Tezos has launched it's first algorithmic stablecoin: Kolibri.
If you have been frustrated with the high transaction fees on Eth, you are not alone. It's been an exciting year for defi. We have even witnessed Hive's integration with eth with wrapped tokens like wLEO. But, when you are interacting with one or more smart contracts on Eth, it can become expensive quickly. Eth tokens are set up as smart contracts, as are DEXs.
Tezos is on of the top Eth competitors, offering a fast and scalable blockchain using LPoS, or Liquid Proof of Stake. One advantage that Tezos is able to employ is the ability to stake your tokens and yield 6%, while also participating in #defi at the same time. There are some exciting projects that will launch in 2021 that enable this method. One of the first is a Tezos based algorithmic stablecoin called Kolibri.
Kolibri is similar to what we see with DAI on Eth. The user is able to leverage their Tezos tokens by depositing them into a smart contract called an oven. Once the required collateral has been deposited, you are able to mint kUSD tokens, which have a 1:1 value with USD. The value collateral ratio is 1:2, which means for every $1 kUSD minted, the oven must contain $2 worth of the Tezos XTZ token.
The value backing each kUSD token must be maintained, even if he value of the Tezos XTZ token falls. To maintain this value, any oven that falls below the 1:2 ratio can be liquidated. So, you must be sure to deposit more Tezos XTZ or burn kUSD if you are at risk of falling below this ratio. But, that also provides the opportunity for anyone running a kUSD oven to provide the additional collateral and sieze the oven, thus purhasing Tezos XTZ at a discounted price.
This system provides trust in the USD peg that kUSD holds. In order to avoid liquidation, you must be sure that you do not become under-collateralized.
You can view all ovens, and even sort by collateralization, to see which ovens are pushing the leverage limits and are at risk.
The Kolibri oven receives their price feeds from the Harbinger Oracle on the Tezos blockchain.
You will need the Temple Wallet browser extension, formerly known as Thanos, to complete this. This browser extension is compatible with hardware wallets like Ledger so that you control your keys and the browser is just the interface.
One of the first steps in creating an oven is to choose a Tezos baker for the smart contract. When you do this, you will earn about 6% APY just as you would should you be staking your XTZ from your own wallet address. (Side Note: some bakers require a minimum amount of XTZ in one address to stake. For example, my baker requires 100 XTZ, I must have that amount in the Kolibri oven address to receive rewards) The signifiant advantage here over Eth, is that you are still able to stake your tokens that are used for collateral to mint kUSD. There is a 2% yearly stability fee, so it's great that your stake rewards alone are enough to over this fee and still profit while your XTZ are locked as collateral.
In the past, we have been able to participate in staking, minting stablecoins, and defi. Now, with Kolibri, you will be able to do all 3 at the same time, increasing your revenue streams and yield.
Once you have minted your kUSD, you have multiple options:
- Hold your kUSD in your oven and wait to discover an under-collateralized oven, to take advantage and seize the oven, and obtain the XTZ at a discount.
- Use your kUSD as capital for trading, buying XTZ, or any other crypto.
- Lend out your kUSD for interest.
- Provide kUSD as liquidity to a DEX for interest.
No matter which option you choose, you will effectively be participating in defi and earning staking rewards at the same time.
We have witnessed the creation of wrapped LEO on Eth. But, i think it's time for Hive to collaborate with a blockchain that can offer the same defi experiences, while staking, for faster and cheaper. It's time to see LEOtz and HIVEtz join the Tezos ranks along with ETHtz & tzBTC.
kUSD should be available for trade soon at:
Dexter - Tezos DEX
Quipuswap - Tezos DEX
Update: kUSD has been added to https://wallet.atomex.me/ for trading.
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Very cool! Thanks!
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It's a very cool way to peg an algorithmic stablecoin. I would love to see this type of smart contract on Hive!