Analyzing Stable++: The First Stablecoin Protocol of RGB++Layer Using the CDP Model

The development level of DeFi protocol reflects the status of the public chain ecosystem. Although this evaluation criterion is not perfect, it is still widely adopted. The modern DeFi ecosystem typically requires four key infrastructures: DEX, lending, stablecoin, and oracle. These are common in the EVM ecosystem but still scarce in the Bitcoin ecosystem.

Many BTCFi and BTC Layer 2 projects have only built EVM-compatible chains on Bitcoin, lacking innovation. In contrast, public chains like CKB and Cardano based on the UTXO model may be more attractive. The "isomorphic binding" and "Leap no-bridge cross-chain" solutions proposed by Cipher, the founder of RGB++ Layer, have attracted widespread attention.

The stablecoin system is crucial for the CKB and RGB++ Layer ecosystem. It is not only the core of various DeFi scenarios but also influences the overall ecological landscape. RGB++ Layer provides a good circulation environment for stablecoins due to its advantages such as Turing-complete smart contracts and native account abstraction. Moreover, issuing stablecoins collateralized by BTC can improve the capital utilization of BTC and reduce reliance on centralized stablecoins.

Stable++ is a stablecoin protocol within the RGB++ Layer ecosystem, using BTC and CKB as collateral to generate RUSD stablecoins. It combines a Stability Pool insurance fund and a bad debt redistribution mechanism to provide reliable stablecoin minting scenarios for BTC and CKB holders. With CKB's unique inflation mechanism, Stable++ aims to build an underdamped system within the RGB++ ecosystem to buffer market fluctuations.

The Product Functions and Mechanism Design of Stable++

There are four main types of stablecoins:

1. Purely centralized stablecoin ( such as USDT/USDC )
2. Collateralized stablecoins ( such as MakerDAO )
3. CeDeFi stablecoin ( such as USDe )
4. Pure algorithm stablecoin ( such as AMPL )

Stable++ adopts the CDP( debt collateral position) model, similar to MakerDAO. Users can over-collateralize BTC or CKB to borrow RUSD stablecoin, and can also use RUSD to redeem the collateral.

The main features of Stable++ include:

1. Users can pledge BTC or CKB to borrow RUSD, and can also use RUSD to redeem the collateral.
2. You can stake RUSD back to Stable++ to earn STB governance token rewards.
3. RUSD supports homomorphic binding and Leap functionality, allowing for cross-chain transfers.
4. NervosDAO users can stake CKB to obtain wstCKB

The clearing mechanism of Stable++ adopts a dual insurance mechanism of "Stability Pool" and "Redistribution" to improve clearing efficiency.

Users can deposit RUSD into the Stability Pool as a liquidation reserve. When a liquidation is triggered, RUSD from the insurance pool will be prioritized for liquidating bad positions, and the collateral will be distributed to the insurance pool LPs as a reward. This design makes the liquidation process more efficient.

If the insurance pool funds are insufficient, the Redistribution mechanism will be activated, distributing the debts and collateral of the liquidated positions proportionally among all existing positions.

This dual insurance mechanism can quickly handle liquidation events and effectively address bad debt issues in traditional lending protocols. At the same time, it allows Stable++ to adopt a lower collateralization ratio, improving capital utilization efficiency.

The Role of Stable++ in the CKB Ecosystem

Stable++ can interact positively with the token economy of CKB:

1. When the price of CKB rises, more people will use CKB to stake and mint RUSD, locking in the supply of CKB.
2. The minted RUSD can increase on-chain DeFi activity.
3. Indirectly reduce the CKB inflation rate while enhancing the economic security of the network.

This mechanism helps to form an "under-damped system", which plays a buffering role during CKB price fluctuations, benefiting the healthy development of the ecosystem.

Market Prospects

From a market perspective, the BTCFi ecosystem indeed requires a large-scale decentralized stablecoin:

1. Currently, USDT and USDC account for 90% of the stablecoin market value, but there are centralization risks.
2. The total market value of stablecoins is only a fraction of Bitcoin's market value, and stablecoins based on BTC still have significant growth potential.

With the development of the RGB++ Layer ecosystem and the improvement of projects like UTXOSwap and Stable++, the infrastructure for BTCFi on CKB is gradually being established. The stablecoin protocol based on Bitcoin will bring new imaginative space to the BTCFi ecosystem, and the CKB ecosystem is expected to become a fertile ground for innovation.