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Technical Overview

Core Mechanics​

At its heart, Harbor operates as a decentralized platform for creating and trading synthetic assets - tokens that mirror the value of real-world or digital assets without needing direct custody of those assets. The protocol functions as a single, system-wide collateralized debt position (CDP) with 100% collateral efficiency:

  • Collateral: Users deposit assets (like stETH) into the market's collateral pool
  • Debt (HA Tokens): Synthetic pegged tokens that track currencies, cryptocurrencies, stocks, or anything with a reliable price feed
  • Equity (HS Tokens): Leverage tokens that absorb volatility between collateral and pegged tokens, offering a long position on collateral vs the pegged token
  • Health: Stability pools automatically rebalance the protocol, maintaining system solvency without reliance on off-chain liquidators

This novel three-token model allows users to:

  1. Mint stable, pegged assets (haTokens) against the shared collateral pool
  2. Gain leveraged exposure through HS tokens with liquidation protection
  3. Earn real yield by providing stability through Stability Pools

Protocol Architecture​

Harbor implements a sophisticated 3-token system designed for capital efficiency and stability:

1. Collateral Token​

  • Users deposit approved yield bearing collateral (e.g., stETH, or sDAI) into Harbor's shared collateral pool
  • Collateral is collectively managed by the protocol, not tied to individual users
  • The protocol maintains a global minimum collateralization ratio (e.g., 130%) to ensure system solvency
  • Yield-bearing collateral (like stETH) generates real returns distributed to Stability Pool participants, with 75% of protocol revenue going to stability pools (pre-$10M TVL)

2. HA Tokens (Harbor Anchored - Pegged Assets)​

  • Synthetic assets pegged 1:1 to a reference price using reliable oracle feeds
  • Examples include:
    • haUSD — pegged to USD
    • haBTC — pegged to Bitcoin
    • haTSLA — pegged to Tesla stock price
  • Freely usable across DeFi platforms
  • Redeemable against collateral
  • Designed to maintain a tight peg through arbitrage and protocol rebalancing

3. HS Tokens (Harbor Sail - Leverage Tokens)​

  • Variable leverage tokens representing the residual claim on the collateral after accounting for issued pegged tokens
  • Similar to holding a liquidation-protected leveraged long position on the collateral versus the peg
  • As collateral appreciates relative to the pegged token, HS tokens rise faster than the collateral itself
  • If collateral depreciates, HS tokens absorb losses first, protecting haToken holders
  • Rebalanced automatically by the protocol during market stress via Stability Pools
  • Protection from liquidations - value fluctuates dynamically without sudden margin calls

Rebalancing Mechanism​

The protocol employs automated Stability Pools that trigger rebalances when the system-wide collateral ratio falls below a threshold (e.g., 130%):

Process​

  1. When global collateralization ratio falls below the safety threshold, the protocol enters stability mode
  2. A rebalance transaction becomes executable by MEV searchers who are economically incentivized to execute it
  3. The transaction swaps haTokens from the Stability Pool for either collateral or hsTokens (depending on pool type)
  4. This improves the collateral ratio and maintains system solvency

Types of Stability Pools​

  • Collateral Stability Pools: Pegged tokens deposited here are used to redeem real collateral assets at 1:1 value based on the oracle price
  • Sail Stability Pools: Pegged tokens deposited here are swapped for hsTokens during rebalancing, allowing accumulation of leveraged exposure

Benefits​

  • Maintains system solvency without auctions or external liquidators
  • Generates organic yield for pool participants through collateral yield and TIDE rewards (75% of protocol revenue)
  • Ensures peg stability and protocol health
  • Transforms market downturns into opportunities for Stability Pool participants

Protocol Workflow​

  1. Minting Process

    • User interacts with the global collateral pool
    • Mints haTokens or hsTokens with 100% collateral efficiency

  2. Stability Pool Participation

    • Deposit haTokens into stability pools
    • Earn yield from collateral and TIDE rewards
    • Provide protocol security
    • Choose between Collateral or Sail Stability Pools based on risk preference

  3. Leverage Trading

    • Users acquire HS tokens
    • Gain protected leverage exposure
    • No funding fees, margin calls, or liquidation risk

  4. Automated Rebalancing

    • System monitors collateral ratios
    • MEV searchers execute rebalancing when triggered
    • Maintains peg stability and system health