‘With Stacks, we can finally have internet-native banking/finance powered by Bitcoin’: Arkadiko founder Philip de Smedt
Behind-the-scenes interview
Stacks is bringing decentralized applications to Bitcoin, presenting developers an opportunity to set up the crucial DeFi primitives upon which the Stacks DeFi ecosystem will operate. Arkadiko liquidity protocol is one such innovation claiming its place in serving the mission of a user-owned internet. The project aims to bring liquidity and market-making to the fledgling Stacks DeFi ecosystem. Arkadiko achieves its goals by implementing a stablecoin xUSD and governance token DIKO on Stacks. I managed to have an opportunity to chat with the founder of Arkadiko liquidity protocol to get the inside scoop. And here’s my interview with Philip.
Deestar: Hello Phillip, thank you for accepting my interview invitation. Let us get straight into it! You are the founder of the Arkadiko Liquidity Protocol. Kindly tell us more about the protocol in generalized terms.
Philip: Hi! Of course. Arkadiko is what I call a non-custodial liquidity protocol that comprises two pillars: minting stablecoins and a lending and borrowing platform. On a high level, Arkadiko allows you to mint stablecoins that enable many use cases, such as offering stability/liquidity for trading, betting in prediction markets, and creating leverage to stack additional STX.
Deestar: What inspired you to start Arkadiko?
Philip: Stacks is a Layer 1 blockchain that leverages the security of Bitcoin. Since I identify myself with Bitcoin but am an advocate of DeFi, it was an easy choice to build a liquidity protocol on top of Stacks.
I look at the ecosystem in the following way:
- Bitcoin: internet-native money
- DeFi: internet-native banking and finance
- NFT: internet-native intellectual property
With Stacks, we can finally have internet-native banking/finance powered by Bitcoin. Arkadiko will be one cornerstone that enables DeFi structurally soundly.
Deestar: Please get into more detail on the contribution of Arkadiko to the Stacks ecosystem? Please drive home on how it intends to leverage the ecosystem’s fundamental building blocks, the Stacks blockchain, and the Stacks cryptocurrency (STX).
Philip: Arkadiko combines the best of the DeFi and Stacks world, including but not limited to:
Use of STX tokens as collateral to mint xUSD stablecoin. STX collateral will automatically be stacked in PoX and providing liquidity (the xUSD). With this liquidity, you could go to an AMM decentralized exchange (which should be out soon on Stacks) and do several things, such as buying more STX tokens to stack them again.
Alternatively, you could use the xUSD to buy our DIKO governance token and stake that. When minting stablecoins and participating in the Arkadiko protocol, you will receive DIKO, the Arkadiko governance token. We will allow staking DIKO, which gives you additional rewards paid in DIKO.
The uses of the DIKO governance are to:
- Manage and vote on proposals put forward by the community.
- Add a new collateral asset type with a unique set of Risk Parameters.
- Change the Risk Parameters of one or more existing collateral asset types
- Set the percentage threshold to distribute BTC earnings
- Trigger Emergency Shutdown
DIKO governance token holders will receive income in two ways: yield generated through stacking and stability fees, where applicable.
The staking APY will probably be higher than the PoX stacking APY, especially in the beginning. When providing liquidity on the DIKO/xUSD or DIKO/STX pair on a DEX, most of these DEXes will give you an LP token. We will accept this LP token in DIKO staking, resulting in a double yield.
Other novel use cases will come alive as Arkadiko and its lending/borrowing hub matures.
Deestar: Please give us an overview of the components or technical specs of the project. What will the final deliverable be? How will you measure success?
Philip: See GitHub repo :)
Deestar: Whom will the protocol serve? How do Stacks (STX) holders benefit from it?
Philip: People who search for liquidity and yield on their tokens or people who want to borrow cryptocurrency. Stacks (STX) holders will benefit from this as they might get a higher return than merely stacking the STX in PoX since Arkadiko creates building blocks for higher leverage (but also higher risk).
Deestar: What’s the most important thing you’re working on right now, and how are you making it happen?
Philip: Lending and Borrowing. Which requires the first pillar, minting stablecoins, to launch. Eventually, Arkadiko will turn into a DeFi bank where users can deposit, borrow and lend on top of Bitcoin and Stacks.
Deestar: A stablecoin and liquidity protocol is one cornerstone of DeFi. What are some of the use cases of xUSD and the Arkadiko liquidity protocol that enable Stacks to expand its ecosystem?
Philip:
- Trading Liquidity (the two can be the standard to trade against on Stacks DEXes)
- Market-Making (the two enable stacking with a tradeable derivative and allows exchanging a productive asset that yields BTC while the STX are locked up)
- Lending & Borrowing (Arkadiko Lending & Borrowing platform will support a multitude of assets (and SRC20 tokens)
When a Stacks-native peg against another stablecoin exists, e.g., USDT or USDC, one can trade the xUSD for it, transfer the coins to a CEX, cash out into real fiat, and use it to cover real-life investments and expenses. One’s STX, or other forms of collateral, will continue to exist unless they get liquidated. Any application that wants to utilize stable prices & liquidity, for example, games and prediction markets, can also take advantage of the protocol.
Deestar: How long will the project take to implement? What are some of the significant milestones to note in the project life cycle?
Philip: The project is very ambitious and requires significant effort. We are aiming for a mainnet launch somewhere in autumn. A more granular public roadmap will be out soon, but 90% of the functionality is ready for test net. We will do a small community test on testnet somewhere in June.
Deestar: Are investors welcome? If yes, how much capital would you like to raise, and when can they expect cash flow to break even?
Philip: Yes, they are welcome! They can leave their email address on www.arkadiko.finance to participate. We are planning on raising a modest round of around $1 million that should take a small team through the next 18 months, after which we should be profitable, if not before.
Deestar: Exciting times ahead for Arkadiko, bringing liquidity and DeFi to Stacks and Bitcoin. Thank you for the time you had to discuss Arkadiko with me. All the best!
Philip: Thanks! The whole Arkadiko team is looking forward to getting this launched soon and boost DeFi on Bitcoin.
