How to spend the tens of millions of dollars from Binance Labs? Sweet troubles and DeFi ambitions in Helio V2
Spending Binance Labs' millions Helio V2's sweet troubles and DeFi ambitions
The Helio V2 plan includes AMO modules, liquidation module upgrades, RWA integration, and multi-chain expansion plans, etc., striving to use the best boards from various companies to build the most balanced bucket.
Author: Frank, Foresight News
On August 11, Binance Labs announced a $10 million investment in Helio Protocol, which is one of the few recent high-profile multimillion-dollar investment and financing projects at the public level, attracting much attention.
On August 15, Helio Protocol officially disclosed the V2 roadmap, revealing a series of new plans for the addition of AMO modules, liquidation module upgrades, RWA integration, and multi-chain expansion in the future.
This article combines the latest V2 roadmap released by Helio Protocol to see what Helio Protocol, established on BNB Chain, wants to do and whether it carries Binance Labs and Binance’s larger ambitions in the DeFi field.
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Helio V1: Overcollateralized stablecoin protocol based on BNB
As a decentralized collateralized loan and liquidity collateral platform on BNB Chain, Helio Protocol has launched the overcollateralized stablecoin HAY in the V1 version, allowing users to borrow HAY by collateralizing BNB at a certain ratio.
As of August 16, according to the data on the Helio Protocol official website, the total amount of collateral is approximately 184,700 BNB (approximately $43 million), higher than Ankr’s 59,000 BNB.
DefiLlama data shows that its TVL ranks 13th on the BNB Chain and 1st in the CDP track. The total amount of HAY borrowed is currently 20.1 million, with a collateralization ratio of 2.13, showing a moderate performance overall.
In addition, in July, Helio Protocol established a partnership and merger with collateral provider Synclub, and the newly established foundation is responsible for managing the full revenue stream of Synclub and Helio.
Through the Synclub product, Helio Protocol combines overcollateralization, decentralized stablecoin lending, multi-chain StaaS (Stake as a Service), and LSDfi services on BNB Chain.
In the financing news on August 11, Helio Protocol confirmed that the use of new funds includes expanding the protocol to networks such as Ethereum, Arbitrum, and zkSync, which will bring changes to the collateral options—for example, users will be able to choose to provide ETH as collateral for HAY in the future.
Similar to BNB as collateral, users who deposit ETH and mint HAY will be subject to the same minimum loan-to-value ratio (LTV) of 66% and 0% borrowing interest.
In addition, Helio Protocol will lock the liquidity rights of the ETH provided by users, convert it into ETH LSTs (wBETH), and also plans to introduce other collateral options, including wBETH and SnBNB, with an expected completion date at the end of August.
Helio V2: A Greater DeFi Ecosystem Vision
Information disclosed by Helio Protocol shows that they are currently actively preparing to develop the V2 roadmap, with key feature updates expanding beyond stablecoins and LSDFi to include four parts: Algorithmic Market Operator (AMO) module, lending module, liquidation module, and integration plan for Real World Assets (RWA).
The AMO module is a key component of Helio Protocol aimed at improving the stability and capital efficiency of the stablecoin HAY. When others make exchanges in the deployed AMO pool, they are essentially minting HAY by depositing other stablecoins into the pool.
In terms of mechanism design, the AMO module and the PegKeeper stability mechanism of crvUSD are almost identical in their approach – both maintain the peg of the stablecoin through flexible (expansionary and contractionary) monetary policies in different market conditions:
If the price of HAY rises above $1, the AMO module will mint more HAY through smart contracts and add it to the liquidity pool to increase supply, adjusting the HAY price to $1.
If the price of HAY falls below $0.99, the AMO module will withdraw and burn previously minted HAY from the liquidity pool to reduce supply, bringing the price back to $1.
In short, the supply of HAY is adjusted by the AMO module based on the asset balance in the AMM liquidity pool that affects the HAY price.
In this adjustment mechanism, the AMO module plays the role of a central bank in the traditional financial system, able to stabilize the value of the stablecoin (anchor exchange rate) by executing open market operations (buying and selling HAY) through algorithms.
From this perspective, it is also similar to the concept of macroeconomic regulation of national grain reserves – during a year of food shortage (appreciation of HAY), the government (project party) injects reserve grain into the market (increasing HAY supply), while during a year of abundant harvest (depreciation of HAY), the government (project party) purchases grain as reserves (burning HAY).
This way, the regulation of adjusting the supply of grain (minting or burning HAY) achieves the goal of stabilizing prices.
However, the biggest advantage of the AMO module is that it eliminates the need for collateral to mint HAY for adjustment, allowing for quick response to market conditions and improving the efficiency of the entire anchoring mechanism. Additionally, the HAY minted by the AMO module can also participate directly in liquidity mining, serving as one of the ways for protocol revenue generation.
Currently, Helio Protocol states that the AMO module is expected to be launched at the end of September or early October this year.
In addition to the AMO module, Helio Protocol is also developing its own lending module to allow users to borrow HAY minted by AMO and separate the liquidation risks of different collateral pools.
In addition, Helio Protocol plans to collaborate with multiple DEX and lending platforms. After borrowing HAY, users can also convert their HAY into different HAY-LP tokens and use these HAY-LP tokens as collateral to continue borrowing more HAY, thereby expanding the possibilities of leveraged lending and improving the capital efficiency of HAY.
As we all know, after the “0 DAI” liquidation incident on “3.12” in 2020, MakerDAO launched the Liquidation 2.0 plan, which changed the auction method to a Dutch auction model to prevent abnormal liquidation from causing bad debts. This new liquidation mechanism has also withstood extreme market fluctuations such as “5.19”.
In the disclosed V2 roadmap of Helio Protocol, its liquidation module also plans to adopt the Dutch auction model. When the borrower approaches the liquidation threshold, the liquidation Dutch auction will be initiated to maintain the loan’s LTV ratio and avoid bad debts:
The auction will start with a higher price and gradually decrease until a bid is made for the collateral; the buyer will purchase the collateral from it and take over the “debt”.
Of course, this new liquidation mechanism will make it easier for bidders to profit by leveraging the price difference between the auction price and the collateral market price, while maintaining Helio Protocol’s over-collateralization ratio.
In addition, Helio Protocol also stated that it will allow the community to participate in the liquidation process more easily through an intuitive user interface and community education, aiming to improve process efficiency and community participation.
RWA Integration Plan
To further improve the capital efficiency of HAY, Helio Protocol plans to explore the integration of RWA (Real World Assets) to better optimize reserves and bring low-risk, stable, and attractive returns to the community. However, no further details have been disclosed.
In addition, it is worth noting that Helio Protocol explicitly stated that after the implementation of the AMO module and the lending module, it will achieve a multi-chain layout and expand the Helio Protocol on multiple different blockchains. The primary goal is to expand from the BNB Chain to Ethereum, and then consider the current mainstream Layer2 networks (such as Arbitrum and zkSync).
“DeFi Self-Contained Ecosystem” in a Bucket Shape?
At least from the roadmap information currently disclosed, the V2 roadmap of Helio Protocol outlines a DeFi self-contained ecosystem in a bucket shape: covering various DeFi functional modules such as stablecoins, lending, trading, LSDFi, etc.
HAY is the core routing asset in it. Helio Protocol plans to provide deep trading liquidity between HAY and other stablecoins through the AMO module, thereby building a rate market for pricing HAY. Next, the lending module will be launched to further support collateralizing other mainstream assets for exchange into HAY.
This connects HAY more widely with large-scale on-chain assets and distributes them to use cases outside of its own DeFi ecosystem. It also means that the exchange rate and interest rate market for HAY are complete.
In summary, in terms of the macro combination of product functions, Helio Protocol’s V2 design aims to use stablecoins as a springboard, leverage core AMO modules and lending modules to form an internal circulation, and then expand to the entire DeFi world by pushing the small ball to the big ball.
In the future, through the RWA integration plan, Helio V2 may also attempt to further expand from on-chain to off-chain-from on-chain DeFi scenarios to CeFi and TradFi use cases.
In terms of design mechanisms, Helio Protocol does indeed “draw on the strengths” and strives to build the most balanced bucket using the best boards from various parties:
HAY’s stability module adopts a similar AMO module to crvUSD;
HAY’s lending module can achieve leverage through HAY-LP tokens, enriching on-chain use cases;
HAY’s liquidation module uses the Dutch auction mechanism verified by MakerDAO to reduce bad debt risks;
However, the challenge lies in the critical first step, that is, whether the exchange rate pricing market for HAY can be effectively established-the liquidity issue of the AMO module.
After all, if it relies solely on the liquidity pool built by Helio Protocol itself, it will be quite difficult to maintain the price stability of all circulating HAY in the initial stage without sufficient liquidity.
This “critical first step” also directly determines whether the interest rate market for HAY and subsequent expansions can proceed smoothly, and is related to the life and death of the Helio V2 vision.
Overall, the AMO module, liquidation module upgrade, RWA integration, and multi-chain expansion planning in the Helio V2 plan are all aimed at creating their own “DeFi self-retaining kingdom” covering stablecoins, lending, trading, and LSDFi. This is to explore a possibility of breaking the solidified interests in the current DeFi track:
By building a self-composable ecosystem and gradually creating a series of on-chain application scenarios, establishing a robust liquidity market and interest rate market for HAY, and ultimately expanding to the entire on-chain ecosystem with HAY as a springboard, and even exploring off-chain with RWA. If it can steadily advance, it is not a bad path from self-circulation to positive feedback.
From this perspective, it does match Binance Labs’ multimillion-dollar investment, and it is worth noting that Binance Labs recently invested 5 million US dollars in Curve. As a funded project, Curve also stated that it will expand its protocol products to the BNB Chain and is expected to play a key role in Binance’s LSD layout in the future.
Whether Helio Protocol will cooperate with Curve, such as using Curve to build a pricing liquidity pool for HAY in the first step mentioned above, is currently unknown, but this possibility cannot be ruled out.
Currently, the DEX, lending, and other tracks of DeFi have already established their positions, and it is difficult for latecomers to surpass them. Even those giants have started to expand horizontally from thin protocols to fat ecosystems. Therefore, whether Helio V2 can achieve its desired effect still needs careful observation.
“With a grand vision comes great challenges.” For Helio Protocol, how to spend the $10 million from Binance Labs and achieve the expected results will undoubtedly be a “sweet trouble”.