Hubble Protocol and USDH guide
Hubble Protocol and USDH Guide
WHAT IS HUBBLE PROTOCOL AND USDH: A BEGINNER'S GUIDE
This is an overview/tutorial guide on Hubble Protocol and their USDH stablecoin's mechanism.
In this guide, we shall cover and explore the following topics:
What is the Hubble protocol, and understanding it's mechanism.
What is USDH and how it works.
How to mint and borrow USDH on Hubble and which assets can be used as collateral for your borrowing needs.
What is the purpose of Hubble's HBB token.
How stakers earn yield on Hubble and how to stake.
Hubble's proof of reserves.
In an ever-evolving landscape like decentralized finance (DeFi), innovative platforms are reshaping finance and empowering individuals worldwide by providing financial services without intermediaries. Hubble Protocol is one of such revolutionary platform.
WHAT IS HUBBLE PROTOCOL:
Hubble is simply a DeFi protocol built on the Solana Blockchain, Hubble allows you to borrow USDH using different assets, so you can access cash from your long-term holdings. A Stability Pool of USDH is set up by Stability Pool Providers. They pay off loans and get a 10% difference in assets. They also earn HBB tokens, which they can stake to get 85% of protocol fees. Hubble has it's own decentralized application ( hubbleprotocol.io ) where all their services are available in an easy to use integrated platform.
The project began as a Solana hackathon and has since gained the backing of leading investors in the ecosystem. Hubble was formed in August 2021 by Marius Ciubotariu.
Instead of merely storing your tokens in your wallet, why not leverage them to generate returns?
Using Hubble's borrowing platform you can:
Borrow USDH at your own pace: Hubble offers you flexibility when borrowing USDH such that, you can take a loan in USDH and use it across Solana to earn yield. Then you can pay back this loan at anytime and have your collateral back, together with the profit from deploying your stablecoins on DeFi.
Deposit multiple crypto assets to mint USDH: Hubble accepts a variety of yield-bearing assets as collateral, such as mSOL, stSOL, daoSOL, and kTokens from Kamino. You can deposit these assets into Hubble to mint USDH while still maintaining exposure to the underlying asset.
Earn positive interest on collateral deposits: you can earn from collateral deposits such that, if your collateral has increased in price, you will benefit from that price action as well.
Participate in democratic liquidations: By depositing USDH into Hubble's USDH Vault (formerly known as the Stability Pool), you play a crucial role in ensuring loan repayments on the platform. As a token of appreciation, USDH Vault providers can earn a substantial net positive reward of approximately 10% from liquidated accounts.
Leverage your opportunities to the fullest: Hubble offers a range of LTV (loan-to-value) ratios within its diverse vaults and assets. These ratios are 75% for normal tokens or even lower for assets prone to volatility. These flexible LTV options empower you to manage your asset leverage to your specific risk tolerance. However, it's essential to exercise caution when considering leverage as part of your strategy.
The Hubble Protocol is a very secure and easy to use platform which has been audited five times, all you need is a Solana wallet, SOL to pay gas fee, and any of the tokens accepted as collateral for borrowing.
WHAT IS USDH:
USDH is a stablecoin native to Solana. It is crypto-backed, over-collateralized, and softly pegged to the US dollar. All USDH comes from Hubble Protocol, where users can mint it by depositing crypto assets. When collateral is deposited, USDH is minted, increasing its circulation.
USDH can be held in any Solana wallet and for every 1 USDH in the market, more than $1 worth of crypto is deposited into Hubble.
Stablecoins like USDH, Tether (USDT) and USD coin (USDC) aim to keep a stable value and link traditional finance with crypto.
USDT and USDC are widely used but are actually centralized, making them vulnerable to censorship, where central authorities could control or block transactions using these stablecoins due to regulations.
However, the crypto-backed USDH offers numerous advantages, such as:
USDH is a censorship-resistant stablecoin and is therefore not prone to control by external authorities or central entities.
USDH gives users access to liquidity and an avenue to pursue yield on DeFi.
USDH is also designed for sustainability and utility. Many stablecoins have come and gone but stablecoins that have been minted against collateral debt position (CDP) are historically doing better.
USDH is a decentralized stablecoin; USDH operates on the Solana Blockchain, with its stability and issuance governed by smart contracts. This setup offers users a more open and censorship-resistant financial solution.
HOW TO MINT AND BORROW USDH ON HUBBLE:
As mentioned earlier, all USDH comes from Hubble Protocol. Users can create USDH by depositing crypto assets as collateral, and this collateral enables the minting of USDH.
To deposit collateral, start by borrowing USDH. You can borrow USDH on Hubble using these steps:
STEP 1: Navigate to the Hubble Protocol app ( hubbleprotocol.io ), connect your wallet, and go to the Borrow section.
STEP 2: On the page that pops up, input the amount of collateral you would like to deposit.
Some assets that can be used as collateral when borrowing on Hubble include:
Solana (SOL), Lido DAO (LDO), Ethereum (ETH), Bitcoin (BTC), Raydium (RAY), Marinade Staked SOL (mSOL), Lido Staked SOL (stSOL), and MonkeDAO (daoSOL).
STEP 3: Input the amount of USDH you would like to borrow against your capital and ensure that the LTV ratio is appropriate.
STEP 4: Click borrow to open your position.
In order to close your position and withdraw your collateral, simply navigate to the "Loan" page, click "Repay USDH," input the amount borrowed, and click "withdraw collateral."
Before considering borrowing on Hubble, it's essential to familiarize yourself with key terms and concepts, as well as have answers to important questions. These include:
What is the maximum borrowing amount?
Users can currently borrow as much USDH as they can provide collateral for. If a user can provide up to $10 worth of SOL as collateral then they can borrow up to 8 USDH.
What is the minimum borrowing amount?
The minimum borrowing amount is 2 USDH, which equals $2. This also means your account must have at least 2 USDH, and you cannot repay USDH to have a borrowing amount of less than 2 USDH.
What is loan-to-value (LTV)?
Loan-to-value is a very important factor in lending decisions. It is simply the ratio of the total value of borrowed USDH to the total value of collateral deposited. LTV is expressed in percentage.
For example, if a user borrows 6 USDH and deposits $10 worth of SOL, then his LTV can be calculated as:
LTV = (USDH borrowed ÷ Collateral deposited) × 100
LTV= (6 ÷ 10) × 100 = 60%
liquidation typically occurs when the LTV ratio surpasses 100% or the collateral's value falls below the outstanding loan amount. In this case, the user will face liquidation when their collateral becomes worth less than the borrowed amount, which usually happens when the LTV ratio exceeds 100%.
Users should understand how liquidations work on Hubble before borrowing in order to manage risk.
What happens when a user gets liquidated?
When a user gets liquidated on Hubble, Hubble takes the assets you used as collateral but not the USDH you borrowed. They use these assets to pay off your debt. If you don't repay your debt as agreed, you lose those assets. Users get liquidated on Hubble when the value of their collateral falls below an acceptable level.
What is the maximum loan duration?
There is no maximum loan duration. Your loan can remain open for as long as you want provided your LTV is below maximum LTV.
HUBBLE'S HBB TOKEN:
HBB is the native token of Hubble Protocol, the token plays an important role in Hubble's governance structure. It is distributed to stability pool providers, individuals who have the option to further enhance their earnings by staking USDH tokens. Those who choose to stake their HBB tokens gain the ability to participate in voting processes that influence the direction of Hubble's development. In addition, users earn 85% of the revenue generated by Hubble Protocol’s services by staking the HBB token. This yield comes from 0.5% fee charged for users minting USDH and redeeming USDH for collateral.
The HBB token has a total supply of 100,000,000 HBB and on January 28, 2022 it reached an All-Time-High of $5.12. The HBB tokens can be traded on centralized and decentralized exchanges like Kucoin, Orca and CoinEx.
Holders of HBB tokens can actively engage in the decentralized autonomous organization (DAO) governance of the Hubble protocol. As the protocol enters its next phase, it will introduce additional products and revenue streams, expanding the opportunities for token holders.
HOW STAKERS EARN YIELD ON HUBBLE:
In the Hubble Protocol, users can boost their earnings in a couple of ways, one of which is a two-way staking method using HBB tokens and USDH. Here's how stakers can earn yield:
Staking HBB for USDH:
Stability Pool Providers: Users who contribute to the stability pool are rewarded with HBB tokens. These HBB tokens can be further staked for USDH at a 23.27% APR at time of writing.
Earning Yield: By staking HBB for USDH, stakers contribute to the stability and liquidity of the protocol. In return, they receive USDH tokens as rewards, effectively earning a yield on their HBB holdings.
Diversification: This approach allows stakers to diversify their crypto holdings by converting HBB into USDH, a stablecoin, which can be useful to generate yield in DeFi.
Staking USDH for HBB:
Additional Rewards: Users can stake their USDH tokens to earn additional rewards in the form of HBB. You can stake USDH for a discounted price of HBB and at an APR of 304.35% at time of writing.
Governance Participation: Stakers of HBB gain the ability to participate in the governance aspects of the Hubble Protocol. They can vote on proposals, influencing the platform's direction, and potentially impacting its future value.
Yield from Staking: Staking USDH for HBB provides stakers with a way to earn more HBB tokens, potentially benefiting from the token's growth over time.
HOW TO STAKE ON HUBBLE:
Staking on Hubble as stated before involves a two-way process, you can stake HBB to earn USDH or vice versa. Here are the steps to stake on Hubble.
Staking HBB for USDH:
STEP 2: scroll down to the "HBB vault" section and click on the stake button below.
STEP 3: Enter the desired amount of HBB tokens on the page, ensuring you have enough available. Then, simply click "Stake" and approve the transaction in your wallet.
Staking USDH for HBB:
STEP 2: scroll down to the "Stability vault" section and click on the stake button below.
STEP 3: Enter the desired amount of USDH on the page, ensuring you have enough available. Then, simply click "Stake" and approve the transaction in your wallet.
To unstake tokens, just return to the section, find the unstake button below, click it, and approve it in your wallet. Keep in mind that if you unstake the token right after staking, the value staked may not change much.
In the Hubble Protocol, staking HBB for USDH and staking USDH for HBB create a dynamic ecosystem where participants can earn yield while contributing to the protocol's stability and governance. This dual staking mechanism not only offers financial incentives but also empowers the community to actively shape the future of Hubble based on their preferences and participation in governance decisions.
HUBBLE'S PROOF OF RESERVE:
Hubble places a strong emphasis on transparency and security, ensuring the safety of users' assets. One significant aspect of this commitment is the implementation of a Proof Of Reserve system.
This system is designed to maintain full backing of the assets it issues, such as USDH and HBB (Hubble's Native token).
Here's how it works:
Real-Time Verification: Hubble continuously maintains a record of the assets held in its reserves. This data is accessible in real-time to users and investors through its decentralized application at ( hubbleprotocol.io ).
User Access: Users of Hubble can easily access the reserve data and verification reports. DeFi on public permissonless Blockchains allow for full transparency of funds held promoting a sense of trust and confidence in the protocol.
On-Chain Transparency: Hubble leverages the Solana blockchain's transparency and immutability to publish on-chain data regarding its reserves, providing verifiable proof of its financial health. Hubble's proof of reserve is on the Stats page of the website.
This commitment to maintaining a transparent and fully-backed reserve showcases Hubble's dedication to the principles of DeFi, assuring users that their assets are secure and that the protocol operates with integrity.
The advantages of utilizing the Hubble Protocol can not be overemphasized. Hubble Protocol offers a user-friendly platform for token staking, collateralizing assets, borrowing USDH, and allowing users to earn rewards in multiple ways and by utilizing multiple opportunities. Overall, Hubble's user-friendly interface and straightforward processes make it a great choice for both beginners and experienced DeFi participants.