We hope you are all having a great summer after the past months that have been tumultuous to say the least. Markets have unwinded significantly after the collapse of Terra Luna which left large players in the ecosystem with serious holes in their balance sheets. This led to even further deleveraging with everyone scrambling for liquidity. This resulted in the most bearish move of the past three years with the landscape looking different in the aftermath.
Once again, centralized custodians proved to be unreliable in their dealings. Low transparency and questionable ethics when dealing with user deposits are some of the fundamental problems in this segment of the industry. These problems should be addressed and are one area where we believe regulation could actually improve the situation by setting some ground rules that are just common sense.
In one way, we are happy to see the broader community finally realize the risks and trade-offs associated with centralized parties. When you don’t own the keys to your coins and you are unaware of where your assets are going and under which circumstances they are liable to forfeiture, you have a high chance of being left out to dry as others hurry towards the exit.
All of these developments only strengthen the thesis for Decentralized Finance, based on open-source smart contract protocols that leverage the decentralized nature of public blockchains and utilize the ownership model of public/private keys. Except for Terra Luna, which was an isolated incident with some minor ripple effects, most of DeFi as we know it held up very well. Remember those centralized entities that went belly-up? They had to pay back their loans to smart contract protocols to unlock their collateral so they could pay out their depositors. The operation and structural health of these protocols was completely unaffected. Of course, tons of liquidity flowed out of on-chain protocols which was inevitable since we now know that these centralized entities were very significant in terms of their total share of value locked.
Let’s hope the worst of times are behind us and we can continue the journey with positive sentiment and excitement for the future. Maybe not for us diehard believers, but mainly for all others still to be convinced of the boons and benefits of what we are building here.
Arkadiko and its core products; Vaults, Arkadiko Swap and the Liquidation Pool operated perfectly during this volatile period. Naturally, the protocol experienced the same outflows of capital as people rightfully sought safety during uncertain times. The decreasing STX price made several Vaults unhealthy, resulting in their liquidation through our liquidation mechanism. In the end, everything worked as predicted and expected and we are happy to have passed this stress test with flying colours.
In terms of development, the Core Contributors at Arkadiko have certainly not been idle ! During these months of low engagement and lackluster investor appetite, we’ve had our heads down and were building. It is often said the best times to build are bear markets and there is certainly some truth to that statement. Less distractions and more time to think and evaluate where we are and what is needed next. So naturally we have been iterating on Arkadiko, coming up with some new features, new types of infrastructure projects and a cool NFT reward for our loyal members.
Let us go over some of the latest developments.
A couple of months ago Philip had the idea to build an important piece of infrastructure for the Stacks ecosystem. A few days later, a primitive first version of a Keeper network was born. After the initial rough design and code, Niel was brought in to brush up the codebase and assure the highest standards of quality. The project improved over the past weeks up until the point of it being almost ready to be used in production by everyone on Stacks.
A Keeper Network enables any protocol in need of on-chain activation of its features to bribe off-chain entities to create transactions and the right moment in time. This brings traditional CRON-jobs to the Stacks blockchain.
An example of this would be the harvesting of DIKO rewards on our Liquidation Pool. An off-chain entity would trigger a transaction on the smart contract representing the Liquidation Pool. This harvest DIKO rewards and makes them available for claiming by Liquidation Pool participants.
A different example would be Lydian rebases, where every 8 hours a transaction needs to be triggered. Anyone can do it and Arkadiko Keepers provide the right framework to have increased certainty on the transactions happening.
Through the Keeper Network, any off-chain entity would be rewarded in DIKO, paid by the party that wanted to make sure there were entities monitoring smart contracts and executing transactions when certain conditions are met. This way of providing incentives to encourage behavior is a core dynamic in DeFi and we are happy to expand on this and bring this type of functionality to Stacks. This makes it easier for developers to find maintainers for their smart contracts and further decentralizes DeFi as there is less reliance on a single party triggering transactions.
I’m guessing Philip will want to showcase his creation further in depth in a future blog post, explaining some of the technical challenges and choices that were made.
We are truly blessed to have these types of altruistic coders in our team, looking beyond immediate economic impact and prioritizing infrastructure across the ecosystem, enabling other teams and protocols to develop more quickly and more efficiently. Part of the success of other blockchain ecosystems can be explained by the diversity of programmers creating all sorts of useful applications, to be reused by the collective DeFi-consciousness.
We’ve been reviewing all our user interfaces and preparing them for a new wave of adopters. The main goal is to abstract the technical details of protocol and offer them to new users with a different type of terminology in the past. We won’t talk about Vaults as much, as they can be confusing for new users. We’ll talk more about borrowing and creating a borrowing position against assets. These positions have a health that the user needs to monitor. Expect some UI/UX updates in the coming weeks and these are being finalized as we speak.
AlexGo has recently created an auto-compounding primitive of their governance token ALEX, called atALEX. These types of primitives are ideal collateral candidates for minting USDA. Our developers have been working on implementing the required custom code to make this work and a governance vote will be released soon to vote in this new collateral type. Integration and cross-collaboration in the Stack DeFi ecosystem is something we have always wanted and are actively pursuing with this addition.
Arkadroids NFT projects
At Arkadiko we are certainly not shy of an NFT project to bring the community together.
Arkadroids are just that, created to reward loyal members and to bring some new eyes to Arkadiko. Details will be announced soon in a separate blog post. Stay tuned !
On top of all these concrete new features, Arkadiko has been an active participant behind the scenes of Stacks, talking to new protocols and infrastructure players to maintain our position as a community hub for builders within Stacks. We are exploring DLCs, Discreet Log Contracts, that promise some increased accessibility to native Bitcoin. Lots of business development is happening and Arkadiko is part of the most important conversations happening in Stacks.
Today marks the 9 months anniversary of Arkadiko, we are proud of where we are and of the road we have traveled together. The protocol has seen some significant improvements since its inception and the rest of the ecosystem is maturing around us. We welcome the increased developer activity and willingness to provide liquidity by major ecosystem players. We hope both of these keep increasing to foster the next stage of our decentralized journey.