BabelFish Reaches Milestone with Innovative Balancing Curves

In the ever-evolving landscape of DeFi, adaptability and innovation are key. BabelFish, a pioneering force in this realm, is always keen on unique solutions and experimentation. And today with one of our greatest developments — the Balancing Curves — we have reached a significant milestone. This achievement marks a new era in stablecoin management, empowering users with tools and incentives that help maintain a healthy ratio among aggregated stablecoins.

BabelFish’s approach focuses on aggregating various stablecoins across different chains and issuing a meta stablecoin, XUSD, on Rootstock. The primary challenge was ensuring proper stablecoin allocations within the BabelFish aggregator, aiming to mitigate idiosyncratic risks inherent in individual stablecoins. Aggregating stablecoins promotes risk diversification, a crucial aspect of this strategy.

Balancing Curves, voted in late summer 2023, became fully operational on September 26, 2023, when we injected the Balancing Curves Reward Manager with 10,000 XUSD. The aim was jumpstart it and battle test this ambitious enhancement. Back then, Bitcoin-backed Stablecoins (DLLR) comprised over 95% of all aggregated stablecoins. While the Bitcoin-backed stablecoins are considered one of the safest stablecoins, high concentration of DLLR posed liquidity challenges, especially for users looking to bridge from Rootstock to Ethereum and the BNB Smart Chain.

Today marks a significant milestone. For the first time since the launch of Balancing Curves, DLLR has reached its Target Weight of 49%. We have successfully transitioned from a high concentration in a single stablecoin to a more diversified stablecoin allocation, enhancing liquidity across the Rootstock, Ethereum, and BNB Smart Chain blockchains. The current distribution includes approximately 50% in Rootstock’s native Bitcoin-backed stablecoins, around 23% in Ethereum stablecoins, another 23% in BNB Smart Chain stablecoins, and the remainder in RSK bridged USDT. This diversification strategy has proven to be an efficient method for balancing stablecoin pools within BabelFish Aggregator, as evidenced by the success of Balancing Curves. As we celebrate these achievements, our journey in innovating within the DeFi space is far from over. The success of our current strategies lays the groundwork for even more ambitious endeavors.

Now, we believe it’s time to set new, ambitious goals. So, stay tuned for more updates as soon as we prepare a new set of Target Weights to encourage more inflows of external stablecoins into the Rootstock ecosystem. Join us on this exciting journey of innovation and progress. Share your thoughts, experiences, or questions about BabelFish’s Balancing Curves in the comments below. Let’s continue to explore the limitless possibilities of decentralized finance built on the Bitcoin economy together!