Introduction
Last updated
Last updated
Stablecoins have emerged as a crucial innovation in the dynamic crypto industry, offering stability amidst the volatility of cryptocurrencies. These digital assets, designed to mirror the value of major fiat currencies such as the USD or EUR, provide a reliable store of value and mitigate price fluctuations. However, the stablecoin market encompasses diverse types, each employing distinct collateralisation methods, resulting in variations in stability, decentralisation, and scalability. While fiat-backed stablecoins like USDC and USDT have gained significant popularity, alternative stablecoin models have also gained traction. Crypto-collateralised stablecoins provide a decentralised alternative, while algorithmic stablecoins operate without collateralisation. Each stablecoin model presents its own advantages and disadvantages, catering to users seeking stability and value preservation. However, the advent of collateralised debt position (CDP) protocols has brought challenges to the stablecoin landscape by virtually reducing the cost of capital to zero, thereby decreasing the yield potential and creating possible risks.
In this context, the StaikaFi Protocol aims to revolutionise the stablecoin landscape by introducing a groundbreaking solution that overcomes the limitations of traditional CDP protocols. By leveraging the concept of Liquid Staking Tokens (LSTs) and accessing Ethereum Proof-of-Stake Rewards, the protocol unlocks a scalable and lucrative source of yield generation for stablecoins. The StaikaFi Protocol recognises LSTs as a means to establish an inflation-proof stablecoin protocol, providing a groundbreaking paradigm shift that positions crypto-backed stablecoins as a solution for generating yield backed by LSTs.
One of the central dilemmas plaguing stablecoin protocols is the dwindling yield potential, a direct consequence of the almost negligible borrowing costs propagated by conventional CDP models. This, over time, has considerably undercut the allure of stablecoins as a lucrative yield-generating asset. Addressing this quandary head-on, the StaikaFi Protocol has pioneered a balanced monetary policy coupled with judicious borrowing rates. Through incentivizing the borrowing rate for SUSD — the stablecoin birthed by the StaikaFi Protocol — it not only aligns this rate with a blend of the Consumer Price Index (CPI) Annual Change and the Central Banks Rate but also harnesses it as a sustainable revenue source. This approach allows the protocol to redirect the accrued revenue from borrowing back to its user base. As a result, users benefit not just from traditional yield farming rewards but also tap into an additional, scalable, and sustainable revenue stream. This dual-reward mechanism empowers users to effectively counteract the adversities of inflation, ensuring their returns consistently outpace inflationary pressures.
To incentivise participation and ensure liquidity within the StaikaFi Protocol, the platform implements various gauges such as liquidity, lending, and borrowing gauges. These gauges distribute rewards in the form of STAIKA to various stakeholders, including lenders, borrowers, and liquidity providers decided by participants who have locked their STAIKA in vote-escrow for equivalent veSTAIKA positions. Furthermore, the protocol distributes yield in the form of SUSD through the SUSD Redistribution Rate (SRR), which enables users to deposit their SUSD in SRR smart contracts in order to receive interest on their deposit. The allocation of these revenues will in part be decided by the Global Staika Council, specifically in terms of distribution between SUSD to the SRR and SUSD to liquidity gauges with a core mandate of ensuring SUSD price stability.
In this whitepaper, the intricacies of the StaikaFi Protocol are expanded upon, offering a thorough comprehension of its intricate workings, technical specifics, and governance structure. We extend an invitation to stakeholders, developers, and the wider DeFi community to delve into the transformative possibilities of the StaikaFi Protocol, actively contribute to its advancement, and collaboratively spearhead a groundbreaking transformation in the realm of stablecoins. Through its unique capability of providing an inflation-resistant stablecoin solution with yield generation via LSTs, the StaikaFi Protocol introduces a fresh outlook on stablecoin innovation, fundamentally reshaping the role of crypto-backed stablecoins within the DeFi ecosystem.