Zephyr Protocol v1.0.0: Unlocking the Private Stablecoin

7 min readOct 13, 2023

The much-anticipated release of Zephyr Protocol’s stablecoin is here, marking a significant milestone in our journey towards a decentralized, private stablecoin ecosystem.

Journey to launching the Zephyr Stable Dollar

On October 1st, 2023, Zephyr Protocol achieved a pivotal hardfork, activating its private, decentralized, crypto-backed, over-collateralized stablecoin protocol. This transition underscores our commitment to pioneering a platform that seamlessly blends privacy with financial stability. A mere four months post our mainnet launch on May 29th, 2023, we’re thrilled with the strides we’ve made!

Community Milestones:

Twitter Followers: 4.5k
Discord Members: 2.7k
Telegram Members: 1.2k
Hashrate: 600–1000 MH/s

Network Insights:

More in-depth information will be available below, but this is a snapshot of our network state:

For a detailed look at our network’s current state, visit: https://network.zephyrprotocol.com/

Branding Discussion:

After engaging with our community, we’ve refined our asset naming conventions:

ZephUSD ($ZEPHUSD) -> Zephyr Stable Dollar ($ZSD)
ZephRSV ($ZEPHRSV) -> Zephyr Reserve Share ($ZRS)

These changes align with our native currency, Zephyr ($ZEPH), ensuring clarity and consistency across our asset suite.

They are also more concise and do not clash with other tickers on CMC and Exchanges. (USDZ is taken by several others)

Zephyr Reserve Share makes a lot more sense as it represents a share of equity in the reserve!

New Native Assets:

This update enables two new assets on the Zephyr Blockchain. Zephyr Stable Dollar ($ZSD) and Zephyr Reserve Share ($ZRS).

Zephyr Stable Dollar ($ZSD)

$ZSD is a private stable coin, overcollateralized and backed by $ZEPH.

Key $ZSD Advantages over other stablecoins:

Private. $ZSD Transactions have hidden amounts, recipient and destination addresses
Decentralized. Other stable coins namely USDT are operated by centralized entities and are fundamentally at odds with the ethos of decentralization underlying DeFi.
No Base Coin Inflation. Algorithmic stablecoins have to mint their base coins to maintain their pegs, causing inflation. Most notably with Terra/Luna. $ZSD is not pegged algorithmically, instead is crypto-backed.
Over-Collateralized. At the time of minting $ZSD, there needs to be >400% ZEPH in the reserve to back $ZSD. USDT is backed by <1% US Treasury Bills.
Proven. Zephyr Protocol is inspired by the proven Djed Protocol which has had working implementations with SigmaUSD (Ergo) and Djed (Cardano) for serveal years.
Low Transaction Fees. Transferring $ZSD costs less than a cent.

A more in-depth analysis can be read here: https://medium.com/@zephyrcurrencyprotocol/stablecoin-solutions-a-comparative-analysis-9247c8faeaf9

Zephyr Reserve Share ($ZRS)

Zephyr Reserve Shares represent a share of reserves equity. It is received in return for adding ZEPH into the reserve, thus minters become “Reserve Providers”.

Zephyr Reserve Share ($ZRS) holders receive a portion of the block reward every block as premium for providing the backing power for Zephyr Stable Dollar ($ZSD). Reserve Providers are effectively betting on Zephyr, in terms of value and adoption.

Reserve Provider Incentives

Leveraged Position. As Zephyr’s Price appreciates, the value of ZEPH in the reserve does too meaning there is more equity available, which is what ZRS represents
Conversion Fees. As adoption grows and the protocol is utilized more frequently, more fees will be accrued which bolters the reserves equity.
Block Reward. 20% of the block reward goes directly into the reserve, bolstering it and gives another avenue of ZRS appreciation.
Spot and MA Divergence. Due to the dual pricing of Zephyr’s Assets; users will use the ‘worse’ rate between the Spot and MA prices. This mechanism is employed for manipulation protection but also has the added benefit helping the reserve.

We call the incentives structure the “Pseudo-Staking reward” for $ZRS on Zephyr Protocol. More in depth information can be found here: https://medium.com/@zephyrcurrencyprotocol/becoming-a-reserve-provider-pseudo-staking-in-zephyr-protocol-fa71e6345be1

Protocol Performance

The performance of the protocol has been great and is working as expected. We will have a look at some graphs and figures to get an insight

Reserve Ratio

The reserve ratio quantifies the assets (ZEPH in reserve * USD Price) backing the circulating $ZSD. It’s calculated as: Assets/Liabilities.

Below is graph displaying the reserve ratio with assets and liabilities:

Currently, we’re well above the maximum ratio for minting more ZRS. This restriction ensures existing ZRS holders aren’t diluted. Initially, ZRS minting was allowed until Zephyr Stable Dollars ($ZSD) were introduced, determining the reserve ratio.

Healthy Reserve: Above 800%
Our current reserve ratio stands impressively at ~1100%. This translates to every $1 of $ZSD being backed by $11 worth of ZEPH. While some may have missed the initial ZRS purchase opportunity, it’s anticipated that the ratio will soon drop below 800%.

To achieve this, the minting of ZSD stablecoins is the way forward. Approximately $15,000 ZSD needs to be minted to bring the ratio below 800%, enabling more individuals to become reserve providers and fostering Zephyr Protocol’s growth.

$ZEPH Performance

ZEPH is currently in a downturn, as is most of the crypto market this month, but we see it as the calm before the storm. With the foundational work complete, our primary focus is driving adoption and raising awareness.

Initiatives in branding, marketing, and partnerships are underway. As the saying goes, “If you build it, they will come.”

$ZRS Performance

Below are graphs that show ZRS performance

This first graph prices $ZRS in terms of ZEPH — which is how it is notated in the protocol.

The demand for ZRS is evident from its performance. The primary driver behind its price appreciation is the 20% block reward. As the protocol matures, the block reward’s influence will wane, and conversion fees from increased adoption will rise.

This second graph shows ZRS performance in terms of USD:

Additional Network Figures (Oct 1st — Oct 13th):

Miner Reward: 99,468.01
Reserve Reward: 26,521.66
Conversion Transactions: 193

Mint ZRS

Mint Reserve Count: 63
Mint Reserve Volume: 281,766.51

Redeem ZRS

Redeem Reserve Count: 1
Redeem Reserve Volume: 3,169.12

Mint ZSD

Mint Stable Count: 90
Mint Stable Volume: 42,753.49

Redeem ZSD

Redeem Stable Count: 39
Redeem Stable Volume: 3,284.04

Fees:

Fees Accrued (ZSD): 872.52
Fees Accrued (ZEPH): 131.70

Partnerships — $ZEPH and $ZSD Adoption

We’re thrilled to announce our collaboration with Seven Seas Exchange, which has robustly supported both Zephyr and $ZSD. They’ve not only added $ZSD but also introduced additional quote markets:

Here are the ZSD markets currently available:

https://www.sevenseas.exchange/market/BTC-ZSD
https://www.sevenseas.exchange/market/ZEPH-ZSD
https://www.sevenseas.exchange/market/XMR-ZSD
https://www.sevenseas.exchange/market/ZRS-ZSD
https://www.sevenseas.exchange/market/USDT-ZSD

Our long-term vision is to position $ZSD as a formidable USDT alternative. While establishing numerous $ZSD quote markets is a long-term goal, even introducing ZSD-USDT markets on various exchanges will significantly benefit users seeking privacy, low transaction fees, and reduced exposure to centralized entities like Tether.

Stay Tuned!

We’re actively exploring partnerships and discussions with multiple platforms to expand $ZSD’s reach.

Wallet Updates

Upcoming Wallet Release: We’re gearing up for a new wallet update packed with quality-of-life enhancements. Additionally, we’re addressing issues some m1/m2 Mac users have reported.

Web Wallet: Given the overwhelming demand, we’ve decided to host our web wallet. While a web wallet may not offer the security of a desktop wallet, its integration with web3 makes it a necessary addition for now.

Mobile Wallet: A mobile wallet is on our roadmap. We’re aiming for compatibility with existing wallets, especially those supporting Monero. Conversations are ongoing, and we’re making steady progress! But still early days so we will keep you updated.