Hydration, the largest DeFi protocol on Polkadot, has launched HOLLAR, its native stablecoin, designed to maintain a $1 peg through a blend of over-collateralization and advanced stability mechanisms.
Unlike algorithmic stablecoins that rely solely on market dynamics, HOLLAR is backed by user-deposited collateral including DOT, ETH, wrapped BTC variants, and stablecoins such as USDT and USDC.
Built on the framework of Aave’s GHO stablecoin, HOLLAR integrates proven features for collateral management and liquidation. A distinctive element is Hydration’s Stability Module, which provides asymmetric price support: It caps HOLLAR’s ceiling by allowing users to mint at predictable rates while applying intelligent buybacks when the token trades below $1. This approach is designed to prevent manipulation while sustaining the peg.
Hydration also introduces partial, automated liquidations that occur at the start of each block. Rather than wiping out an entire position, the protocol restores health factors incrementally, reducing user losses during volatility. Borrowers currently pay a 5.12% annual interest rate when minting HOLLAR, with revenues flowing back into yield strategies.
As a Polkadot-native, app-specific blockchain, Hydration can embed features at the runtime level, allowing deeper integrations than smart contract-only systems. This enables HOLLAR to provide advanced arbitrage opportunities, seamless interoperability across Hydration products, and additional yield generation for token holders.
While HOLLAR positions itself as a decentralized alternative to USDC and USDT, risks remain. Peg stability could be tested under extreme conditions, and the Stability Module introduces new smart contract vectors despite its GHO-inspired architecture.
This is a developing story.
This article was generated with the assistance of AI and reviewed by editor Jeffrey Albus before publication.
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Source: https://blockworks.co/news/hydration-decentralized-stablecoin
