Introduction

In the world of cryptocurrency, there are four types of staking: individual staking, liquidity staking, centralized exchange staking, and staking-as-a-service. Among them, liquidity staking is widely used due to its low entry barrier, high asset liquidity, and wide range of composability applications. In the BNB network, validators are elected through voting by BNB holders, and validators take turns producing blocks and receiving corresponding rewards. Delegators can delegate their BNB to validators and receive staking rewards. It is well-known that the amount of BNB staked is increasing, similar to Ethereum, but the staking yield of BNB is not high.

On the other hand, in the stablecoin sector, the total issuance has exceeded 72.4 billion US dollars, with fiat-collateralized stablecoins occupying the majority share. Over-collateralized stablecoins are currently one of the more mature methods of issuing stablecoins and are often categorized as lending projects in DeFi. MakerDAO, as a pioneer, has paved the way for this sub-sector, and after the launch of the Liquity protocol, it has rapidly developed. We can see that the development of over-collateralized stablecoins represented by DAI and LUSD has been running well.

Helio is a CDP (Collateralized Debt Position) protocol built on the BNB chain that uses BNB as collateral to mint the collateralized stablecoin HAY. This article will provide a detailed analysis of the product’s operational logic, liquidation model, tokenomics model, and current development status.

Overview of Helio Protocol

Helio Protocol was established in May 2022 and officially launched on the BNB chain in August 2022, along with the opening of stablecoin HAY staking. Users can mint stablecoin HAY by collateralizing BNB, and the collateralized BNB will be automatically converted into BNB’s LSD tokens, such as snBNB, BNBx, stkBNB, ankrBNB, to earn rewards. The earnings will be transferred to Helio’s fund pool to reward HAY stakers and liquidity providers.

However, three months after the protocol went live, in December 2022, a vulnerability in the Ankr protocol’s aBNBc was exploited, resulting in a large amount of aBNBc being minted and used by arbitrageurs to mint HAY. The price of HAY once dropped to $0.2, but the team immediately took countermeasures and repurchased and burned approximately 15 million HAY, bringing the price back to $0.99.

On July 4th, Helio merged with the liquidity staking platform Synclub, making Helio not only a collateralized stablecoin protocol but also a liquidity staking platform. On August 10th, the protocol received a $10 million investment from Binance.

Product Logic

Core Idea

Like general CDP protocols, the core of Helio Protocol is the over-collateralized stablecoin HAY. Users can mint HAY by collateralizing BNB or BUSD (BUSD is no longer accepted as collateral). The BNB assets collateralized by users will be automatically converted into BNB’s LSD assets (snBNB, BNBx, stkBNB, ankrBNB) to earn profits. The earnings will be distributed to HAY stakers and liquidity providers. After repaying the debt and interest, borrowers can choose to directly withdraw any LSD assets or wait for 7-15 days to convert them back into BNB for withdrawal.

Price Stability

Similar to MakerDAO, Helio does not adopt a redemption mechanism but maintains the price of HAY around $1 through interest rate regulation. When the price of HAY is higher than $1, the circulation of HAY is increased by reducing borrowing interest rates and collateralization rewards, thereby increasing the supply and lowering the price. When the price of HAY is lower than $1, the circulation of HAY is reduced by increasing borrowing interest rates and collateralization rewards, thereby reducing the supply and raising the price.

Liquidation Model

Helio Protocol uses a Dutch auction mechanism to complete liquidation, where the price of the collateralized assets is initially quoted by an oracle, and then the price of the collateralized assets gradually decreases over time through a Dutch auction.

Anyone who triggers a liquidation event, i.e., the person who starts the Dutch auction, will receive a fixed fee (tip) and a certain percentage of fees (chips), which will be paid from the HELIO token reserve.

Use Cases

The application scenarios of stablecoins are one of the core aspects of the decentralized stablecoin field. From the current issuance volume, the total collateral of HAY is approximately 8.3 million tokens, and staking HAY can earn an APR of 0.31%.

Image source：https://helio.money/app/earn

To expand the application scenarios of stablecoin HAY, the team has introduced a series of incentive measures. Currently, the Helio Protocol supports liquidity incentives on multiple decentralized exchanges to better maintain the price of HAY and incentivize users to mint HAY.

Image source: https://helio.money/app/earn

Tokenomics

The Helio Protocol has introduced a dual-token economic model, where HAY is the protocol’s native decentralized stablecoin, and HELIO is the native governance and incentive token.

The protocol has not yet launched a governance token, but the whitepaper mentions that the maximum supply of the governance token HELIO will be 1 billion tokens, with the following distribution plan: 1) 60% to the community; 2) 17% to the ecosystem; 3) 10% to the treasury; 4) 5% allocated to liquidity providers; 5) 6% for strategic financing, with a gradual unlock over 7 years; 7) 1% to the team, also with a one-year lockup and a gradual unlock over 7 years; 8) 1% of the tokens will be used for airdrops.

Image source: Helio Protocol Whitepaper, https://helio.money/static/whitepaper.pdf

Current Development

Having been online for over a year, Helio Protocol is the CDP protocol with the largest total locked value (TVL) on the BNB chain. At its peak, the TVL reached nearly $110 million, but it has since experienced the Ankr protocol vulnerability incident and the decline in BNB price. Currently, the TVL is over $4.7 million.

Image source: https://helio.money/app/analytics/

In its project roadmap, Helio Protocol mentions that future development will be divided into two phases: first, supporting ETH as collateral, upgrading the contract price, and better stabilizing the price of HAY; second, supporting networks such as Ethereum, Arbitrum, and Zksync.

In terms of the current market situation, BNB’s staking rewards are relatively low, and there is limited market demand for its liquidity staking. If the protocol only uses BNB as collateral, its market development potential is limited. Therefore, including ETH as an option for collateral is a necessary move. However, the ETH LSD sector is already dominated by projects like Lido, and Helio Protocol currently doesn’t seem to have a competitive advantage.

Conclusion

Helio Protocol uses BNB as over-collateralized assets to mint stablecoin HAY. In terms of product design, it does not have significant advantages compared to traditional CDP protocols. The main difference is that the collateral asset BNB will be automatically converted into LSD assets to generate income, which is then rewarded to HAY stakers and liquidity providers. However, the current staking rewards for BNB in the market are low, and there is limited market demand, resulting in the project having limited competitiveness.