB++ protocol combines the original RGB protocol with UTXO-based solutions (such as CKB), replacing client verification with trusted third-party decentralized verification. Technically, RGB++ and RGB protocols are compatible through isomorphic binding. This means that chains based on RGB++ can naturally integrate with Bitcoin, allowing seamless interaction and data transmission within the Bitcoin ecosystem.
Turing Complete
RGB++ also introduces Turing complete contract improvements to Bitcoin without the need for cross-chain solutions. The redesigned UTXO model (Cell model) can store various types of data, including public keys, tokens/NFTs, and compiled programs. This makes it possible to design, deploy, and interact with more complex smart contracts in the Bitcoin ecosystem, greatly expanding the programmability of Bitcoin.
Based on UTXO
Under the RGB++ protocol, users can directly use their Bitcoin accounts to operate their RGB asset containers on CKB and all other UTXO-based chains without the need for cross-chain transactions. They only need to use the characteristics of UTXO in the above public chains to set the unlocking conditions for the Cell container. This means that investors' assets can freely flow between different chains, DEXs, platforms, etc.
Not only that
In addition, the protocol also supports transaction folding, shared state of non-owner contracts, and non-interactive transfer without the need for cross-chain transactions.
By leveraging the innovation of the RGB++ protocol, combined with the extension of the PoW mechanism and the Cell model, CKB is naturally bound to Bitcoin, allowing assets and data to freely "leap" between any UTXO-based chains within the Bitcoin ecosystem.
RUSD, Unprecedented#
Stablecoins are a key part of the ecosystem because their prices remain constant. This allows stablecoin holders to have confidence in the stability of their assets. As most cryptocurrencies face price uncertainty, stablecoins provide a safer option for investors. Therefore, the expansion of stable assets is also a key indicator of industry capital inflows and can be used to measure the sentiment of external investors.
Market Situation#
With the development of smart contracts and the increasing market demand, many stablecoins have been launched in the Ethereum ecosystem, including well-known ones such as Tether, USDC, Dai, and ERUC. As of the writing of this article, the market value of stablecoins is $164 billion, with half of it dominated by Ethereum.
As of today, the market value of Bitcoin is $1.267 trillion, three times the current market value of Ethereum, which is $389 billion. At the same time, according to the SSR (Stablecoin Supply Ratio), the market value of stablecoins on Ethereum is $79 billion, while on Bitcoin it is $83 billion. Although the quantity is slightly larger, the proportion is extremely low compared to Ethereum.
However, the rise of decentralized applications in the Bitcoin ecosystem has brought new opportunities.
Facilitating Transactions
For these applications, the increasing demand for stablecoins is becoming more and more urgent. The stability of stablecoins is crucial for users to carry out daily transactions, borrowing, and other financial activities. With the development and popularization of more decentralized applications, the demand for stablecoins will continue to increase, thereby driving the growth of the market value.
Interoperability and Integration
Stablecoins can easily integrate with various decentralized applications and services in the Bitcoin ecosystem, providing seamless operability. This integration helps facilitate transactions and interactions between different platforms and even different chains.
Security and Trust
With the launch of more decentralized applications in the Bitcoin ecosystem, the market needs stablecoins that can provide higher credibility and security compared to other cryptocurrencies. This trust is crucial for users who are concerned about the volatility and risks of traditional cryptocurrencies.
With the continuous development of decentralized finance, the demand for stable, reliable, and accessible stablecoins will continue to increase. Currently, stablecoins occupy a quarter of the market share on Ethereum. Ideally, to achieve a similar market proportion, the market value of stablecoins on Bitcoin should reach $250 billion in the foreseeable future, accounting for a quarter of its total market share. This indicates that stablecoins have a potential growth space of approximately $160 billion in the Bitcoin ecosystem.
Future#
Unlike Ethereum, stablecoins in the Bitcoin ecosystem are mainly based on Bitcoin's Layer 2 solutions. Some popular stablecoins include USDA on Stacks, Doc and rDai on the RSK network, and L-USDt on the Liquid network. Although they are popular, these stablecoins also face challenges, as there is no solution that can seamlessly integrate into Bitcoin like Nervos CKB.
RUSD is theoretically the first stablecoin issued directly on the Bitcoin network based on the RGB++ protocol, using the capabilities of CKB to provide a more localized and efficient solution. This integration offers unique advantages and may even set a new standard for stablecoins within the Bitcoin ecosystem.
Thanks to the advantages brought by the RGB++ protocol, RUSD is the first stablecoin that can freely circulate on any UTXO-based chain, perfectly fulfilling the role of a stablecoin.
Stable++, the Ultimate Solution#
The mechanism of Stable++ is based on an over-collateralized vault and an efficient liquidation module. With the help of the RGB++ protocol, combined with the powerful programmability and Turing completeness brought by the CKB virtual machine, these sophisticated designs are realized.
The functionality of Stable++ is similar to other common CDP stablecoin protocols.
- Borrow stablecoin RUSD by collateralizing BTC or CKB.
- Provide RUSD to the protocol in exchange for liquidation or sub-collateral tokens.
- Collateralize sub-collateral tokens to earn fees for borrowing or redeeming assets.
- Exchange assets at a price anchored to the US dollar.
In addition to these features, Stable++ also introduces liquidity staking through Nervos Dao. Users can stake CKB to obtain wstCKB, allowing them to earn staking rewards while still being able to use their wstCKB for investment without sacrificing asset liquidity. Stable++ aims to be a multi-functional protocol, providing users with powerful and diverse financial services.
The key features of the Stable++ protocol are equally impressive.
Decentralization#
Since the CKB-VM fully supports running programs stored in the Cell model, even complex programs can be executed based on smart contracts that have been designed and deployed on the chain. Once deployed, the contract will remain immutable, and no one can tamper with it at any time. Therefore, users can interact with Stable++ safely and confidently, and the reliability of the system based on consensus is guaranteed.
In addition, the protocol does not require any permission. Stable++ is a completely independent, decentralized, and permissionless protocol, with no single entity having control or the ability to impose restrictions. This autonomy allows users to interact with the protocol freely, without any barriers or additional permissions, further enhancing the credibility and security of the system.
Instant and Modular Liquidation#
Liquidation essentially means that if the value of the collateral falls below a critical threshold, the smart contract will automatically liquidate the collateralized debt position, selling the collateral to repay the outstanding debt and other related fees.
Traditional liquidation mechanisms rely on auctioning the collateral to the highest bidder or offering it at a discounted price to buyers. Although these methods are feasible, they often suffer from inefficiency and other vulnerabilities. Auctions are relatively inefficient and may not always attract enough bidders to achieve a fair market price, while discounts mean selling at a low price, which may cause significant losses to the entire protocol itself.
Stable++ aims to address these issues by establishing a dual insurance mechanism.
Stability Pool#
When the vault is liquidated, the protocol first absorbs the debt through the stability pool and distributes the collateral to stability providers.
Reallocation#
If the stability pool does not have enough stablecoins to absorb the debt, the reallocation mechanism is triggered, and the debt and collateral of the liquidated vault will be reallocated to all existing vaults based on the collateral amount ratio.
This dual insurance mechanism, which is automatically executed by smart contracts, ensures the efficiency of the liquidation process and minimizes losses.
The reallocation mechanism will be launched in the first phase of Stable++'s official release. The stability pool will be updated in the second phase, further enhancing the overall stability and reliability of the Stable++ protocol.
Capital Efficiency#
With the instant and modular liquidation mechanism in place, all under-collateralized vaults will be liquidated immediately. The risk of potential losses faced by the protocol and stability providers due to inefficient liquidation is eliminated. Therefore, it allows the system to maintain a lower Minimum Collateral Ratio (MCR) without sacrificing stability and security.
Conclusion#
Stable++ provides a powerful, decentralized, and efficient solution for stablecoin financial services within the Bitcoin ecosystem, marking a significant progress in the decentralized finance world.