Yield-Bearing Assets on Stellar: Unlocking Potential with Soroban

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Introduction to Soroban: Enabling Advanced Finance on Stellar

Soroban represents a pivotal advancement in the Stellar ecosystem, introducing a robust platform for smart contracts that significantly enhances the network’s capabilities.

This innovative layer is not just an addition; it’s a transformative step forward, enabling developers to create more complex, secure, and efficient financial instruments on the Stellar network.

With Soroban, the reach of the Stellar ecosystem can be extended beyond simple transactions and asset trading, diving into the realm of sophisticated financial applications that can cater to the modern demands of the finance sector.

The introduction of Soroban on Stellar is akin to unlocking a new dimension of potential for blockchain technology.

It allows for the creation of new types of applications and expands the existing features capabilities. It can be used to introduce on-chain management of yield-bearing assets, among other advanced financial products, with unparalleled ease and increased security.

By leveraging Soroban, the Stellar network is positioned to offer solutions that rival traditional financial systems, providing a decentralized, transparent, scalable, and programmable platform that meets the needs of a wide array of financial operations.

Soroban’s integration into the Stellar ecosystem reflects a commitment to continuous innovation and user empowerment, helping make financial services more accessible and more efficient for individuals and institutions worldwide.

Stellar Asset Sandbox: Demonstrating Asset Issuance and Innovation

The Stellar Asset Sandbox showcased at the Meridian event in Madrid, stands as a cornerstone for asset tokenization on Stellar, enhanced by the integration with Soroban for smart contracts.

This innovative tool, developed by Cheesecake Labs provides a simple Sandbox environment for businesses to experiment with creating, managing, and distributing digital assets, including smart contracts for yield-bearing assets, with no code required.

Designed for experimentation and learning, the Stellar Asset Sandbox operates exclusively on Stellar’s testnet. Its purpose is to demonstrate the features and capabilities of asset tokenization and smart contracts in a simulated environment. 

Assets created or manipulated within the Sandbox hold no real-world value and should not be treated as such. The Sandbox is designed for experimentation and learning, showcasing how Stellar’s features can be integrated for a seamless asset management experience.

The Sandbox’s user-friendly interface allows for straightforward minting, burning, and management of asset flags, bridging the gap between traditional financial mechanisms and blockchain technology.

The Sandbox not only demonstrates the capabilities of Stellar that allow for straightforward asset management but also its potential for programming more complex financial instruments through Soroban’s smart contract functionality.

As a practical platform for exploring decentralized finance on Stellar, the Stellar Asset Sandbox empowers users to innovate without extensive blockchain expertise, making advanced financial operations accessible to a wider audience.

Advanced Financial Instruments on Stellar: Yield-Bearing Assets

The Stellar Asset Sandbox introduces an innovative feature for creating yield-bearing assets such as certificates of deposit and bonds in a testnet environment.

This feature in the Sandbox allows users to experiment with and understand the complexities and potential of utilizing blockchain for sophisticated financial products.

Concept: Vault-Based Yield Management

The Stellar Asset Sandbox introduces the concept of a vault, which is central to the yield-bearing assets. The vault is a dedicated treasury account in the Sandbox designed to hold and manage the balance of the issued asset.

This vault is critical for interacting with users’ deposits and ensuring a central source for the automated distribution of payouts. In the Sandbox, on top of managing funds within the treasury vault, potential issuers can leverage a smart contract to pay predefined interest rates based on the characteristics defined during its setup.

Furthermore, the Stellar Asset Sandbox provides potential asset managers with easy-to-use, yet intricate and customizable features necessary for effective user fund oversight and tailored management strategies.

Administrators deploying these financial instruments in the Sandbox can define specific rules that govern the operation of the yield-bearing asset, including:

  • Minimum Deposit: Setting the lowest amount users must deposit to participate in the yield-bearing scheme.
  • Term (in Days): Determining the yield period. 
  • Yield Rate: Establishing the return on deposit over its term.
  • Early Redemption Penalty Rate: Specifying the penalty for withdrawing the funds before maturity, expressed as a percentage of the interest earned.
  • Type of Interest: Offering options between simple interest, which accrues linearly over the term, and compound interest, which can be compounded at intervals as short as 10 minutes or as long as 30 days, allowing earnings to be accumulated at each interval.

Within the testnet environment, the Stellar Asset Sandbox enables the exploration of highly personalized financial products.

This highlights the versatility of blockchain for experimentation with various preferences and risk profiles.

Underlying Functionalities: Stellar and Soroban Synergy

The yield-bearing asset feature on the Stellar Asset Sandbox uniquely leverages the strengths of both Stellar and Soroban.

While Stellar excels in managing accounts, moving funds, and issuing assets, Soroban introduces the capability to embed these operations within programmable smart contracts.

This use case highlights the seamless interoperability between Stellar’s traditional asset management system and its new smart contract layer, showcasing a special feature that wraps classic assets in standard asset contracts for use with Soroban.

This innovative approach not only demonstrates the practical application of smart contracts in creating complex financial products but also underscores the flexibility and power of the Stellar network in accommodating a broad spectrum of financial operations.

By integrating classic asset management with programmable contracts, the Stellar Asset Sandbox offers a testing platform for users to explore, understand, and innovate with yield-bearing assets, bridging the gap between traditional finance and blockchain technology.

Step-by-Step Guide: Crafting Yield-Bearing Assets in the Stellar Asset Sandbox

Before we dive into the specifics, ensure you’re registered and signed in to the Stellar Asset Sandbox with an admin role. Sign up or log in here to get started with creating and managing yield-bearing assets.

Step 1: Select Your Asset

Choosing the right asset is the first step in creating a yield-bearing product. This decision impacts the asset’s appeal to potential users and its overall performance.

  1. Using the left-side menu, navigate to ‘Asset Management’:
  1. Here select an existing asset from the list of assets issued in the Sandbox or click on ‘Forge Asset’ to create your own custom asset from scratch. Refer to the Sandbox Knowledge Base for a step-by-step guide on how to issue your own asset.

Step 2: Setting Up a Vault

The vault is essential for managing the funds that back your yield-bearing product. It ensures there’s a secure, dedicated account for yield payments and principal security that issuers can prefund upfront or before payments are scheduled to be made. The chosen vault will be used to manage the deposits and facilitate the payout process for the yield-bearing asset.

  1. Using the left-side menu, navigate to ‘Treasury’
  1. Here select an existing vault from the list that operates with the chosen asset or click on ‘Create vault’ to create your own custom vault from scratch. Refer to the Sandbox Knowledge Base for a step-by-step guide on how to create your own vault.

Step 3: Deploying a Yield-Bearing Asset Contract

Deploying the contract is where the rules of your financial product are defined. This step codifies the terms under which depositors will participate, including how and when they earn returns.

Under the hood, the Stellar Asset Sandbox will be deploying a dedicated implementation of this use case to the Soroban testnet in the form of a smart contract and setting up your chosen parameters in a unique instance to be used in the Sandbox.

  1. Using the left-side menu, navigate to ‘Yield-bearing asset’
  1. In this section, you’ll see the full list of yield-bearing assets created in the Sandbox. Here click on the button labeled ‘New Yield-bearing asset’
  1. Input the personalized configuration with parameters that define the asset terms. Begin by selecting the previously chosen vault and asset, then proceed with the details of the interest mechanism and penalty. Once all fields are populated, click on the ‘Create Yield-bearing asset’ button.

This step may take a few seconds as the Sandbox is automatically running all the necessary steps to deploy a new smart contract, initialize with the custom parameters, and manage the underlying transactions necessary to execute the whole workflow.

Done! You have a Yield-bearing Asset!

Once the Sandbox finishes its process you’ll be directly taken to the list of yield-bearing assets. You should be able to immediately spot your own custom asset in the list showcasing the defined rules for the yield rate.

Now, Sandbox users may access this asset and perform a deposit to engage with its automated interest-yielding mechanism in testnet. With the contract live, all deposits from users will directly go to the vault.

This step showcases how vault managers can implement custom strategies for fund management, balancing security with growth.

Here we invite you to interact with these test assets and monitor the vault’s balance and transaction history to track deposits. This helps demonstrate the importance of developing a strategy for managing the funds within the vault to maximize returns for the depositors while ensuring the principal is secure.

Step-by-Step Guide: A User’s Journey Engaging with Yield-Bearing Assets

This guide continues from the previous one to outline the following perspective on how users can participate in testing yield-bearing assets, from setting up their wallets to making a deposit and managing their position.

Step 1: Setup Your User Wallet

In the Sandbox, let’s begin by creating a digital wallet if you don’t already have one. This wallet will be used to hold and manage your user balance on the Stellar testnet.

  1. On the left-side bottom menu, click on ‘Profile’. This will take you to your user’s profile page.
  1. On your profile page, click on ‘Create my wallet’. In case your user already has a wallet, the button will be named ‘Access my wallet’.
  1. Your wallet page is very similar to a treasury vault and can be managed in the same way, with the difference that only you can access your personal wallet and manage it.

    Here, click on the pencil icon at the right side of the ‘Assets’ header to trigger the editing mode for your balances.

While in edit mode, make sure to select the yield-bearing asset and click on ‘save’. This will ensure your wallet can hold balances of this asset

  1. Now, you just need to send some units of this asset to fund your wallet. This can be done by sending funds from one of the existing vaults in the ‘Treasury’ area if you have treasury management permissions or by distributing directly from the asset main vault, under the ‘Asset Management’ area if you have asset management permissions.

    Once you have funds, you should be able to see the balance by hovering your cursor over the top-right section labeled ‘My wallet’.

Step 2: Perform a Deposit

  1. Using the left-side menu, navigate to ‘Yield-bearing asset’.
  1. In this section, you’ll see the full list of test yield-bearing assets created in the Sandbox. Here click on the asset that contains the interest-yielding rules that you would like to interact with. You’ll be taken to the instrument’s individual page.
  1. Here, one may review the details of this asset. On the right side, input the desired amount and click on ‘Deposit’.

Once your deposit is confirmed, you should see it under the history list as well as real-time updated position on the right side, showing how much interest has been accrued to your deposit.

Step 3: Withdraw

Once you have a deposit in place, watch as your deposit position updates in real time within the Sandbox. This allows you to track the accrual of interest based on the terms of the test asset. As time goes by, the rules are automatically applied, updating the balance of your deposit.

By default, once the term for your deposit is reached, it will stop accruing interest and the ‘withdraw’ button will be enabled to withdraw the full amount.

At any moment, you might decide to withdraw early and take the penalty stipulated in the contract. For that, just select the check box for ‘I would like to anticipate my withdrawal’ and click on ‘Withdraw with penalty’

The withdrawal will be automatically processed and you should see your updated balance as well as the details of your transaction in the history list.

Exploring New Frontiers in Digital Finance

Through the Stellar Asset Sandbox, we’ve embarked on a detailed exploration of creating and interacting with test yield-bearing assets, inspired by traditional certificates of deposit, fixed-income, and bonds, yet innovatively implemented on the Stellar blockchain.

This step-by-step journey has not only demystified the process for administrators and users alike but also showcased the powerful capabilities of Soroban in bringing programmable finance to life.

As we wrap up, remember that the Sandbox serves as a dynamic platform for experimentation, learning, and innovation.

Whether you’re deploying a new financial product as an administrator or diving into the possibilities of blockchain instruments as a user, the Stellar Asset Sandbox is your gateway to understanding and leveraging the Stellar network’s vast potential.

We encourage you to continue exploring and experimenting with what’s possible in digital finance. The future of finance is being written today, and through tools like the Stellar Asset Sandbox, you have the opportunity to be part of this exciting narrative.

About the author.

Fabricius Zatti
Fabricius Zatti

With several years of experience in customer services, my background goes through several areas of technical support, from incident handling and real-time support to on-site service delivery and Knowledge Management through the KCS Methodology, as well as project and product management.