What is Papaya?

A Decentralized Financial Infrastructure for Bitcoin

Papaya is a platform with two interrelated products: A Liquid Staking protocol that yields Bitcoin rewards via PoX stacking and a Proactive Market Maker. These protocols are designed to work in unison, providing both individual and institutional users with a more efficient and stable financial platform.

Papaya aims to enhance Bitcoin liquidity and plays a pivotal role in bootstrapping sBTC on the Stacks blockchain.

Problem

There are very few ways to earn native BTC rewards, and Proof of Transfer (PoX), the consensus mechanism on the Stacks network offers a way to earn native BTC yield. The release of sBTC represents a trust minimized peg to BTC, which enables the use of sBTC without the need for KYC/AML in Smart Contracts on Stacks.

In addition to the lack of financial services for Bitcoin, participating in stacking comes with a tradeoff: the STX tokens used for Stacking become illiquid, as they are locked during the Stacking period. This means that the Stacked STX tokens cannot be sold or transferred until the lock-up period is over. While this may not be ideal for users who require immediate liquidity, the potential BTC rewards earned through Stacking can make the tradeoff worthwhile for many STX holders.

Solution

In contrast to “pure stacking”, Liquid Staking refers to a mechanism that allows users to stake their digital assets and receive a tokenized representation of their staked assets in return. This tokenized representation can then be used in various other DeFi applications, while the original assets remain locked and continues to earn stacking rewards.

As mentioned before, Papaya is a protocol that offers two main products: a new way to stake STX and sBTC tokens, and the implementation of an improved market-making system. The staking system lets users lock in their tokens and earn rewards, while the market-making system aims to offer better trading conditions than traditional options. These features are designed to work together, providing both individual and institutional users with a more efficient and stable platform. Both of these products have unique risk profiles, which we will detail later in this paper.

The Papaya platform introduces a unique opportunity in the Bitcoin DeFi space by combining Liquid Staking combined with PoX Stacking yielding BTC rewards.