In its development, the crypto ecosystem has seen the growth of stablecoins with various stabilization techniques. Basically, investors bet on these assets to protect their assets. But the lack of decentralization, capital efficiency and stability got the better of some stablecoins. To overcome these shortcomings, the Helio protocol brings a new class of assets, destablecoins, which provide more guarantees.
What is the Helio protocol?
THE Helio protocol is an open-source liquidity protocol designed to borrow and earn yield on its native destablecoin HAY. Built on the BNB chain, the Helio protocol consists of a dual token model. It also operates through mechanisms that support instant conversions, asset collateral, borrowing, yield farming, and destablecoin staking.
The team explains that the Helio protocol aims to provide an enhanced version of successful stable projects by further optimizing security and capital efficiency. In this perspective, the protocol wants to take advantage of Proof-of-Stake (PoS) rewards, liquid staking and yield-bearing assets. She adds that Helio will function as a DAO after the launch of the protocol’s governance token, HELIO. In this DAO, the community will govern the treasury, revenue pool, and future direction of the protocol.
Understanding destablecoins
The arrival of the first stablecoins on the cryptocurrency market was generally welcomed by the community. This class of assets backed by fiat currencies appeared to be the solution to the excessive volatility of cryptocurrencies. Investors quickly adopted stablecoins such as USDC, BUSD and USDT. However, the latter had their limits, which explains a certain reserve on the part of the community.
The limits of stablecoins
Critics pointed in particular to the lack of capital efficiency, but also to the centralization inherent in stablecoins, which contrasts with the very principle of DeFi. In the face of which, decentralized (encrypted) stablecoins appear in the ecosystem. These assets do not have a central depository. But despite better capital efficiency and higher returns, sustainability still seems to be lacking in these decentralized stablecoins.
After an in-depth study of the market and decentralized stablecoins, the Helio protocol team was able to identify areas for improvement to solve the trilemma of stability, capital efficiency and decentralization. The proposed solution: a new revolutionary concept, the destablecoin.
HAY, the destablecoin of the Helio protocol
The HAY (“de” for decentralized, not destabilized) destablecoin is a non-custodial, over-collateralized destablecoin, also known as a Collateral Debt Position (CDP). The asset is backed by liquid capitalization BNBs. To borrow or obtain the HAY, users will need to provide BNB as collateral by interacting with Helio’s protocols. HAY includes several use cases including:
- The loan. Users who have deposited BNB on the Helio protocol are eligible to borrow the HAY. All borrowing, repayment (with interest), and collateral withdrawal operations are governed by a set of smart contracts;
- Liquidity Mining via third-party LPs on DEXs;
- Payment. With the HAY, users can purchase goods and services.
Helio protocol: what are its objectives in the crypto ecosystem and DeFi?
The main objective of the Helio protocol is to provide disruptive innovation for the stablecoin industry. The platform provides in this perspective a product that ensures both capital efficiency, decentralization and security.
Concretely, Helio wants to offer a high return in the long term, allowing the majority of users to benefit from the increasing speed of money in the crypto markets. Furthermore, the protocol wants to make the HAY token a benchmark rate catalyst for the stablecoin industry.
The team likes to say that the protocol’s destablecoin aims to solve the stablecoin trilemma:
- Decentralization. The Helio protocol is decentralized with open source code. A governance token and a DAO is planned in the roadmap;
- Stability. Helio is over-collateralised by BNB and BUSD (152% minimum over-collateralisation);
- Capital efficiency. Through the use of BNB liquid staking, Helio is able to generate a return on its collateral and redistribute a portion of it to users via HAY staking and yield farming which DAI, for example, does not.
Why choose the Helio protocol?
The Helio protocol has many advantages for users compared to similar projects on the market.
Capital efficiency
HAY’s capital efficiency remains the protocol’s biggest key strength over other products in the decentralized stablecoin industry. For crypto stablecoins, the collateral provided to borrow these stablecoins is basically stored in a vault. These are not utilized to their full potential, resulting in capital inefficiency.
Additionally, these stablecoins are over-collateralized to account for collateral price fluctuations. This leads to greater capital inefficiency. However, over-collateralization is essential to ensure that the stablecoin product is still backed in 1:1 value. The HAY is no different, with a minimum collateralization ratio of 1.52x.
Helio Protocol solves the problem of capital inefficiency by introducing liquid staking. Through the staking of BNB collateral stored on Helio, the protocol is able to earn additional staking rewards from transaction fees and network fees. These rewards will then be distributed to HAY stakingrs and liquidity providers.
What’s more, with liquid staking, assets are no longer locked in, as users will receive a token in liquid staking. The latter is similar to a receipt to verify that the user has a particular amount of blocked BNB. This receipt can be used later. for additional liquidity mining or other staking opportunities available in DeFi.
Decentralization
The HAY is backed by decentralized cryptocurrency assets such as BNB. This makes it more resilient to market sentiment and less susceptible to risk or regulatory intervention, as is the case with Paxos and BUSD.
Open source code and governance
An open source code assumes that anyone can review the code and contribute to its development, thus improving the transparency and security of the protocol. Furthermore, the protocol offers users the possibility to participate in the governance of the protocol via its HELIO governance token. This means that users can have a say in the future direction of the protocol and contribute to its development. This is not possible with traditional stablecoins like USDT or Tether.
Security
Helio Protocol is also a project focused on security. The platform has always made it a top priority, at all levels. On the active side, HAY is designed to
minimize volatility. The project operates with an LTV ratio of 66%. In other words, a guarantee of 100 dollars in BNB is necessary to obtain 66 HAY. This corresponds to an over-collateralisation ratio of 152%.
It is the first fully decentralized and oversized USD-pegged destablecoin backed by Binance Coin (BNB). In other words, HAY uses decentralized assets as collateral. This brings global stability with no absolute peg to fiat currencies. This design keeps the asset anchored even in the worst market scenarios. This assumes more resilience and greater asset stability.
The platform has also set up a Liquidation Alert System (LAS). Thanks to this option, users are informed in case there is a risk of liquidation on their positions.
Finally, the protocol regularly dispatches major third-party auditing firms (such as Certik, Peckshield, Veridise, Slowmist) to assess infrastructure security. Auditors generally commit to several days of engineering to first understand the platform (size, scope, functionalities, etc.). They then review the codes and before identifying potential vulnerabilities. Everything is done to guarantee the security of the project and ultimately of the users.
Helio-Protocol introduces a new destablecoin asset class with the open source liquidity protocol. The goal of the project is to give users a new way to generate a long-term return and unlock liquidity for their crypto-assets. It also aims to contribute significantly to the democratization of financial services. This, by producing an improved version of the successful stablecoin solutions, and then putting more emphasis on safety and capital efficiency.
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