This review will look at the Hubble Protocol focusing on its features and characteristics, as well as the governance of the decentralized protocol and its native utility token. We’ll also discuss its fee-sharing, liquidity, and security, among other things.
About Hubble Protocol
Hubble began as a project for the Solana Hackathon and has since gained the backing of leading investors in the Solana ecosystem, with the protocol’s Mainnet set for launch on January 28, 2022.
The Hubble Protocol was formed in August 2021 by Marius Ciubotariu, a former senior software engineer at Bloomberg LP. Marius had participated in the Solana Season Hackathon and identified the potential opportunities within Solana and decentralized finance (DeFi) services.
Currently, in Phase 1 of development, the fee-sharing DeFi system built on the Solana blockchain mints USDH an algorithmic stable stablecoin which is the Hubble-issued stablecoin pegged to US dollar against a variety of assets while also allowing users to access the liquidity in their HODLed tokens via zero-interest borrowing on the network.
Hubble also has its own native token, HBB, which users can stake to earn protocol fees as well as utilize to vote on improvements to the protocol in the future.
In particular, users of the Hubble Protocol can benefit from the following features:
- Zero cost possibilities: Hubble allows users to borrow USDH in exchange for a one-time fee of 5%. Additionally, there are no changeable rates which means that depending on the yield on your deposits, your collateral value may rise to the point where it can offset fees.
- Multi-Asset collateral: Users can deposit a wide range of assets on Hubble boosting your collateral ratio and freeing up liquidity in your wallet simultaneously.
- Earn yield on deposits: You can delegate your collateral to earn the highest possible yield on the Solana ecosystem.
- Up to 11x Leverage: User deposits may also be leveraged up to 11x owing to Hubble’s capital-efficient collateral ratio of 110%.
Why do traders use Hubble?
With cryptocurrency traders constantly on the lookout for higher yield earnings, lower fees, and better liquidity, the Hubble protocol has entered the space, enhancing liquidity on the Solana blockchain in particular while also being supported by many of the crypto industry’s most prominent firms.
Note: Taking advantage of Hubble, users can maximize their portfolio efficiency while still earning the highest possible profit on their deposited cryptocurrency. On top of that, the algorithmic stablecoin USDH allows users to utilize the asset across the entire Solana ecosystem.
In its roadmap, Hubble aims to offer an all-in-one location for DeFi services, harnessing the speed and efficiency of Solana’s network while combining years of experience in the FinTech industry.
- Phase 2: In Phase 2 of Hubble’s mission, which is expected to launch in Q2 2022, the team will explore offering DeFi structured products, filling a gap in the market that has hitherto gone unfilled.
- Phase 3: In Phase 3, Hubble intends to provide undercollateralized DeFi loans, which would be a groundbreaking step forward in the field of decentralized lending.
The desire to bring DeFi into the mainstream for the benefit of all people around the world has culminated in the development of Hubble, which offers such benefits as:
- Borrow USDH interest-free for an unlimited period of time;
- By staking HBB, Hubble’s native token, you may earn 85% of the protocol’s fees;
- HBB is also supported by tokenomics, which is intended to capture value for the protocols DeFi community;
- A variety of cryptos can be used to mint USDH, including SOL, BTC, ETH, RAY, SRM, and FTT;
- By placing USDH in Hubble’s stability pool, you may earn liquidated assets and HBB;
- Collateral deposits yield positive interest:
Hubble key products
In particular, the Hubble Protocol offers six core features, which are all analyzed in detail below:
- Minting USDH;
- Borrowing on Hubble;
- Earn Yield;
- Earn Liquidated assets;
- Stability Pool.
Users may share profits from asset liquidations as the Stability Pool comprises USDH contributions from users. When a borrower’s collateral ratio (CR) falls below 110%, each user receives their fair share of liquidated assets.
Whatsmore, users may earn extra HBB by depositing USDH into the Stability Pool. Afterward, users may stake these rewards in order to gain a larger share of the fees produced by the protocol.
Hubble’s revenue is split, so 85% goes to HBB token stakers while the remaining 15% goes to Hubble’s treasury.
After Hubble decentralizes governance and establishes a Decentralized Autonomous Organization (DAO), the community will control the treasury. It will also have the authority to change the abovementioned figures for earnings and treasury.
The current fee structure is as follows:
- Hubble charges a one-time fee of 0.5% for minting USDH.
- There is a 0.5% fee for redeeming USDH for reduced collateral when USDH drops below the peg.
Additionally, the protocol is making preparations for the future, with new services expected to generate new revenue streams from which HBB stakes will profit in the future.
2. Minting USDH
USDH is native to Solana and can be used in the same way stablecoins are used in DeFi, including pairing for liquidity as an automated market maker (AMM) to enable the automatic trading of digital assets or bonding for tokens and holding them as a store of value.
Note: The 100% decentralized stablecoin USDH is supported by many decentralized crypto assets, including SOL, mSOL, BTC, ETH, RAY, SRM, and FTT, to the tune of at least 150%. Moreover, Hubble plans to whitelist additional tokens for borrowing in the future, subject to a stringent verification procedure.
USDH pegged to the dollar
Since arbitrageurs are motivated by profits, the USDH has been successfully pegged at a 1:1 value with the USD. To do this with Solana’s speeds, USDH must stay rigidly pegged.
The redemption mechanism was implemented in order to prevent USDH from falling below the peg. When USDH is trading below the peg, users may purchase it on the market for a low price and redeem it at face value. Redeeming at face value implies that for every one USDH, you can receive $1 worth of SOL in exchange for it (or other collateral).
- Redeeming USDH helps maintain the peg to the dollar (USD), for instance, a currency arbitrageur may acquire USDH from the market and redeem it for the underlying collateral if the USDH falls below 1.0.
- For example, if USDH is trading at $0.70, anybody may purchase 142 USDH for 100 USDT and redeem USDH for $142 worth of SOL, BTC, ETH, and other cryptocurrencies on Hubble.
- When USDH goes over 1.0, anybody may purchase SOL, BTC, ETH, and other digital assets from the market, deposit these assets on Hubble, and mint USDH at a greater value than the current market price. USDH with a higher value may subsequently be swapped for USDT at a profit.
- As a result of the high speeds and cheap costs associated with using Solana, bots can (and will) perform this arbitrage. USDH’s value is swiftly restored to parity with USD thanks to the implementation of these redemptions, which burn USDH as it is received.
3. Borrowing on Hubble
During Phase 1, the emphasis will be on maximizing value for existing Solana tokens and HBB holders. In order to do this, Hubble will provide low-cost and capital-efficient borrowing options to its users.
Initially, Hubble will accept deposits of six assets as collateral: SOL, ETH, BTC, FTT, RAY, and SRM, though the platform intends to expand its multi-asset deposit capabilities to include other major cryptocurrencies in the future.
- When staking the HBB token, users may receive interest on their collateral as well as income from the collection of transaction fees;
- In order to maintain the upside potential of their portfolio, holders who want to spend USDH and earn yield elsewhere may take out a loan up to 110% of their collateral while retaining their tokens in the Hubble vaults. They will reclaim possession of their collateral after they have paid off their loan;
- One-time fees of 0.5% of the loan amount will be charged; there will be no continuously compounding interest or set maturity dates applied. Whatsmore, debtors have the option to pay back their loan anytime they choose;
- Those who own these assets have the option of issuing USDH, a stablecoin they may use to invest, spend, or stake in other assets in order to increase their returns on investment. Users will be able to unlock their holdings and close their debt upon the payback of the given loan.
In a short synopsis, borrowing offers the following benefits:
- A one-time 0.5% minting fee;
- 110% collateral ratio;
- Borrow USDH, a 100% decentralized stablecoin;
- Earn yield on collateral.
There are two occasions when users experience fees:
- The point of borrowing USDH.
- Upon redeeming USDH (not the same as repaying a loan).
At the moment of borrowing, the fee is determined depending on the amount borrowed and is added to the user’s debt. In the case of 100 USDH borrowed at a 0.5% fee rate, the following takes place:
- Hubble mints 100 USDH and deposits it in the borrower’s wallet.
- Hubble mints 0.5 USDH and deposits it in the HBB Stakers’ pool.
- Hubble reports a debt of 100.5 on the borrower’s account.
99% of the time, Hubble’s fees are set at 0.5% of the total amount. As a result of supply and demand, the quantity of USDH in circulation can influence the price peg.
4. Earn Yield
Using Hubble, clients can earn yield while they borrow on the protocol, so not only is the upside of collateral retained by the borrower, but also Hubble allows them to earn interest on it.
In addition, users may choose to have their collateral allotted to partner protocols to increase their yield income. The following example illustrates how a user might earn 6% (current yield) on their SOL after one year of staking the cryptocurrency.
In the ‘Resulting Position,’ we can see the collateral has been moved up from 200 SOL to 212 while the collateral ratio has gone up from 265% to 281% while the debt has remained at 3015 USDH.
- Not only may borrowers gain from the rise in the SOL price, but they can also profit from the Solana PoS yield if they have sufficient collateral ratios.
- Lending protocols in the ecosystem will also payout the yield on other types of collateral, such as Bitcoin and Ethereum, as well as choosing which approach strategy to earn yield.
5. Earn Liquidated assets
Under typical circumstances, users may borrow up to 90.9% of the value of their multi-asset collateral during regular operations (110% CR). Users’ borrowed USDH may be liquidated if their borrowed USDH climbs in value over the loan-to-value (LTV) ratio of 90.9% (collateral ratio at or below 110%), at which point their position becomes liquidated.
It is possible to liquidate accounts with collateral ratios less than 150% in recovery mode. However, it’s worth mentioning that recovery mode does not affect the amount of the liquidation penalty. Like in normal mode, users in recovery mode are only at risk of losing 10% of their collateral when liquidated.
Anyone may initiate loan liquidations using Hubble if the loan’s collateral ratio falls below 110% in most circumstances though, bots will be used to trigger liquidations. Hubble plans to make an open-source bot available so that anybody may use it to assist in the process.
Finally, users who execute liquidations are rewarded with 0.5% of the liquidated assets sold, while the remainder of those assets are distributed to those that deposit USDH in the Stability Pool.
Recovery Mode makes sure that USDH on Hubble remains collateralized and is basically a safety net that ensures that USDH is always backed by collateral to the tune of at least 150%.
- Hubble has included a Recovery Mode mechanism to maintain the protocol healthy in order to prevent bank runs and severe escalating liquidations that would make the system bankrupt.
- After a recovery mode has been enabled, Hubble permits liquidations to be triggered below a collateral ratio is less than 150%. In doing so, the system’s Total Collateral Ratio (TCR) is restored to more than 150%, allowing it to close high-risk positions.
- Maintaining a TCR over 150% guarantees that the system can endure a 50% decline in asset values without becoming bankrupt or requiring the intervention of bots or liquidators.
Two system modes
Normal Mode and Recovery Mode are the two possible operating modes for the system. According to the TCR, which is calculated as TotalCollateral / TotalDebt (for the entire protocol).
- When the TCR is more than 150% the system is operating in Normal Mode.
- When the TCR falls below 150%, the system is in Recovery Mode.
As mentioned earlier, when the TCR falls below 150%, Hubble begins liquidating users who fall below the level to ensure that the system stays solvent. However, the liquidations penalty is still just 10% in this instance.
The purpose of Hubble is to maintain the system free of insolvency risks while also protecting the value of USDH. That entails keeping the TCR at or above 150% at all times. Additional safety is provided by the fact that while the system is in normal mode, any activity that has the potential to further send the system into recovery mode will be prevented.
6. Stability Pool
The Hubble stability pool maintains system health and rewards Hubble’s users.
USDH is programmed and engineered always to be backed by collateral. The Stability Pool contributes to the assurance of this collateral backing while also democratizing the liquidation process for users who participate by placing USDH in the pool.
Those participating in the Stability Pool guarantee that USDH obligations may be repaid if collateral ratios drop below an appropriate level. Those that deposit USDH into the Stability Pool are entitled to an equitable part of the collateral from liquidated accounts as a reward for helping to maintain the protocol running smoothly and efficiently.
Stability Pool providers additionally earn HBB token compensation for their involvement in the pool, which serves as an additional incentive for depositing USDH and ensuring system health.
The liquidations are managed by redistribution in the case that the Stability Pool is completely depleted. This procedure redistributes users’ debt and collateral until a sufficient amount of USDH is placed in the Stability Pool to cover the debt and collateral.
Hubble will function as a DAO with a community-supported governance model. Through governance, the community will be able to propose, discuss, and vote on protocol modifications, as well as to adopt new features or delegate implementation to the core team.
Furthermore, Hubbles has outlined three key reasons why it will use decentralized governance:
- Empowerment: Hubble’s goal is to empower users and early adopters who have a stake in the system and are most influenced by it.
- Trust in the system: Decision-making will be decentralized, which will prevent any malicious behavior or bugs from being introduced by the team.
- Community guidance: Hubble acknowledges its inadequacies and welcomes input from the community.
Decentralized governance must enable the most active members of the community to have an essential role in decision-making processes in order to be effective.
Hubble is integrating elements of current models that it has found to be the most effective, including:
- Once a quarter, the community will vote on general direction suggestions, in which the community will define the development activities of the core team.
- Group proposals enable the Hubble community to join together even if individual voters do not have enough voting tokens to cast a vote.
Since Hubble will start out as a centrally managed system and gradually transition to full decentralization, which is a condition in which decision-making and protocol modifications are delegated to the community, there will be two types of proposals that the community will vote on:
- After a successful vote, executable code suggestions will constitute the majority of the proposals, which will be executed by the community and will replace the old programs.
- Every quarter, general directive recommendations will be offered, and a part of the developers’ effort will be dedicated to community-driven choices, providing that the previous quarter’s directive has been accomplished.
- Governance will be based on the paradigm of community implementation and community voting. Voting power will first be bestowed on HBB holders, but Hubble will gradually provide the voting power to those who also own USDH, provide Liquitidy Pools for HBB or USDH, or maintain an open Debt Position.
- A minimum of 0.5% voting power will be required before users will be allowed to vote, delegate their voting rights, and make proposals for amendments.
- After a seven-day period of voting and discussion on the Hubble Governance forum and Governance platform, a proposal may be approved and placed in a queue for immediate implementation.
As already mentioned, Hubble’s governance token is the HBB token which is supported by tokenomics, which is intended to capture value for the protocols DeFi community.
Furthermore, HBB may be staked on Hubble in order to earn fees from the protocol. As the governance token for Hubble DAO, HBB will be utilized in the future to vote on improvement suggestions.
In addition, users earn 85% of the revenue generated by Hubble Protocol’s services simply by staking the HBB token.
Is Hubble safe?
Since third-party reviews help Hubble create a more secure protocol, Hubble’s borrowing platform is currently under review by four separate security audits.
In addition, after adjustments have been implemented in response to the recommendations of the four audits, Hubble has confirmed that the changes will be made public.
Whatsmore, Hubble gained the support of leading investors in the Solana ecosystem and crypto community.
You can discover more about the protocol on other networking platforms such as:
Pros & Cons
- Using Hubble’s stability pool, users can earn liquidated assets and HBB;
- Simply by staking HBB you can earn 85% of the protocol’s fees;
- Users can earn yield while they borrow on collateral deposits;
- Long-term interest-free USDH borrowing;
- The protocol has a recovery mode to make sure USDH stays pegged at the dollar;
- Mint USDH with SOL, BTC, ETH, RAY, SRM, and FTT.
- At the moment the project is not fully decentralized and is still transitioning from a centralized protocol.
All in all, Hubble strengthens its community by distributing the fees the system generates with the HBB holders while also introducing governance in a novel manner.
Moreover, Hubble plans to remain in the DeFi space for a long period of time, owing to the fact that the DeFi landscape is always shifting and innovations with new ideas that are revolutionizing the technology.
The protocol wants to broaden its services to fulfill the rising need for a peer-to-peer financial system like DeFi. It is currently being backed by leading firms in the crypto space to do so after starting out on the Solana Hackathon.
FAQs about Hubble Protocol
What is Hubble?
Hubble is a DeFi project built on Solana; the protocol mints USDH against a number of assets, allowing users to access the liquidity in their HODLed tokens via zero-interest borrowing on the Solana blockchain.
What is Hubble recovery mode?
Hubble keeps USDH collateralized 150% at all times; thus, recovery mode is a system state that occurs when the total collateral deposited on Hubble falls below 150% of the quantity borrowed. Positions that are collateralized at a ratio of less than 150% may be liquidated in this situation.
How much yield can I earn using Hubble?
Currently, users can earn 6% on their SOL after one year of staking, although other collateral, such as Bitcoin and Ethereum, can also earn yield from lending protocols in the ecosystem. Users can also choose to allocate their collateral to partner protocols to earn yield.
What is is HBB token?
Hubble’s governance token HBB can can can be staked on Hubble to earn fees from the protocol. HBB will be used in the future to vote on improvement recommendations for Hubble DAO. Users can also earn 85% of the Hubble generated revenue just by staking the HBB token.