The Web3 space gets more and more interesting as you understand the landscape and dig deeper. New projects are coming up which are consistently solving problems and they’re trying their best to ease up the process and benefit their users with their products so that everyone can travel along this journey.
As we talk about the various use cases, one concept that strikes is DeFi and its applications. I recently came across an interesting borrowing protocol that is built on Solana called the Hubble Protocol.
As stated on their website, Hubble helps you to “Maximize your portfolio efficiency while your funds are deposited. Your crypto continues to earn the best yield available. You use USDH across the Solana ecosystem”
It is a borrowing protocol built on Solana that is designed to allow long-term holders of crypto assets to unlock liquidity, increase capital efficiency and earn yield at the same time. The users achieve this by taking out a zero-interest loan against their multi-asset collateral, with no recurrent interest payments, or maturity. There will be a small upfront fee and, in turn, users will receive USDH, Hubble’s native dollar-pegged stablecoin. The great part is that USDH can be deployed across the whole Solana ecosystem.
Whoa, that was a lot of complex information, let’s break it down by understanding their features one by one:
Suppose you are having crypto that you don’t want to sell, you can deposit them as collateral and get an interest-free loan in USDH (more on this below) to invest in some other asset.
One can deposit collateral such as SOL, BTC, ETH, RAY, SRM, FTT or any combination of those assets and get your loan. The maximum loan one can get is up to a 110% collateral ratio; where the collateral ratio is calculated as CollateralValue / LoanValue. If the coins drop, your collateral ratio might go below 110%, in which case you will get liquidated. You lose your collateral, but you don’t have to pay back your debt anymore!
If one wants to increase their leverage in the market, one can deposit some funds in SOL or other cryptos and then take a loan. With the loan, one can buy some more SOL and deposit them and rinse and repeat. One can increase their collateral (SOL, ETH, etc.) exposure and gain up to 11x leverage, without incurring continuous borrowing costs. There’s only a one-time fee of 0.5% to take a loan.
While one waits, Hubble with their partners, deploy your collateral and earn yield for you.
To be able to earn along with Hubble, one needs to stake HBB. It is Hubble’s native value-accruing coin. Stakers of HBB receive the fees from anything issued through Hubble, whether that is a loan, a derivative, or a structured product. HBB is also the governance token for Hubble, allowing users to propose and vote on directly executable chances to the protocol along with other governance activities.
HBB stakers earn 85% of Hubble’s revenue. The other 15% is directed towards Hubble's treasury. Once Hubble decentralizes governance and forms a DAO, the community will be in charge of the treasury and may amend these figures.
We came across USDH many times, so what exactly is it?
USDH is a Solana-native SPL token that can be used for anything stablecoins are used for in DeFi: pairing for liquidity on AMMs, bonding for tokens, or being held as a store of value. It is the Hubble-issued stablecoin pegged to USD at 1:1, backed by a basket of crypto assets including SOL, BTC, ETH, RAY, SRM, and FTT. Hubble achieves a peg within 1.005 and 0.995 at all times due to Solana’s scaling. USDH is always backed and over-collateralized by crypto assets. It’s designed to be used anywhere in the Solana ecosystem.
The minting and redeeming mechanisms combined with bots and Solana’s extremely fast speeds and low costs means USDH will remain strongly pegged to USD while providing arbitrageurs and HBB stakers a consistent stream of revenue.
It’s simple, to make your funds work for you. This is how you can do it:
Keep upside to your collateral while earning yield elsewhere
Take a loan in USDH and invest it in other protocols paying yield for stablecoins. Return to Hubble and pay back your debt. At the end of the process you have your collateral back and the profit from your stablecoin. If your collateral has increased in price, you have benefitted from that price action as well.
Earn yield on collateral without being blocked
Solana DeFi allows you to take a loan against yield-bearing collateral. For eg., you can deposit SOL or mSOL and still take a USDH loan. When depositing SOL, Hubble will delegate it to PoS yield staking protocols (such as Marinade) to earn yield. For BTC, ETH, they will delegate it to partner lending platforms. All this time you have control and can change the yield strategy or withdraw your collateral. All the yield earned is yours, Hubble does not take a cut.
Earn from democratizing liquidations
If you deposit USDH into Hubble's Stability Pool (which helps keep the platform healthy by guaranteeing loans are repaid) then, as a reward, Stability Pool providers earn the ~10% difference from liquidated accounts.
Users who deposit USDH in the Stability Pool also earn HBB rewards at a constant rate.
Earn fees from the protocol
Hubble is a fee-sharing protocol, and 85% of the platform's fees are distributed to users who stake HBB. The more USDH is minted or redeemed, the more HBB stakers can earn. In the future, additional services and products will generate even more revenue for HBB stakers.
Hubble doesn’t charge interest and doesn’t require a payment due date, so you are free to repay the same amount you borrowed at any time. Your debt will never increase unless you borrow more USDH.
With other borrowing platforms, you will watch your debt increase over time. However, with Hubble, you can watch your deposit amount increase over time by choosing a yield strategy for your tokens while you borrow. Your debt remains the same, but your collateral value increases, and in the future Hubble will explore making self-repaying loans a feature.
Hubble’s roadmap has been broken down into 3 phases. Currently, the project is in Phase 1 and working towards Phase 2.
Phase 1 is the borrowing protocol, designed to allow holders of crypto assets to unlock liquidity, increase capital efficiency and earn yield at the same time.
In phase 2, which is estimated to launch in Q2 2022, Hubble will introduce structured products like capital-protected notes by combining PoS yield and options.
In phase 3, Hubble will introduce vanilla lending and undercollateralized bond issuance that could further bring DeFi use cases to the mainstream.
Hubble will begin as a centrally controlled platform and move slowly towards full decentralization, a situation where decision-making and protocol changes are handed over to the community. There will be two types of proposals the community will vote on:
Executable code proposals will be the majority of the proposals, implemented by the community and, upon successful voting, will be swapped out for the old programs.
General directive proposals will happen once a quarter where part of our developers’ time will be dedicated to community-driven decisions, subject to the previous quarter’s directive being completed.
Governance will follow the model of community implementation and community voting. Voting power at first will be conferred holding HBB holders, but they will slowly be granted by also owning USDH, providing Liquitidy Pools for HBB or USDH, or holding having an open Debt Position.
Users with at least 0.5% voting power will be able to vote or delegate their voting rights and propose changes. After a 7 days period of voting and debate, using their Governance forum and Governance platform, a proposal can succeed and be automatically queued up for going live.
Hubble has an active community with 19K+ Twitter followers, 7K+ Telegram members, and 8K+ members on the Discord server. They also have their Substack and blogs on their website which are super clarifying and rich in information. The community and the team overall are helpful and very responsive.
Hubble is backed by a long list of credible investors like:
Hubble is only available on the web currently. There are no iOS or Android apps. Their website has a clean and intuitive user interface that is easy to follow. There are 6 self-explanatory tabs at the top.
Go to https://dev.hubbleprotocol.io/, use the connect button to connect to a Solana wallet (I used Phantom, but in total 7 different wallets can be used). After you approve the wallet connection, you’ll be able to see all the data linked to your wallet.
With such a wide range of benefits and features plus the ease of usage that the protocol offers, Hubble Protocol will go a long way and it is just getting started. As thousands of users are adopting to use and build on top of the fastest blockchain - Solana, Hubble is setting itself in the early stages with a high-value product. When the mass adoption will start to happen which might be just around the corner, Hubble will be ready for both, beginners and advanced users and it will serve as a revolutionary borrowing and staking platform with lots of more upcoming features, all built on Solana.