Arkadiko Case Study


Your STX tokens generate a yield, which pays back the USDA loan automatically over time.

The proposed addition to the protocol would allow users to collateralize native Bitcoin to mint a soft-pegged US Dollar stablecoin. Similarly to USDA, this loan would be contained in an Arkadiko vault with similar terms and agreements around liquidation ratios and penalty fees.

The benefit here is that a Discreet Log Contract (DLC) will be used to guarantee outcomes in market conditions where the Bitcoin price fluctuates and execute automatically to settle debt and repayment directly in BTC.

Minting USDB and Repayment


A user connects a DLC-enabled wallet to Arkadiko’s site and navigates to the vaults section. The user determines the vault (loan) parameters which are sent to the DLC.Link oracle system, either through a web 2 api, or via a smart contract.

These include the amounts, liquidation details, dates, etc. The user would likely also identify his/her STX wallet address as the destination for the stable coin to be minted.

The DLC.Link oracle exposes a DLC event announcement which has the payout outcomes programmed into it. This announcement value is used within the Arkadiko wallet to make a DLC offer to the user’s DLC-enabled wallet.

The user accepts from within their wallet, and then the BTC transaction is put on the chain either by Arkadiko or the user. The user’s BTC is now locked into the DLC along with the Arkadiko Treasury Wallet and the liquidation price and payout outcomes are set in the payout curve of the contract.

Depending on how things are configured with Arkadiko, the STX-based stable coin would either automatically be transferred to the user’s STX wallet, or the user would need to take an action on Stacks to retrieve the funds.


To repay the loan and have the BTC returned, the user can navigate to their loan on the Arakadio site and send USDB to an Arkadiko smart contract which communicates with the DLC.Link smart contract, also on clarity.

This way the smart contracts let the DLC.Link oracle server know (via an off-chain listener) that the debt is repaid and can attest to the corresponding “close event” which either the user or the Arkadiko wallet can obtain to unlock the BTC in the DLC to be returned to the user.

Minting USDB and Liquidation


The mint process is identical as described in the previous scenario.


In the event that the price of BTC decreases to a point where the collateralization ratio falls below the threshold, the DLC.Link oracle attests to the price of BTC which triggers the ability to close the DLC. The price is fetched from a price feed oracle service such as Redstone/Chainlink.

The locked BTC is sent back, in part, to both the user and to Arkadiko’s BTC wallet as agreed upon during origination for this BTC price.

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