Introduction

Welcome to the Hyperstable documentation. This guide provides comprehensive technical information about our decentralized stablecoin protocol and its ecosystem.

What is Hyperstable?

Hyperstable is a decentralized finance (DeFi) protocol that enables users to mint USH, an over-collateralized stablecoin designed to maintain a stable value relative to one US dollar. The protocol combines battle-tested DeFi mechanics with innovative features to create a robust and sustainable stablecoin ecosystem.

Key Features

USH Stablecoin

• Decentralized and crypto-backed: USH is backed by a diverse set of cryptocurrency collateral
• Over-collateralized: All USH in circulation is backed by collateral worth more than the minted amount
• Stable by design: Multiple mechanisms work together to maintain USH’s peg to $1

Collateral System

• Multiple collateral types: Support for HYPE, wstHYPE, uBTC, and uETH
• Isolated vaults: Each collateral type has its own risk parameters
• Dynamic interest rates: Rates adjust based on utilization, peg stability, and protocol parameters

PEG Token & Governance

• Dual token model: PEG for liquidity incentives, vePEG for governance
• Vote escrow mechanism: Lock PEG to receive vePEG and participate in governance
• Revenue sharing: vePEG holders earn 100% of protocol revenue from interest and liquidation fees
• Anti-dilution rebases: vePEG holders are protected from supply dilution

Liquidity & Incentives

• Gauge voting: vePEG holders direct PEG emissions to liquidity pools
• Farming rewards: Liquidity providers earn PEG tokens
• Bribe marketplace: External incentives to influence gauge votes
• Sustainable emissions: Carefully designed tokenomics for long-term stability

How It Works

1. Mint USH: Deposit supported collateral to mint USH stablecoins
2. Manage positions: Monitor health factors and manage collateralization ratios
3. Provide liquidity: Supply liquidity to USH pairs and earn PEG rewards
4. Lock for governance: Convert PEG to vePEG to vote and earn protocol revenue
5. Direct emissions: Vote on gauges to direct liquidity incentives

Architecture Overview

The Hyperstable protocol consists of several interconnected components:

• Core Protocol: USH minting, collateral management, and liquidations
• PEG Tokenomics: Emission scheduling, vote escrow, and rebasing
• Gauge System: Liquidity incentives and voting mechanisms
• Risk Management: Interest rate models, liquidation system, and safety buffers

Getting Started

This documentation is organized into four main sections:

• Protocol: Core mechanics of USH, minting, and risk management
• PEG: Tokenomics, distribution, and governance features
• Security: Audit reports and security practices
• Contracts: Deployed contract addresses and technical details

Whether you’re a user looking to mint USH, a liquidity provider seeking rewards, or a developer building on Hyperstable, this documentation provides all the information you need to understand and interact with the protocol.

Community & Support

Join our community to stay updated and get support:

• Discord: Join our server
• Twitter: @HyperstableX
• GitHub: hyperstable

Hyperstable is an experimental protocol. Users should understand the risks involved with DeFi protocols, including smart contract risk, liquidation risk, and potential loss of funds. Always do your own research.

USH

• USH is a stablecoin, which is a type of cryptocurrency that is designed to be less volatile than other cryptocurrencies because they are pegged to assets that are relatively stable. USH is designed to hold a stable value relative to one US dollar.
• USH is crypto-backed, because it uses cryptocurrencies as collateral. Users can deposit one of the accepted collateral types to create (mint) USH.
• USH is over-collateralized, which means that the backing collateral always needs to have a higher value than the amount of USH in circulation. The purpose of the over-collateralization is to account for volatility.
• USH is decentralised. Collateral types do not have a single point of control, collateral vaults are non-custodial, anyone can mint USH, anyone can trigger a liquidation and interest rates are adjusted onchain by the system.

Mint

To mint the USH stablecoin, users deposit one of the supported collateral types into the designated vault. Each vault has its own minimum health factor requirement and interest rate.

Farm

Liquidity providers (LP’s) earn PEG tokens by providing liquidity in selected pools. PEG emissions are distributed to LP’s.

A liquidity pool is a collection of digital assets or tokens that are locked in a smart contract to enable trading. LP’s deposit assets into the pool and in return, they receive tokens that represent their ownership of the liquidity.

The tokens that LP’s receive after providing liquidity are then to be deposited in a so called Gauge. PEG emissions are distributed to gauges based on vePEG voting and LP token depositors earn their share of PEG emmisions that flow to the gauge.

Lock

Hyperstable uses two tokens to manage its utility and governance:

• PEG (ERC-20), is distributed to liquidity providers through emissions

• vePEG (ERC-721), is used for governance, to vote on emissions, to earn all protocol revenue generated via interest and receive incentives. vePEG is protected from dilution via rebases.

Vote Escrow

The “ve” in vePEG stands for : vote escrow, which is a mechanism used in decentralized governance to ensure fairness and transparency in decision-making. Any PEG holder can vote escrow their tokens and receive vePEG in exchange. With Hyperstable, we call this locking.

Locking

The maximum lock period is 1 year, following the linear relationship shown below:

• 100 PEG locked for 1 year will become 100 vePEG
• 100 PEG locked for 3 months will become 25 vePEG

The longer the locking time, the higher the voting power of the underlying locked balance. Additional PEG tokens can be added to a Lock at any time.

Additionally, Hyperstable locks can be set into auto-max lock, which are treated by the protocol as being locked for the maximum duration of 1 year, and their voting power does not decay. The auto-max lock feature can be turned on and off for each lock.

Vote

The amount of rewards per pool is decided via gauge voting. Pools receive an amount of rewards proportional to their share of the total votes. To vote, users have to Lock their PEG tokens first.

Bonus

Hyperstable rewards their users for actions and assigns PEG rewards via bonus. The following actions are rewarded a bonus.

Minting

The USH minting bonus is a borrow incentive paid out in PEG tokens. This incentive promotes growth of the protocol by allowing borrowers to potentially offset their interest payments. 21% of the initial PEG supply will be distributed to USH minters on a weekly basis determined by a preset PEG reward-rate (tbd) per USH minted.

Referral

The referral bonus is a similar incentive model whereby referrers can earn PEG tokens based on the USH minted on their referral code. 21% of the initial PEG supply will be distributed to referrers on a weekly basis by a preset PEG reward-rate.

Gauges

A gauge is a smart contract that takes in LP tokens and rewards the depositors with PEG tokens and other additional Incentives.

Gauges are a governance mechanism that allow vePEG holders to allocate PEG Emissions via voting. Gauges make it possible for the community to self-direct the growth of the Hyperstable ecosystem by giving each vePEG token holder the power to direct liquidity provision to certain pools.

Incentives

By incentivizing vePEG voters to vote for gauges, users or protocols who provide these incentives, can try to draw more liquidity to specific pools. More votes to a gauge means more PEG emmissions will flow to that gauge, which in turn means higher rewards for liquidity providers in the pool.

Interest rates

Interest charged to borrowers is obtained as the sum of the following components:

1. Manual rate \(r_m\)
2. Vault utilization rate \(r_u\)
3. Peg rate \(r_p\)

Manual rate

The manual interest rate is static and set by the protocol as a constant value and represents the minimum interest rate that the protocol charges.

Vault utilization rate

Hyperstable uses Morpho’s AdaptiveCurve interest rate model at the vault level, which is engineered to maintain the ratio of the borrowed asset (USH) over the supplied asset (collateral), close to a preselected target. When the (vault specific) collateral ratio is above the set target, the interest rate automatically trends towards zero.

Peg rate

The purpose of the peg based interest rate is to manage supply and demand for USH and keep the stablecoin trading at one dollar. If USH is trading above one dollar, the interest rate is lowered. If USH is trading below one dollar, the interest rate is raised. Just like the vault collateralization rate, under normal circumstances (when USH trading at or above one dollar, aka at ’‘peg’’), the peg rate trends towards zero.

Total interest rate

The total interest rate \(r\) charged to borrowers is the sum of the above.

\( r = r_m + r_u + r_p \)

Liquidations

Loan liquidation is the process of closing a loan by repaying it with USH. A loan may be liquidated when a borrower’s health factor drops below the minimum threshold. With Hyperstable, anyone is able to (partially) repay loans that fall below the minimum health factor.

In practice, this means bots will be actively monitoring all loans, looking for opportunities to liquidate.

The liquidator receives a preset liquidation reward as a percentage of the repaid USH debt and the borrower pays a liquidation fee to the protocol as a percentage of the remaining overcollateralization at the time of the liquidation.

The liquidation fee is a source of revenue for the protocol that first gets transferred to a safety buffer (one per vault). The safety buffer tracks a percentage of the total USH debt in the vault, safety buffer “overflow” gets distributed to vePEG (PEG lockers) in USH.

In the rare case where a liquidation is unprofitable for the liquidator who calls it (and the safety buffer has insufficient funds to cover the difference), an alternate liquidation process known as “redistribution” comes into play.

In this -edge case- scenario, the system makes the liquidator whole by drawing the required amount of collateral from the vault and redistributes the losses between all debtors in the system relative to their share of the collateral in the vault.

Health factor

A health factor measures the value of collateral in relation to the amount of a loan. A higher health factor indicates a lower risk for the borrower. A loan with more collateral than the value of the loan is considered over-collateralized, which reduces the risk of liquidation.

The health factor is calculated by dividing the value of the collateral by the amount of the loan. For example: a loan with a collateral value of $150 coupled with a debt of $100, produces a health factor of 1.5.

For users who are unfamiliar with health factors, but familiar with the term loan-to-value: a health factor of 1.5 is the same as a loan-to-value of 0.67.

Collateral types

Hyperstable supports the following assets as collateral:

Tokens

Hyperstable uses two tokens to manage its utility and governance:

• PEG (ERC-20), is distributed to liquidity providers through emissions
• vePEG (ERC-721) which is used for governance, to vote on emissions, to earn (100% of) protocol revenue from interest and liquidation fees and receive incentives. vePEG also gets protected from dilution via rebases. vePEG is represented as a (transferrable) NFT.

Vote Escrow

The “ve” in vePEG stands for: vote escrow, which is a mechanism used in decentralized governance to ensure fairness and transparency in decision-making. Any PEG holder can vote escrow their tokens and receive vePEG in exchange. With Hyperstable, we call this locking.

Distribution

Initial supply of 500mm tokens. Distribution at launch:

Emissions

Hyperstable seperates PEG emissions into two phases:

Phase 1: Liftoff

At launch, weekly emissions are set at 0.2% of the circulating supply. Adjustments will be made per epoch if necessary.

Phase 2: Cruise

After 20 epochs the system will enter “cruise mode” and the emissions will be set at a % of circulating supply based on data from the “Liftoff” phase.

Rebase

vePEG holders receive a rebase proportional to PEG emissions and to the ratio of vePEG to PEG supply, reducing vote power dilution for vePEG.

The weekly rebase amount is calculated with the following formula:

$$ w_{rb} = 0.5 w_e \left( 1 - \frac{s_{vePEG}}{s_{PEG}}\right)^2 $$

Here, the weekly rebase amount \(w_{rb}\) is proportional to the weekly emissions ($w_e$) and the ratio between locked and liquid PEG tokens. This rebase formula will reward vePEG holders most when locking rates decrease, incentivizing new lockers to step in. vePEG supply does not affect weekly emissions distributed to liquidity providers.

Audits

Hyperstable’s security audits can be found here: Audits

Bug bounty

coming soon

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