【Reflect】Software-as-a-Stablecoin protocol on SVM that allows anyone to create interest-bearing stablecoins / also supported by a16z / @reflectmoney
Toward a society where everyone can make stablecoin
Good morning.
This is mitsui from web3 researcher.
Today I researched about "Reflect".
🟩What is Reflect?
👀 Use Cases and Yield Distribution Logic
💬Towards a society where everyone can create stablecoins
🧵TL;DR
Reflect is a "Software-as-a-Stablecoin" protocol running on Solana that provides a mechanism for anyone to issue interest-bearing stablecoins without permission.
The core elements are (1) the ability to tokenize assets on-chain, (2) a mechanism to generate yield through DeFi strategies such as delta-neutral and cross-margin, and (3) a "Verifiable Insurance" insurance mechanism that automatically compensates in case of loss.
The primary stablecoins planned are USDR in the SOL strategy and USDX in the USDC strategy, with yields distributed in price appreciation or cash dividend "Liquid Bond" tokens (sUSDR/sUSDX).
Open beta is planned for Q3 2025, and investment is inferred from a16z Crypto's participation in the accelerator.
🟩What is Reflect?
Reflect" (Reflect Money) is a new stablecoin infrastructure protocol on Solana (SVM) that advocates "Software-as-a-Stablecoin".
We aim to create a protocol that allows anyone to easily issue stable coins without permission, with a particular focus on interest-bearing stable coin issuance.We are building a system in which deposit, stablecoin issuance, asset management of deposited assets, and interest granting are all completed on the DeFi smart contract, without the need for a central administrator or conventional financial intermediary.
The Reflect infrastructure consists of three major components.
Tokenisation
A mechanism whereby the value of a user's deposited assets or financial instruments is represented by a token on the on-chain; in Reflect, collateral assets (e.g. SOL or USDC) deposited by users into the protocol are tokenized as storable coins via smart contracts.
The image is that the liquid staking token is the stablecoin.
DeFi Strategies
Reflect backs various DeFi strategies and issues stablecoins corresponding to each.Upon issuance, users first deposit assets corresponding to a particular strategy with the protocol.
The protocol automatically executes a predetermined management strategy (e.g., delta-neutral strategy) using the deposited collateral assets and issues new stablecoins backed by that position.This issuance can be performed by anyone without any permissions, and in principle there are no restrictions on deposit or redemption, KYC, etc.
The value of each stablecoin is backed and stabilized by a corresponding strategic position, and after issuance, it can be freely transferred and used for transactions just like regular USD stablecoins.
The strategies are also executed and managed autonomously and programmatically by smart contracts.This makes it transparent and the logic and execution of the strategy can be verified by anyone.
Verifiable Insurance Organization
The biggest risk for stablecoins is a value de-peg.Since collateral funds are invested, if this deviation occurs, the stablecoin will not be viable.
Therefore, Reflect has a dedicated insurance mechanism for each stablecoin (strategy).This is called "Verifiable Insurance" and is a new insurance model that combines automation with smart contracts and cryptographic proof.
The basic mechanism is designed to automatically make insurance payments (replenishing assets in custody) in the unlikely event of a loss or shortfall in the strategic position backing each stablecoin.
Specifically, there is an on-chain insurance program managed by the protocol, in which funds for insurance are pooled in advance.This insurance program constantly monitors the health of the strategic positions, and when a loss is confirmed based on provable attestations (verified information), a smart contract agreement is executed to make an immediate payment.
This series of mechanisms is executed using zero-knowledge proof and restaking technology.
With zero-knowledge proof, important states regarding strategic positions (e.g., amount of loss, occurrence of a specific failure event, etc.) are cryptographically proven without divulging privacy, and insurance payment decisions are made based on this information.
With respect to restaking, Reflect allows network validators to provide insurance services using their own staking assets as collateral.
Specifically, multiple validators (or stakers) commit their staking assets to Reflect's insurance pool, and instead of slashing their stakes in the event of a loss to Reflect's strategies, they usually receive a portion of the revenue generated by each strategy as a reward.The staker receives a portion of the proceeds of each strategy as a reward, instead of taking the risk.For the staker, this means that they receive a return on their investment instead of taking on risk, and for the user, it means that they are provided with a solid safety net in the event of an emergency.
Based on these considerations, insurance in the Reflect protocol will be managed primarily in the following two-tier structure
Hard Cash Insurance FundAn insurance fund of cash (e.g. USDC) that is accumulated by the protocol itself.It consists of a portion of the proceeds from each strategy and initial reserves, and any minor losses or fluctuations are first made up from this fund.
Restaking Validator Service:As described above, this is an insurance policy in which external network participants (validators/stakers) offer their own stake assets as collateral.In the event of a major loss that cannot be covered by the protocol stand-alone fund, the collateral of these stakers is thrashed and the funds are used to compensate for the loss.
With this two-tier insurance, Reflect seeks to provide a high level of asset protection and peace of mind to its users.
👀 Use Case and Yield Distribution Logic
Reflect" has not yet released an application at this time, only its conception has been announced.The roadmap is unclear, but the documentation suggests that eventually anyone will be able to create strategies and issue stablecoins.
In the meantime, it appears that initially stablecoins will be issued under several strategies that "Reflect" is working on.
For example, stablecoins that Reflect plans to offer include USDR, which will be operated under SOL's delta-neutral strategy, and USDX, a cross-margin strategy using USDC.
The delta-neutral strategy, like Ethena's USDe and others, is a method of maintaining prices through both SOL's cash and short strategies.
A cross-margin strategy with USDC means that the user deposits a stable asset, such as USDC, and the protocol first holds it in physical form (USDC).At the same time, a position of the same amount is opened in one futures market for both buying and selling (e.g., both long and short the same stock at the same price).
This provides cross-margin liquidity (cash) to the market while eliminating the effects of price volatility and normal funding payments.
Specifically, when traders engage in leveraged trading on futures exchanges, long-oriented traders borrow virtual currency to buy and short-oriented traders borrow stable coins to sell.It serves to lend cash (stable coins) to the short side.In other words, in the overall market, Reflect is a lender of stable funds and its lending interest income increases as the demand for leverage increases.
These are the two main strategies planned for the Reflect project, but other strategies may be introduced in the future.The document also mentions RWA management strategies as examples, which could be low-risk, low-return strategies, such as structuring a portfolio of government bonds and tokenizing the interest in stable coins.
Two methods also exist for these yield allocations.
One is the price value appreciation type and the other is the cash dividend type.The former is in the form of rebasing to the price itself in the same way as LST and LP share, while the latter is in the form of a normal increase in volume.
However, since it is unnatural for a stablecoin to be value-increasing, interest-granting stablecoins are envisioned in the form of "Liquid Bonds" such as sUSDR and sUSDX.Users can unwrap these tokens at any time and receive cash, including the value of the accumulated interest.
Note that there are no fees for minting or burning stablecoins.
We do not know how much of this area is concerned with stable coins.We will know after it is released whether it is simply a form of Yield Aggregator's bond tokens that are stable-like or whether it is completely concerned with stable coins.
Open beta is scheduled for Q3 2025, and invitation codes are now being accepted.
Also, there was no funding information announced at this time, but it is believed that a16z crypto is investing in the program, as they have stated that they are participating in CSX, a16z crypto's accelerator program.
💬Towards a society where everyone makes stablecoins
Finally, a summary and discussion.
The concept of "Software-as-a-Stablecoin" is emerging, reminding me of the emergence of Sanctum, which allowed anyone to create LSTs.
As stablecoin became more popular and many projects emerged, the trend was to return the yield of collateral funds, and each company was trying to differentiate itself with its investment strategy.
In this context, "Reflect" emerged as a protocol that allowed anyone to create those projects.Rather than being a completely new concept, however, it is more like taking what was done with LST and Yield Aggregator and putting it into the form of a stable coin.
I know many people wonder what the point is in making the proof of deposit of an operational strategy into a stablecoin, or why not simply a Vault proof of deposit token, but my opinion is that there is actually a big difference here.
BlackRock's BUIDL has a big influence, but that too issues proof of investment in US Treasuries in the form of stabled coins.Of course, BlackRock's brand power and existing customers are driving its growth, but I think the fact that they did so in the form of stable coins was also very significant.
Stablecoin has the advantage of being "easy to calculate" and "easy to incorporate into DeFi".It is easy to calculate the assumed yield from the investment strategy that you have confidence in, easy to calculate at the time of investment, and easy to understand as a means for other DeFi protocols to manage their earnings.
So, I believe that surprisingly, the form of making all proof tokens of any strategy into stablecoins will work.
The other thing is the utility and liquidity within DeFi when stablecoins are disrupted, but we think there will be one case where they are intended to be used only within their own ecosystem, and another where this area will be abstracted as well.
This week, Paradigm proposed Orbital, a new way of being liquid (AMM) in an era of stabled coins in disarray.
I don't know if this will be adopted, but like DeFi currently handles USDC and USDT, but not emerging stablecoins.So I think that eventually things like the lack of utilities and unavailability of stablecoins will gradually become abstracted, and the worldview will be such that any stablecoin can be used in any DeFi.
In such a case, stablecoins that he himself thought could be invented purely as an operational strategy may be able to grow significantly.In addition, not only individuals but also companies and influencers may create their own stablecoins.I am looking forward to it.
This is the research for "Reflect"!
🔗Reference Link:HP / DOC / X
Disclaimer：I carefully examine and write the information that I research, but since it is personally operated and there are many parts with English sources, there may be some paraphrasing or incorrect information. Please understand. Also, there may be introductions of Dapps, NFTs, and tokens in the articles, but there is absolutely no solicitation purpose. Please purchase and use them at your own risk.
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mitsui
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