The mainnet of Helio Protocol was successfully launched on the 19th of August. We’ll be outlining more about Helio Protocol and their BNB-backed destablecoin, HAY. We will also be shining a light on how the project intends to disrupt the entire stablecoin landscape.
Introduction
The advent of stablecoins was a significant step forward in the development of the wider cryptocurrency market. We first saw the arrival of fiat-backed stablecoins such as USDC, BUSD and USDT, who brought a non-volatile, digital form of currency. Since then, the community has viewed stablecoins as integral for mass cryptocurrency adoption, as existing coins such as BTC or ETH were not entirely suitable to be used as a form of currency for transaction due to price volatility.
However there were significant drawbacks that prevented the unanimous acceptance of these stablecoins. Opponents have called out the lack of capital efficiency and the inherent centralization required as contradictory to the DeFi ethos, and were reluctant to accept that these stablecoins were the best that the community had to settle for.
Additionally, the term “stablecoin” or even “algorithmic stablecoin” is generally a misnomer, as all stablecoins, including fiat-backed ones, have potential to de-peg and become volatile, albeit to a much lower extent. The stablecoin industry is under constant scrutiny due to many retail investors over-investing under the allure of constant stability and becoming vulnerable to significant financial loss during such an event.
Using the term “destablecoins” signals the underlying risk of stablecoins and encourages users to invest more responsibly, building a far healthier and more sustainable ecosystem of users. Therefore, the Helio team believe that the term “destablecoins” (in which “de” stands for decentralized) more perfectly and accurately mirrors what the team had envisioned for our new product, HAY. Going forward, Destablecoins will be an entirely brand new asset class of digital tokens, and HAY will be the first of its kind to be launched on the market.
Distinguishing between destablecoins and stablecoins
Once again, destablecoins are not fully volatile assets with no price stability.
Destablecoins differ from the conventional 4 stablecoin types that currently exist in the market. Currently, there are four main types of stablecoins, Fiat-backed (BUSD), Crypto-backed (DAI), Algorithmic (USDD), Commodity-backed (PAXG). Like other crypto-backed stablecoins, destablecoins will utilize the overcollateralized model backed by crypto assets such as DAI.
Firstly, destablecoins are fully decentralized. Crypto-backed stablecoins such as DAI leverage on centralized crypto assets such as USDC, while destablecoins such as HAY will use decentralized assets such as BNB as collateral. Additionally, destablecoins will also leverage on liquid staked assets.
Secondly, destablecoins aim to achieve stability broadly without an absolute peg to the fiat currencies. All currencies are different and have varying reference rates, so price fluctuations should be considered a norm defined by the market instead of aiming for a sense of absolute price stability at all cost. Similarly with destablecoins, it does not aim to achieve absolute price parity with US $1 as a primary objective nor rely on fiat assets as the backed collateral.
Helio Protocol
Helio Protocol is an open-source liquidity protocol for borrowing and earning yield on HAY – a new BNB backed, over-collateralized and an entirely new asset class in crypto called “destablecoins”.
Initially, Helio Protocol was branded as a provider of decentralized, over-collateralized stablecoins. However, the team has re-branded to “destablecoin” to highlight the key element of decentralization that our destablecoin HAY, possesses, and to also avoid using the “stablecoin” misnomer.
Destablecoin is a new type of asset class within the crypto space that seeks to label a more accurate term in the current stablecoin landscape. The prefix “de-” stands for decentralized – it does not signify price volatility the way assets such as BTC experience.
Destablecoins utilize decentralized, liquid staked, crypto assets only as collateral and do not aim to achieve absolute price stability with fiat-based currencies such as USD. While destablecoins are not fully volatile assets, it will allow for some price fluctuations as regular fiat-currencies would experience with varying reference rates and interest rate parities as defined by the open market.
Built on the BNB Chain, Helio Protocol consists of a dual token model and mechanisms that support instant conversions, asset collateralization, borrowing, yield farming, and staking.
Helio Protocol aims to deliver an improved version of already successful projects by further optimizing on safety and capital efficiency. The protocol aims to achieve this by leveraging Proof-of-Stake (PoS) rewards, liquid staking and yield-bearing assets. Following the launch of our governance token, HELIO, Helio Protocol will also operate as a DAO, where the community will govern the protocol’s treasury, revenue pool and future direction.
HAY Destablecoin
HAY is a non-custodial and over-collateralized destablecoin, that is backed by liquid staked BNB. To borrow or obtain HAY, users will have to provide BNB in the form of collateral by interacting with Helio’s protocols. Upon launch, HAY will be issued as a BEP-20 compatible token. It’s use cases include the following:
1. Borrowing of HAY
- Users who have deposited BNB on the Helio Protocol (CeVault) are eligible to borrow HAY
- The operations of borrowing HAY, repaying the loan (with interest) and withdrawing the original collaterals are all governed by a set of smart contracts.
2. Liquidity Mining: Via 3rd party LPs on DEXes (our PancakeSwap LP is now live!)
3. Payment: As means to transfer value, purchase goods & services.
Loan-To-Value Ratio & Liquidation Process
The initial maximum LTV (loan-to-value) ratio will be 66% (collateral ratio of 152%), meaning users can borrow HAY up to the equivalent of 66% of the value of their collateral. Should the price of collateral fall and the LTV ratio rises above the limit, the liquidation process will kick in.
Users can liquidate their holdings if they see a liquidation process due, as the borrowed HAY value becomes higher than the current worth of user’s collateral with safety margin, and receive a flat fee (tip) and a dynamic percentage (chip) simply for starting a Dutch auction, which is the core component of the liquidation process. It is an opportunity arising in the liquidation process, and any Helio user can utilize it. Besides this opportunity, anybody who restarts the Dutch auction receives the same reward (chip + tip) for doing it.
Improving Capital efficiency & Liquid Staking
Helio Protocol will be incorporating the BNB liquid staking mechanism into its system, which is an improved and more efficient method compared to the traditional staking mechanisms. With BNB liquid staking, users are no longer required to lock their assets up with a central node. This removes the disadvantage of having assets that are “illiquid” which can’t be utilized or spent elsewhere.
This is achieved by providing instant liquidity for staked assets in the form of Liquid Staking (hBNB) tokens. The hBNB tokens can be utilized in many ways, such as liquidity mining and further farming opportunities etc.
Additionally, Helio protocol will also deploy the yield-bearing mechanism to allow users to take advantage of their interest-bearing position by borrowing against it.
In staking the collateralized BNB in the Helio Protocol, BNB will be automatically converted into aBNBc yield-bearing tokens. These tokens will increase over time to reflect staking rewards, meaning 1 aBNBc will grow in value when compared to BNB.
Therefore, with these newly introduced mechanisms, Helio Protocol is able to provide greater capital efficiency due to HAY being a fully redeemable asset with a strategy to generate yield against BNB collateral while reducing illiquidity risks.
Risk Management
The team has outlined that Safety and risk management has always been a top priority for Helio Protocol. The team has several systems in place to ensure the integrity and security of their assets. This includes an initial debt ceiling, meaning a maximum minting cap for HAY with respect to the market cap of the collateral (BNB).
Helio has also deliberated and decided on a conservative LTV ratio of 66%, which allows a ~34% buffer for any change in price with respect to BNB collaterals. On top of that, it has a Liquidation Alert System (LAS) in place that borrowers could subscribe to, so as to notify them should their positions be at risk of liquidation.
Last but not least, Helio Protocol has in place an emergency shutdown mechanism which acts as the last line of defense against any potential attacks or exploits on its infrastructure.
Find out more about Helio Protocol
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