Hubble Protocol Review

What is Hubble Protocol?

Hubble is a fee-sharing decentralized finance protocol built on Solana that offers multiple DeFi services. The Protocol was launched on the mainnet on January 31, 2022.

Hubble Protocol’s roadmap has been broken down into three phases. In the first stage, Hubble begins its mission by introducing lending services and minting its own stable coin USDH. Phase two will focus on structured products, specifically USDH-based trading strategies, and in Phase 3 the Protocol plans to launch undercollateralized lending.

Hubble is now in its first phase of project implementation and offers multi-asset borrowing with a 0% interest rate against collateral, allowing users to earn APY on their deposits. 

How does Hubble Protocol work?

Hubble’s borrowing platform is currently accepting seven types of assets as collateral: SOL, mSOL, ETH, BTC, FTT, RAY, and SRM. Borrowers can deposit their assets as collateral and receive Hubble’s native dollar-pegged USDH stablecoin in return, which can also be invested in other partner platforms to earn more yields. Borrowers may select a yield strategy for their deposits to earn APY on their collateral assets. 

Hubble charges no interest and has no payment due date; however, users are required to pay a one-time 0.5% fee on the amount borrowed, which will be added to their debt. The minimum amount that can be borrowed is 200 USDH, which is equal to $200. 85% of these fees go to the Hubble native token (HBB) stakers and 15% to the treasury.  

USDH is the Hubble-issued stablecoin pegged to the USD. USDH remains pegged to the US dollar through an arbitrage mechanism by redeeming USDH. Whenever USDH value falls below $1 on the market, users can redeem it for $1 worth of another token on Hubble. This means that USDH always has a 1:1 USD ratio. The borrowing fee may increase if a large number of users redeem USDH at the same time since frequent redemption means that there is a surplus of USDH in the market. Redeeming USDH for another asset also incurs a 0.5% fee.

The Hubble’s liquidation mechanism operates in Normal mode and Recovery mode depending on the Total Collateral Ratio, which is calculated as Total Collateral/Total Debt (for the entire protocol).

Under a Normal mode, Hubble sets the minimum collateral ratio at 110%, meaning that users can borrow up to 90.9% of the value of the collateral. Liquidations occur when borrowing reaches a 90.9% loan-to-value ratio (LTV). 

Any user can initiate loan liquidation and earn 0.5% of the liquidated account's collateral. When liquidation is triggered, all of the forfeited collateral assets are distributed to Stability Pool providers. 

However, when the Protocol’s total collateral ratio falls below 150% (or LTV rises above 66.6%), the recovery mode kicks in. During the recovery mode, the minimum collateral ratio is lifted to 150%. In such cases, users who fall below the threshold are liquidated faster to return the system to a normal condition. When the protocol operates under the Recovery mode, the borrowing rate is set to 0% to encourage further borrowing.

Recovery Mode makes sure that USDH on Hubble remains collateralized to prevent bank runs and bankruptcy. In the case of liquidation in both modes, users lose ~9% of the value of the deposited collateral at the time of liquidation.

The Stability Pool ensures that USDH is always backed by collateral. The role of Stability Pool providers is to ensure that USDH debts can be repaid in case collateral ratios fall below the threshold level. The users who source the Stability Pool with USDH are rewarded with a proportional share of collateral from liquidated accounts. As an added incentive, Stability Pool providers also receive HBB token rewards for their participation.  Whenever the Stability Pool gets empty, liquidations are made through redistribution of users' debts and collateral, up until more USDH is deposited in the Stability Pool. 

How to use Hubble Protocol?

As a first step to use the Hubble Protocol app, users need to connect a wallet. Hubble protocol now supports wallets such as Phantom, Solflare, Torus, Ledger, Solong, Mathwallet, and Sollet. Users will also need to have some SOL to pay for transaction fees. 

On the main menu of the Hubble app, users need to navigate to the Borrow section, choose the token and the amount to be deposited as collateral, then choose how much USDH is to be borrowed against the collateral and confirm the operation. Users will be then redirected to the Dashboard page, which will display information about the loan. Dashboard page is also a place where borrowers can track collateral ratio, increase the ratio by depositing additional collateral, borrow more USDH, repay USDH, and withdraw collateral.

Borrowers will also be able to choose from multiple strategies for earning yield on their collateral. It is required to navigate to the Dashboard page, click ‘Manage’ on one of the loans, and the dropdown page will provide an overview of the collateral assets, including Current Value, Price, Yield Percentage, and Yield Strategy.

For staking, users need to navigate to the Stake tab, click ‘Approve  Staking’,  then select the amount of HBB to be staked and approve the operations. 

To provide USDH into the Stability Pool, users need to navigate to the Stability tab, click ‘Deposit’ to open the Provide USDH tab, select a percentage of USDH to be provided and click ‘Provide Stability’.

The HBB token

HBB is the native token of the Hubble Protocol with a total supply of 10 million tokens, which are distributed as follows: 15% goes to the team, 5% to the ecosystem, 30% is intended for token sales, 15% is preserved as a BD fund, 25% for liquidity incentives, and 10% for the treasury. 

HBB can be staked on Hubble to earn rewards from the protocol. HBB also is given as a reward to USDH stability providers as well as to users who lock their earned rewards in the protocol to prevent HBB tokens from being sold on the market and losing their value. These rewards come from borrowing fees and HBB’s total fixed supply. 

In the future, Hubble claims to be transitioned to a DAO, HBB will become a governance token, meaning that HBB holders will be able to take part in the protocol’s decision-making process.

Is Hubble Protocol safe?

So far, Hubble Protocol has been audited by two firms and two more audits are in progress. It is also claimed that a generous bug bounty for economic attacks will be announced shortly.

Hubble Protocol team leader is Marius Ciubotariu who previously worked as a Senior Software Engineer at Bloomberg for eight years. As it is claimed in the Discord channel, Hubble’s team consists of 12 highly qualified front-end engineers including Marius, six marketing specialists, and content developers. It is also planned to hire CVO and Business Development Lead.

Partners

Hubble Protocol has raised $10 million worth of funding from investors such as Three Arrows Capital, DeFiance Capital, Delphi Digital, Digital Currency Group Crypto.com Capital, ParaFi, Jump Capital, Decentral Park Capital, CMS, Spartan, DeFi Alliance, and Mechanism Capital.

What’s next?

Hubble’s long-term goal is to facilitate widespread usage of USDH. In 2022, it is planned to launch yield yearning vaults as well as undercollateralized lending, expand their multi-asset deposits to other major cryptocurrencies, as well as complete the transition to DAO. The protocol also plans to release an open-source liquidation bot that anyone can set up to help participate.

Links

https://hubble-markets.gitbook.io/hubble-protocol-official-docs/