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# System prepended metadata

title: 'Botanix Ecosystem Interaction – Palladium: A Decentralized Stablecoin Protocol for BitcoinFi (English Version)'

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# Botanix Ecosystem Interaction – Palladium: A Decentralized Stablecoin Protocol for BitcoinFi (English Version) 
![Square_Palladium Logo](https://hackmd.io/_uploads/BySA7-Ohyl.png)

[TOC]

## What is Palladium?

In simple terms, Palladium is a stablecoin protocol built on top of Botanix to meet the needs of the BitcoinFi market, providing Bitcoin's operation and expansion. The stablecoin obtained after collateralizing is called PUSD. It may sound a bit complicated, but you can think of it as similar to USDT/USDC in the market. The difference is that USDT/USDC is pegged to a fiat currency (USD$), controlled by centralized banks, which might make it easier to understand.

So, what role do these stablecoins play? You can still use them in the same way you understand USDT in Ethereum's DeFi ecosystem. They can serve as a medium of exchange and clearing unit in DEX, lending protocols, and payment systems. Without a stable intermediary currency, it would be difficult to anchor and exchange assets. On the Palladium platform, users can use BTC as collateral to borrow, pay, and invest without selling their Bitcoin. Anyone can deposit BTC into Palladium as collateral, mint PUSD, and receive interest-free liquidity (i.e., lending funds without paying interest).

Now, how does it ensure its own stability? It’s driven by an economic arbitrage mechanism. I wasn’t completely clear on this before, so I’ll elaborate a bit more on it, but I hope experts who see this can point out any inaccuracies.

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### How is USDT's Stability Ensured?
Let’s first talk about how USDT’s stability is ensured. This is easier to understand:
- **Managed by Tether**:
  - Every time a user deposits 1 USD, they mint 1 USDT, with the promise that the user can always redeem 1 USDT = 1 USD.
- **Pegging Method**:
  - USDT’s stability depends on **centralized bank assets** (such as cash or bonds).
- **Risk**:
  - USDT's stability relies on **Tether’s credit**.
  - In theory, if **Tether goes bankrupt or refuses to redeem**, USDT may lose its peg.

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### How is PUSD’s Stability Ensured? – *Key Points*
USDT is pegged directly to a fiat currency, but PUSD is pegged to BTC. BTC’s price is inherently volatile, and PUSD needs to stabilize at a 1:1 ratio with USD, which is not easy to understand.
PUSD does not use USD as reserves but instead uses **overcollateralized BTC** to support its value. This is the core function of the Palladium platform. Its stability comes from several key mechanisms:

- **Overcollateralized BTC**
  - Users use BTC as collateral to mint PUSD according to the **BTC value greater than 1 USD**.
  - For example, if a user collateralizes **$130 worth of BTC**, they can mint **100 PUSD** (a 130% collateralization ratio).
  - This ensures that even if BTC's price fluctuates, there is still enough collateral to support PUSD.

- **PUSD Price Above $1 → Encourages New Minting**
  - If **PUSD price > $1**, arbitrageurs will collateralize BTC to mint PUSD, and sell it on the market for profit.
  - **More PUSD enters the market**, increasing supply, and pushing PUSD price back to $1.

- **PUSD Price Below $1 → Redeem BTC, Reduce Supply**
  - Since **PUSD can always be redeemed for BTC at a 1:1 ratio**, when the market price drops to, for example, **$0.98**, arbitrageurs will:
    - Buy PUSD at the lower price.
    - Redeem it on the protocol for BTC at **1:1**, gaining profit.
  - **Redeeming PUSD reduces supply** in the market, causing the price to rise back to $1.

- **Liquidation Mechanism: Preventing the Impact of BTC Price Drops**
  - When BTC’s price falls, if a user’s **collateralization ratio drops below 110%**, the system will automatically:
    - **Liquidate part of the BTC collateral**, using it to buy back PUSD and destroy it.
    - **Reduce PUSD supply in the market**, maintaining its stability.

Through these mechanisms, the platform achieves a **non-governance system**, relying on economic-driven user interactions and arbitrage to maintain the peg's stability. Many DeFi projects rely on governance tokens to manage system parameters, which can be manipulated by whales (e.g., attackers holding large amounts of governance tokens can vote to change the rules).

---

### Comparison Between USDT and PUSD

| **Feature** | **USDT** | **PUSD** |
|-------------|----------|----------|
| **Pegging Method** | Backed by centralized institution Tether with bank assets | Supported by overcollateralized BTC |
| **Stability Source** | Tether promises 1 USDT = 1 USD | Market arbitrage + redemption mechanism |
| **Asset Dependency** | Depends on bank reserves | Depends on BTC collateral |
| **Transparency** | Controlled by Tether with non-transparent asset reserves | Operates on smart contracts, verifiable on-chain |
| **Decentralization** | **Centralized** | **Decentralized** |

---

### Summary
Palladium is a protocol, not a platform. It provides users the ability to mint PUSD stablecoins without paying any interest or periodic fees. As an algorithm-controlled monetary tool, Palladium implements a one-time borrowing fee for newly extracted liquidity, which is crucial for maintaining the USD peg.

I previously read a good summary in a book about the banking system, and it can be applied to DeFi as well. Banks essentially do two things: increase liquidity and control risk. The entire DeFi sector is built around these two factors.

Understanding the above allows me to know what I am doing when interacting with the platform. Otherwise, if you keep clicking around, you’ll be lost. 🤔
Next time when interacting, we will know what to do when we see "trove," "mint," "repay," and "close."

---

## Task Platform Tasks

* ~~[intract](https://quest.intract.io/quest/67a0d29ced2e945bac734067?campaign_initiator_type=alphaHubNarratives&campaign_initiator_id=67a1e8f0ed2e945bac7543fe&card_position=0)~~  
I missed this one. I could have minted the first Botanix NFT, but I came late. I originally wanted to write about this platform later, but since the current task's website interaction has issues these days, I’ll just do this as a catch-up task.

* [zealy](https://zealy.io/cw/palladiumlabs/invite/nrLfqGtvR-5eB_BeiAqtg)  
Just follow the prompts. The tricky part is two platforms, LinkedIn and Medium, where you have to flow and upload screenshots.

---

## Community Essentials

* [X](https://x.com/PalladiumLabs)
* [Discord](https://discord.com/invite/9MMEyJ4JDz)  
  Discord Roles:  
  - @Verified – Verified users (all members who have passed verification)  
  - @OG Palladium – OGs (early members or supporters of the community, probably already finished)  
  - @Pioneer – Active contributors (members making positive contributions)  
  - @Ambassador – Core contributors (bringing value to the community and representing us outside the community)

The Discord community is very active, just keep contributing actively with perseverance.

---

## Testnet Interaction

1. ***Step 1: Connect Wallet***
![image](https://hackmd.io/_uploads/BygAPW_hyx.png)

2. ***Faucet***
Technically, BTC can be used as collateral for direct interaction, but to relieve faucet pressure, the platform provides a substitute WBTC faucet. The prerequisite for receiving WBTC is that your wallet must have some BTC for gas fees, which you can refer to in my previous article [Botanix Testnet Interaction](https://hackmd.io/ttDOGDyBQdOeIrZKbrrTGg).
![1742374588023](https://hackmd.io/_uploads/BJr08Zdn1x.png)

3. ***Open Trove***
At first, "trove" might be confusing, thinking it’s a treasure chest. In DeFi, it’s the concept of collateralized lending, which we mentioned earlier: using BTC to over-collateralize and mint PUSD.
![image](https://hackmd.io/_uploads/Syf9xMd2kg.png)  
Input the amount of WBTC you want to collateralize, and the system will automatically calculate the maximum PUSD you can mint.
![image](https://hackmd.io/_uploads/H1cqXMOnJg.png)  
After entering the amount of PUSD you want to mint, you can view other details of the Trove in the right-side information panel.
![image](https://hackmd.io/_uploads/S1BNrMO21x.png)  
At first, I was confused about "Loan-To-Value (LTV)," but it essentially means overcollateralization. When the collateral (WBTC) is fixed, you can adjust the amount of PUSD to see how the generated order changes. For the same value of collateral, the less you borrow, the lower the liquidation price.

4. ***Update Trove***
You can adjust your collateral ratio anytime. If you just want to add more collateral, you don’t need to mint new PUSD. Similarly, if your LTV allows, you can mint more PUSD without adding more collateral. Just leave one of the input boxes blank and the transaction will proceed.
![image](https://hackmd.io/_uploads/ByJ5Fz_nyg.png)

5. ***Repay***
There are two options here: one is to repay the borrowed PUSD, which is easy to understand, and the other is "Withdraw Collateral," which allows you to take out extra BTC collateral if the LTV threshold allows. I think this should be placed under the "Repay" tab.
![image](https://hackmd.io/_uploads/S1zZLm_h1x.png)

6. ***Close***
Here’s an **important note**: I tried closing a few times, but it didn’t work. To close an order, two conditions must be met: First, you must fully repay all the debt (i.e., repay all PUSD). Second, you must have PUSD in your wallet to pay for the protocol fees. Since I was new to the ecosystem and had no extra PUSD other than what I borrowed from the platform, I couldn’t use the PUSD to pay fees. If you’re in the same situation as me, you need to go to the Botanix ecosystem's [bitzy](https://bitzy-testnet.vercel.app/swap) to swap some PUSD to your wallet.
![image](https://hackmd.io/_uploads/SyeZdEu2Jl.png)

7. ***Stake/Unstake/Claim***
This is easy to understand. You can stake PUSD (I’m not sure when or why someone would do this) or PUSD earned through the ecosystem to provide liquidity to the stablecoin pool and earn rewards.
![image](https://hackmd.io/_uploads/HyB9OXdhyx.png)

8. ***RovBTC***
You can also perform all the above processes using rovBTC obtained through other platforms in the ecosystem, [rover](https://testnet.roverstaking.com/stake). The process is identical to using WBTC, so I won’t repeat it here.
![image](https://hackmd.io/_uploads/BJDoOLd21g.png)

9. ***Dashboard Home***
There’s not much to say here, just complete specified tasks to earn badges. The more you interact, the more points you get. Unfortunately, I missed the early minting of the NFTs, but there should be more opportunities in the future.
![image](https://hackmd.io/_uploads/BJry54dhyl.png)

---

## Conclusion
This is all for the platform tasks. There aren’t many tasks, and the platform doesn’t seem too complicated, but it’s elegantly simple and hides some intricacies. My understanding is limited, and there are still some things I haven’t fully grasped.

For example, the two-layer collateralization, recovery modes, and how investors can maximize their profits on the platform, these questions remain to be explored. Let’s treat it as homework, and I hope experts can provide guidance.

---

## Missing Areas

The platform also mentions bPUSD collateral yield tokens. My understanding is that these are yield tokens generated from collateralization, but the official documentation hasn’t explained the operational mechanism and yield model yet. I’ll update this once I learn more.

---

## Final Thoughts
&nbsp;&nbsp;&nbsp;&nbsp;The Botanix ecosystem is still in its early stages, so those who are seeing this can participate early. 

&nbsp;&nbsp;&nbsp;&nbsp;Even though I’ve just joined the community recently, I want to thank the teachers in the DC group, especially ***(Lonely is a disease, needs treatment) aifei1 [X](https://x.com/chen150805)*** for their witty humor, and **zzzzztai** [X account](https://x.com/pengyuyuan123) and leader **Wade [BotanixLabsCN](https://x.com/BotanixLabsCN)** for their guidance and promotion.


## Other References

Here’s an official introductory video. Feel free to watch if interested:  
<iframe width="560" height="315" src="https://www.youtube.com/embed/58KcsjLsCl4" frameborder="0" allow="accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture" allowfullscreen></iframe>

## Botanix Testnet Series Articles  
More coming soon. Follow [Twitter](https://twitter.com/xuemiaolan) for updates:
* **English Version**
1. **[Botanix Testnet Faucet Collection (English Version)](https://x.com/xuemiaolan/status/1908682212171801059)**
2. **[Botanix Testnet Interaction Guide (English Version)](https://x.com/xuemiaolan/status/1910711696962052446)**
3. **[Botanix Interaction with Arch – Native DEX of the Spider Ecosystem (English Version)](https://x.com/xuemiaolan/status/1911065193859420421)**

* **Chinese Version**
1. **[botanix 测试网领水(faucet)汇总](https://x.com/xuemiaolan/status/1908504291478036505)**
2. **[Boanix 测试网交互](https://x.com/xuemiaolan/status/1901789656922083772)**
3. **[Botanix 交互之生态篇--Palladium 去中心化的稳定币发行协议 ](https://x.com/xuemiaolan/status/1902332151217172862)**
4. **[Botanix 之生态交互终级篇：一口气带你做完与蜘蛛合作的七个生态，50+TX 交互](https://x.com/xuemiaolan/status/1904520725836546197)**
5. **[Botanix 交互 系列之 Arch –蜘蛛生态原生DEX(去中心化交易所)](https://x.com/xuemiaolan/status/1910608268105572802)**




## Join the Botanix  Community  
[Botanix Labs & Friends](https://x.com/i/communities/1772214299731062832) 
An open group for the Spiderchain community to learn, chat, and stay updated on the latest from Botanix Labs.
******



![image](https://hackmd.io/_uploads/BJGfeprnkx.png)

Write by Xuemiaolan | [Twitter](https://twitter.com/xuemiaolan)
*botanix Sequoia Ambassador*
Date: April 13, 2025