Rhizome

A Bitcoin synthetics protocol allows users to create and trade synthetic assets—tokens that represent and track the value of other assets like fiat currencies, commodities, or equities—while using Bitcoin as collateral. With Rhizome, Bitcoin holders can participate on complex financial activities such as hedging, yield farming, and CDPs directly on the Rootstock EVM.

Capital Efficiency Through Multicollateralization of rhUSD Synthetics, primarily the rhUSD dollar pegged instance deployed as an example of the Rootstock EVM mainnet, offers multicollateral support for collateralizing rhUSD, which offers significant advantages:

Capital Efficiency: Utilizing multiple assets (rBTC, RIF, USDRIF, ETHs) as collateral allows for more efficient use of capital, enabling users to leverage a broader asset base. Rehypothecation: Assets used as collateral can be rehypothecated, meaning they can be used simultaneously in multiple financial operations, enhancing liquidity. Ecosystem: Promotes interoperability within the Rootstock DeFi ecosystem, increasing the utility of various tokens. Multicollateralization of assets with rBTC also allows a singular efficient pool of collateral to mint multiple synthetic assets on top of the pool.

Additionally, relying solely on Bitcoin as collateral exposes the system to Bitcoin's price volatility. This can be mitigated with stablecoins or more stable assets in the multicollateral pool for all rh synthetics.

Liquidation Risks: Sharp declines in Bitcoin's price can trigger collateral liquidations, destabilizing the system. Over-Collateralization: Users may need to provide excessive collateral to safeguard against volatility, reducing capital efficiency. Risk Diversification: The volatility of Bitcoin can be offset by the stablecoins, by default decreasing risk compared to a purely BTC collateralized CDP protocol. Stability: A diversified collateral pool enhances the stability of the synthetic stablecoin and decreasing the risk of liquidation for debt positions, maintaining its peg more effectively. Stabilizers Stabilizers are multiple modules in the Rhizome protocol that strengthen the peg price for minted rh synthetic assets. For instance, each synthetic can have it's own Peg Stability Modules (PSM) based on the MakerDAO DAI-USDC PSM with various customizations to the swap fee. In the case of rhUSD, the alternative asset to rhUSD would be rUSDT, the fiat stablecoin with the largest dominance on Rootstock at 34.44%. Additionally, as utilized by MakerDAO and Inverse, the amount of synthetics can be controlled by governance or an administrator address through increasing and decreasing the liquidity of mintable synthetics.

In these deployed contracts, only a US-dollar pegged synthetic, rhUSD, has been deployed, but any synthetic can be deployed as long as there is a secure oracle for the asset on Rootstock EVM. In the case for rhUSD, the price is hardcoded at 1.

This project was based on the Compound v2 lending markets and heavily modified to support synthetic assets, but the synthetics protocol relies on stabilizers, which are optimized modules to keep the theoretical price of Rhizome synthetic assets. The entirety of the contracts were made used with Solidity, and integrated major Rootstock ecosystem tokens such as rBTC, rUSDT, RIF, and USDRIF in the code. The contract deployments were configured to use Umbrella Network oracles for rBTC/rUSDT prices, and were deployed on Rootstock mainnet as well to support all these assets.