ACoconut: The First Cross-Chain BTC Yield Aggregator

Published in

NUTS Finance

5 min readMar 26, 2021

With the rise of transaction costs and fall of returns on Ethereum, there is a growing demand for DeFi users to seek new market opportunities across emerging Layer 1 networks such as BSC, Heco, xDAI and Polkadot.

What does ACoconut Provide?

ACoconut provides the first cross-chain yield aggregator for BTC DeFi users. It consists of two critical components as shown above:

acBTC — a decentralized bridge that carries BTC across chains, and
BTC+ — a liquidity and yield aggregator that optimizes and distributes yield on individual chain.

Image that Alice, a DeFi user who is familiar with protocols on Ethereum, is looking for new yield opportunities on the rising ecosystems, e.g. BSC. She could achieve this with the following steps:

Mints acBTC with WBTC or renBTC on Ethereum,
Bridges acBTC to BSC using AnySwap;
Mints BTC+ on BSC with the bridged acBTC to earn global BTC+ interests;
Bridges acBTC, including both the principal and yield, back to Ethereum via AnySwap.

All of this can be done without much knowledge about BSC DeFi projects. As Alice knows more about BSC, she could potentially get addition return in step 3, e.g. by using BTC+ as collateral in lending protocols. BTC+ is a good collateral as it’s pegged with native BTC, and Alice can maintain her BTC+ global interests even if she uses BTC+ as collateral!

acBTC as the Bridge

acBTC is a synthetic ERC20 BTC backed by a basket of ERC20 BTCs on Ethereum. It is the first synthetic asset built on Curve’s StableSwap algorithm (Five months later, mStable uses the exact same approach to build mBTC).

ACoconut users can mint acBTC using WBTC or renBTC, and then bridge acBTC to other chains via AnySwap. We choose to synthesize acBTC on Ethereum as 1) Ethereum has the most ERC20 BTC in terms of both types and values 2) The active trading activities on Ethereum can help balance the backing of the ERC20 BTC basket in case of price change.

acBTC is a perfect choice as BTC bridge for the following reasons:

acBTC hedges risks of individual ERC20 BTC in the basket which have different technical architecture and economical model;
acBTC value remains constant when the price of underlying ERC20 BTC changes. The StableSwap algorithm ensures a collateral ratio slightly over 100%;
Unlike mBTC which is backed by other synthetic assets such as sBTC, acBTC is backed by assets which are natively backed by BTC. Therefore, 1 acBTC can always represent the value of 1 native BTC on any chain;
Unlike mBTC which integrates with lending protocols on Ethereum, acBTC adopts a minimal design principal and is therefore more robust and reliable.

Currently, Badger also offers a cross-chain yield aggregator but using their bBadger and bDIGG as the bridging assets. They are not helping their BTC holders to bring BTC to other chains, and users’ yield is significantly affected by Badger’s application scope on the other chain as well as the price fluctuation of Badger token. In contrast, ACoconut allows users to seek opportunities and bring back profits on all chains, using their real BTC.

BTC+ as the Aggregator

ACoconut Plus is an asset protocol that aims to solve the dilemma on how to generate native yield and how to keep asset usability at the same time. Most assets (i.e. DUSD) uses another yield token(i.e ibDUSD) to provide native income to their token holders. ACoconut Plus solves the problem using only one token with the rebase mechanism.

ACoconut Plus can be divided into two categories:

Single Plus, which is backed by one token and focuses on yield generation;
Composite Plus, which is backed by multiple plus tokens and focuses on basket management.

BTC+ is a BTC-pegged composite plus token. Each chain has its own BTC+. It is backed by multiple single plus tokens which are backed by BTC-yield tokens on the respective chains. Therefore, it aggregates liquidity and yield for BTC assets, and distributes yield to all BTC+ holders.

acBTC holders can earn global interest by minting BTC+ on each chain with acBTC. They may also earn additional returns by using BTC+ as collateral since BTC+ maintains a stable peg against BTC. BTC+ holders can maintain the interests generated via the underlying BTC-yield tokens even when BTC+ is used as collateral since the interest is distributed globally.

The Roadmap

Phase I starts with Beta testing on BSC. Four single plus BTC tokens are selected as the candidates to construct BTC+ on BSC. They are all BTC-pegged and backed by BTC-yield token on BSC:

vBTC+: Single plus backed by Venus BTC(vBTC),
autoBTC+: Single plus backed by AutoFarm’s BTC position. Since AutoFarm’s position is not tokenized, we tokenizes it as autoBTC;
acsBTCB+: Single plus backed by ACryptoS’s BTC position,
fBTCB+: Single plus backed by ForTube’s BTC position.

Users can try out the ACoconut v2 on BSC via https://bsc-beta.acoconut.fi, mint single plus tokens and stake them to earn mock AC. We will airdrop real AC as rewards according to the number of test AC earned. Once BTC+ is live, users can also mint and stake BTC+ to earn AC as reward.

Resources

Introducing ACoconut v2
ACoconut v2 Beta Testing Guide
Join Telegram → https://t.me/acbtc_community
Join Discord → https://discord.com/invite/mvANFYe

About ACoconut

ACoconut is a BTC DeFi protocol suite designed to enable frictionless movement of BTC liquidity between decentralized systems. The ACoconut protocol suite consists of BTC+ and acBTC, powered by NUTS Finance.

About NUTS Finance

NUTS Finance is a blockchain development DAO focuses on building secure, composable and open source technology to empower financial applications on the blockchain. Our team is composed of experienced developers, financiers and serial entrepreneurs.