Opus - A Native Stablecoin For Starknet
An autonomous and safe platform for credit and savings.
Throughout the crypto winter, we at Lindy Labs have been hard at work building Opus…
Opus is the most robust, dynamic, and autonomous stablecoin protocol, making both access to leverage and USD exposure with deep liquidity and high yield natively available on Starknet.
What is Opus
In the most general sense, Opus is a synthetic protocol. It allows borrowers to deposit collateral, and mint a pegged token (e.g., a USD-pegged stablecoin) against the value of that collateral.
For example, a user may deposit $500 of stETH and $500 of wBTC, and mint $600 of CASH, Opus’s USD-pegged stablecoin.
This enables two things:
It allows borrowers to leverage their assets, by selling CASH to buy things in real life, or to buy more crypto.
It creates a stablecoin which users can then hold to get exposure to USD on-chain and to farm yield.
And it will do all of this without any centralized party controlling the system, only the DAO. Long term, the goal is for the majority of risk management to be autonomously done by the Opus protocol itself directly on-chain.
How Opus Works
Opus is similar to a number of existing stablecoin systems, namely MakerDAO and Liquity. Users can deposit certain collateral approved by the Opus DAO, and mint CASH.
CASH is at all times overcollateralized.
This means that the value of the assets backing CASH should always exceed the value of the CASH itself. While Opus is similar in principle to other existing stablecoin protocols, we have made numerous differentiated design decisions and created novel mechanisms to address the limitations of existing stablecoins.
Opus’ key features include:
Cross collateral borrowing
A multi-layered, dynamic liquidation system
Autonomous Monetary Policy
Native yield
Cross Collateral Borrowing
Cross-collateral borrowing allows you to borrow CASH against multiple assets in the same position. This gives you a lot of flexibility, allowing you to isolate, pool, or hedge your positions as desired.
For example, you might deposit $1,000 of stETH and $1,000 of wBTC, and mint 1,500 CASH.
Now, if ETH goes down 20% but BTC goes up 20%, then the value of your collateral remains the same, and your position is at no higher risk of liquidation.
On the other hand, in an isolated borrowing system, if you borrowed 750 CASH against $1,000 of stETH, and separately borrowed 750 CASH against $1,000 of wBTC, and ETH went down 20%, then your ETH position would be at risk of liquidation no matter how much wBTC goes up.
Opus allows you to create many collateralized debt positions, called “Troves”, from a single wallet (read: Starknet account).
Multi-layered liquidation system
A key component of any stablecoin system is its liquidation mechanism.
What happens if the value of the collateral in a Trove gets very close to the value of its debt? Since we always want to ensure that CASH is backed by more than its pegged value, in a scenario like this we would have to liquidate the trove.
In a nutshell, a liquidation simply means taking the collateral of a trove and giving it to a third party in exchange for that third party paying off the trove’s debt. There are many different ways to do this, each with their own pros and cons.
With Opus, we’ve decided to implement three different liquidation mechanisms, with each ensuing mechanism serving as a failsafe in the event that the previous mechanism fails.
These three mechanisms are:
Open market liquidations:
Anyone can find a liquidatable trove and pay off its debt in exchange for the trove’s collateral. Under normal circumstances, the value of the collateral the liquidator receives should be higher than the value of the debt they paid off, which they can book as a profit. This discrepancy between the value of liquidated collateral and debt is known as the liquidation penalty.
Absorptions (stability pool liquidations):
In the event that no liquidator is interested in liquidating a trove in the open market (this could happen if CASH depegs > $1, for example), a trove can be liquidated via the Absorber, Opus’s stability pool. This is a system very similar to Liquity’s stability pool , and allows CASH holders to deposit their CASH in order to provide liquidity for liquidations in exchange for a liquidation penalty, plus some other bonuses. (more on that later!)
Redistributions:
We again take inspiration from Liquity here. If open market liquidations haven’t occurred and the Absorber is empty, then a redistribution may occur which distributes the liquidated trove’s collateral and debt amongst the remaining troves, proportionally to how much collateral they have.
Layering these three mechanisms, with each one covering for the drawbacks of the others, means Opus users benefit from liquidations that are simultaneously capital efficient, gentle on borrowers, and ensure the solvency of CASH.
Opus also features dynamic liquidation parameters. Each trove has a custom liquidation threshold which depends on the collateral that has been deposited into it. Liquidation penalties are dynamic and get larger the further above its LTV threshold a trove is.
Autonomous Monetary Policy
A key component of any stablecoin is a mechanism for balancing the supply and demand for the token, ensuring an equilibrium is achieved at $1.
Opus uses an interest rate on borrowing (otherwise known as a “Borrow APY” in other protocols) to control borrowing demand and ensure that it doesn’t outstrip demand for holding CASH. In fact, each trove has its own unique interest that depends on its collateral composition.
But markets aren’t static, and demand changes over time. This is why we’ve developed a controller that autonomously adjusts the interest rates of all troves in order to ensure that the supply and demand of CASH are always in balance.
In addition to interest rates, we plan to gradually develop autonomous control systems for many of the other parameters in the Opus protocol. Our vision for Opus is creating a stablecoin that is simultaneously safe and capital efficient, and dynamically responds to changes in the market, including liquidity, borrowing/holding demand, and more, with as little human intervention as possible.
Native Yield
Opus’s Absorber, the module for pooling CASH to participate in liquidations, represents a source of yield for CASH holders that is native to the Opus protocol.
Users who deposit their CASH in the absorber will be able to profit from both liquidations, as well as earn a share of protocol revenue, and possibly other rewards.
The share of protocol revenue directed to the Absorber will depend on how much CASH has been deposited in the absorber relative to CASH’s market cap. If there is too little CASH in the absorber, then more protocol revenue will be directed to the Absorber, and if there is too much CASH then less revenue will be directed to the Absorber.
This helps reduce the risk of an excessive portion of the CASH supply ending up in the absorber, which can lead to significantly less liquidity for CASH in other places, such as DEXs and lending protocols.
More details on precisely how this will work will be revealed in the future.
The Vision
What we’ve described here is just the start for Opus. We have an ambitious roadmap for the future, featuring:
Additional synthetics (CPI-pegged synthetic, floating-peg synthetic, etc.)
Borrowing against real-world assets (e.g. bonds)
Uncollateralized and partially collateralized bonds
IRL uses for CASH
Where we are today
At this stage, the development of the smart contracts and front-end is largely complete, and our smart contracts are currently undergoing a final audit by Code4rena. We are now actively preparing for Opus’ upcoming launch, and are excited to share more details soon!
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