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.
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.
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.
Stacks mining requires a large amount of Bitcoin in order to participate successfully.
Therefore, there is a need for having the ability for pooling together multiple users’ Bitcoin to be an effective miner.
Syvita is taking on this challenge with the Syvita Stacks Mining Pools.
Arkadiko is a decentralized, non-custodial liquidity protocol where users can collateralize their STX tokens and borrow a stablecoin called USDA.
It enables you to gain increased liquidity in the form of a soft-pegged US Dollar stablecoin, while maintaining original asset exposure.
A big challenge and risk today is using Bitcoin in DeFi.
Because the Bitcoin blockchain does not natively communicate with other blockchains, there isn't a secure way to transfer, deposit, or lend your Bitcoin out without entrusting a custodian such as wBTC and opening yourself up to smart contract and third-party risk.