Went back to the stablecoin section of the whitepaper this morning because I can d0 assumed it worked the same way as the lending flow. It does not not quite.
With lending you deposit BTC and borrow an existing stablecoin like USDC against it. With Babylons BTC Backed stablecoin design the vault mints a new token directly USDB minted at a defined collateralization ratio once the vault is verified onchain. No borrowing step. The stablecoin exists because the BTC backs it not because you took out a loan against something else.
Redemption works the way I expected once I saw it burn the USDB on the smart contract chain submit a ZK proof of that burn to the Bitcoin vault wait out the challenge window get your BTC back.
I thought minting and lending were basically the same mechanism wearing different labels. They are not.
I actually think this distinction matters more than it first seems DAI is overcollateralized by ETH through a lending like mechanism and most BTC BAcked stable attempts before this tried to bolt onto that same pattern. This is a direct mint against native collateral not a borrow.
What I nit worked out is how peg stability actually holds without a lending markets liquidation pressure doing some of that work the whitepaper mentions arbitrage incentives and optional peg stability modules but does not spell out which one carries most of the weight.
@BabylonLabs_io $BABY #baby
#MindSharing
$BANK $ZAMA
With lending you deposit BTC and borrow an existing stablecoin like USDC against it. With Babylons BTC Backed stablecoin design the vault mints a new token directly USDB minted at a defined collateralization ratio once the vault is verified onchain. No borrowing step. The stablecoin exists because the BTC backs it not because you took out a loan against something else.
Redemption works the way I expected once I saw it burn the USDB on the smart contract chain submit a ZK proof of that burn to the Bitcoin vault wait out the challenge window get your BTC back.
I thought minting and lending were basically the same mechanism wearing different labels. They are not.
I actually think this distinction matters more than it first seems DAI is overcollateralized by ETH through a lending like mechanism and most BTC BAcked stable attempts before this tried to bolt onto that same pattern. This is a direct mint against native collateral not a borrow.
What I nit worked out is how peg stability actually holds without a lending markets liquidation pressure doing some of that work the whitepaper mentions arbitrage incentives and optional peg stability modules but does not spell out which one carries most of the weight.
@BabylonLabs_io $BABY #baby
#MindSharing
$BANK $ZAMA