Introducing Palladium

The Unstoppable Bitcoin-Native Stablecoin $PUSD

Published in

Palladium Labs

4 min readMar 19, 2024

Stablecoin: Crypto’s First Market-Fit Product

Stablecoins are undoubtedly the single most important instrument in DeFi. They settled over $12 Tn. on-chain last ear, more than 70% of DEX volumes were denominated in stables, and over 40% of TVL in DeFi are occupied by stablecoins.

The Enemy Within: A Flaw in Crypto’s Foundation

And yet, while DeFi aims to build a parallel financial system; stablecoins like USDT, USDC & DAI which are a huge part of the ecosystem remain tied to traditional banking infrastructure. This is a single failure point that creates a risk of centralization, censorship, and disruption of DeFi services.

Crypto immediately needs a decentralized base money asset to stay truly trustless and scale sustainably.

Enter PUSD: A Stablecoin as Robust as Bitcoin

At the forefront of this transformative endeavor is Palladium, pioneering a non-custodial, censorship-resistant stablecoin protocol native to the Bitcoin network. PUSD, the stablecoin issued by Palladium, leverages the security and decentralization inherent in Bitcoin’s blockchain, marking a groundbreaking milestone in the evolution of stablecoin technology.

Design Principles of Palladium Protocol

1. Over-collateralized by BTC

Palladium achieves stability through a two-tiered over-collateralization system. Each PUSD minting position is required to have at least 110% collateralized, while the entire system maintains a buffer with an overall collateralization ratio of 130%. This approach provides high capital efficiency to users while effectively mitigating insolvency risks and safeguarding the value of PUSD well above its pegged point.

2. Secured on the Bitcoin Network

Palladium not only benefits from the robustness of Bitcoin as an asset but also harnesses the settlement infrastructure of the Bitcoin Network. Through its utilization of Botanix, a truly trustless Layer-2 network, Palladium seamlessly executes its smart contracts within the Bitcoin ecosystem, all while upholding the decentralization and security principles fundamental to the Layer-1 Bitcoin blockchain. Learn more about why we choose to build on Botanix.

3. Governance-free policy like Bitcoin

Unlike many smart contract platforms, Palladium does not rely on governance mechanisms to make decisions regarding monetary interventions. All protocol parameters are either preset and immutable or algorithmically controlled by the protocol itself, rendering governance redundant. This ensures that no one can gain control over the protocol or manipulate it at any point in time.

Meet the Most Reliable Stablecoin

The reliability of a stablecoin hinges on its ability to uphold its peg while affording users the freedom to exit the system at their discretion.

In contrast to other stablecoin protocols vulnerable to centralization and failure due to reliance on active governance or monetary interventions, Palladium ensures peg stability through economically incentivized user interactions and arbitrage opportunities. Any PUSD holder can seamlessly redeem their stablecoin with the protocol, receiving an equivalent amount of BTC in return, adjusted for a nominal Redemption Fee.

This mechanism serves as a direct anchor for price stability, establishing a hard price floor at $1. When the exchange rate deviates below this floor, arbitrageurs can capitalize on the opportunity by redeeming PUSD for BTC and selling the BTC at a higher dollar price. This incentivizes arbitrageurs, who play a crucial role in restoring the peg, as the Redemption Fees are designed to ensure profitable arbitrage opportunities whenever the peg is disrupted.

Coming Soon — Exclusively on Bitcoin

Palladium is committed to a fair launch of its secondary token, PDM, which rewards users with protocol revenue and opportunities to earn PUSD and BTC.

Ahead of the launch, Palladium will conduct an incentivized testnet and establish an open bug bounty program to fortify the system’s resilience. Additionally, Palladium will initiate various community campaigns, enabling participants to accumulate points convertible into PDM tokens upon its launch.