The current market for decentralized finance (DeFi) has seen rapid growth in recent years, with a wide range of financial products and services now available on blockchain platforms. However, many of these platforms are still in their early stages and facing several challenges.
One of the main problems users face is the need for more liquidity. Many DeFi platforms need help attracting sufficient liquidity to their products, making it difficult for users to access the financial services they need. This can be especially problematic for those looking to collateralize their assets in order to gain access to credit or other financial instruments.
Using the Arkadiko Protocol, users will be provided with a non-custodial, decentralized liquidity platform where they can collateralize their assets and mint a stablecoin called USDA. Using a soft-pegged US Dollar stablecoin, depositors gain increased liquidity while retaining original asset exposure. In addition, the decentralized and non-custodial nature of the Arkadiko Protocol further adds to its appeal, allowing users to retain control over their assets and reducing the risk of centralization.
Key Features of Arkadiko
Borrowing and lending assets
Arkadiko also provides a platform for borrowing and lending assets, using USDA as the primary collateral and lending currency. This allows users to access liquidity and earn interest on idle assets or borrow assets to meet short-term needs.
Use of STX and bitcoin without giving up custody or security
Arkadiko allows users to use STX and Bitcoin without having to give up custody of their assets. This ensures that users retain complete control and security over their assets while still being able to take advantage of the features and benefits of the Arkadiko platform.
Arkadiko’s Decentralized Stablecoin
One of Arkadiko’s main goals is to introduce a decentralized, crypto asset-backed stablecoin called USDA to the Stacks blockchain. USDA is an over-collateralized stablecoin, which is always backed by more asset value than its outstanding supply. Users can mint USDA by depositing STX tokens in a Vault, and USDA can then be used in other DeFi protocols as a stable asset. The STX tokens in the Vault are also used to “Stack” in the PoX mechanism, which rewards users with a yield in Bitcoin.
Creating Debt with Arkadiko Vaults
Users can open a Vault through the Arkadiko protocol and add collateral to it, which determines the amount of borrowing power they have based on the value of their collateral. They can then create debt in USDA and receive USDA tokens as compensation. If the collateralization ratio of a Vault falls below a certain threshold, the collateral in the Vault will be sold off at a discount to the current market price to an open pool of liquidators. This liquidation pool is freely accessible to everyone who wants to participate in liquidations.
Liquidation Pool: Where Decentralization Meets Stability
Arkadiko updated its auction mechanism with a liquidation pool in April 2022. This allows anyone to participate in Vault liquidation without special software. The pool is made up of USDA capital, which is used for collateral purchases and directly towards liquidation when needed. The liquidations are run through decentralized smart contracts, and anyone can trigger the pool. Participants in the pool get a share of contributions and profits, and during liquidation, USDA is exchanged for discounted assets like xSTX/STX/xBTC.
The liquidation pool offers stability for USDA, increases loan to value for vaults, and adds APY for DIKO emissions. USDA in the pool has a 30-day lock up, and DIKO rewards are distributed at the end of each epoch.
Empowering Arkadiko Users to Shape the Protocol
Arkadiko has a governance system called DIKO, in which users can vote on various protocol parameters and decisions. These votes are weighted based on the amount of STX tokens a user has staked. DIKO voters can change the liquidation penalty fee for specific Vault collateral types and can also propose and vote on new features and changes to the Arkadiko protocol.
Bringing CRON-Jobs to the Stacks Blockchain with Keepers
Arkadiko Keepers is a piece of infrastructure for the Stacks ecosystem that enables off-chain entities to create transactions at the right moment in time, bringing traditional CRON jobs to the Stacks blockchain. Through the Keeper Network, off-chain entities can be rewarded in DIKO for monitoring smart contracts and executing transactions when certain conditions are met, making it easier for developers to find maintainers for their smart contracts and reducing reliance on a single party to trigger trades. This decentralized approach is an essential step in expanding DeFi on the Stacks blockchain and enabling other protocols to develop more efficiently.
In conclusion, the Arkadiko Protocol has the potential to change the future of decentralized finance in several ways. First, its focus on attracting liquidity and improving capital efficiency can enable a broader range of financial interactions within the DeFi ecosystem, leading to the growth and development of the industry. The introduction of the USDA stablecoin provides users with a decentralized, crypto asset-backed stablecoin that can be used in various contexts, increasing the utility and stability of DeFi. As Arkadiko revolutionizes the DeFi system, it will be interesting to see how it does so.