Self-repaying loans are not a novel concept in DeFi, there are already implemented by several projects, such as Alchemix on Ethereum.
The concept is simple: you borrow a stablecoin from a smart-contract, and you provide a token collateral. This locked collateral generates a yield that pays back the interest. Since the collateral is generally three or four times bigger than the loan, the yield is be enough to cover the interest. At least that’s the theory.
Arkadiko, a DEX (Decentralized Exchange) built on Stacks has announced that its own version of the loan is in the works, possibly launching at the end of October with its first mainnet.
Sovryn is also working on such mechanism, allegedly, but it has not reached SIP level yet (Sovryn Improvment Proposal).
The main differences between Arkadiko and Sovryn are the following:
- The collateral must be STX token. Even though STX price has been ranging with BTC lately, this will not be acceptable for most BTC holders who will prefer a BTC or wrapped BTC collateral.
- The yield comes from stacking, Stacks’ consensus mechanism called Proof-of-Transfer (POX) which piggybacks on Bitcoin.
- The collateral should be in RBTC (to be confirmed)
- They yield should come from liquidity mining on Sovryn’s DEX (to be confirmed)
- Arkadiko website: https://arkadiko.finance/
- Sovryn SIPs: https://wiki.sovryn.app/en/technical-documents/sip-repository
- Discuss this article on /r/BitcoinDeFi on Reddit