STYX: a covenant CDP on Liquid
Lock L-BTC as collateral, mint OBOL, a USD-pegged debt token. Every rule - who may mint, who may liquidate, what a keeper may take - is enforced by Simplicity covenants on-chain. No federation signs anything. No admin key exists.
1What STYX is
STYX is an interest-free, over-collateralized CDP (collateralized debt position) on the Liquid Network. Where other designs rely on a trusted signer set to authorize vault operations, STYX replaces the signer set entirely with covenants: taproot UTXOs whose spending conditions are Simplicity programs that read the transaction spending them and reject anything outside the protocol's rules. Opening a vault, drawing debt, liquidating an unhealthy position, redeeming OBOL for collateral - each of these is a plain Liquid transaction that any party can build, and the covenant is the only authority that accepts or rejects it.
Liquid is the right substrate for three reasons: it has native issued assets (OBOL needs no separate token ledger), its tapscript introspection with 64-bit arithmetic and CHECKSIGFROMSTACK-style signature checks lets a UTXO enforce its own rules, and Simplicity is live on mainnet. The cost is accepted openly: Liquid is a federated sidechain, and protocol amounts are explicit (unblinded) so the covenants can read them.
The debt token is the obol, the coin paid to the ferryman for passage across the Styx. An obol either buys the crossing or it does not; there is no negotiating with the covenant.
2The promise
The protocol maintains one central invariant: every OBOL outside the pot is backed by at least its share of collateral, or has been genuinely retired. Concretely:
- No one can mint OBOL without locking collateral worth at least 150% of the debt, priced at the most conservative (minimum) quote of a fresh oracle tick.
- No one can take collateral out of a vault except through an operation the covenant prices and caps: an owner-signed operation, a liquidation of a provably unhealthy vault, or a redemption at the peg floor.
- No one can forge mint authority. Every mint is serialized through a single covenant UTXO holding a unique one-unit identity token that exists nowhere else and can never be reissued.
- The OBOL supply is fixed at 100,000,000 forever. Both genesis issuances were made without a reissuance token, so no minting-based bailout is even possible by construction.
- When collateral genuinely falls short, the system degrades gracefully: a stability reserve absorbs bounded shortfalls, and past its depth OBOL settles pro-rata at the true backing ratio instead of rewarding a bank run.
These claims were tested adversarially across several internal audit rounds: an exhaustive covenant-break audit, a fresh-context audit with on-node proof-of-concepts (seven findings, all fixed and gold-standarded), a maturity audit, and two rounds of economic and MEV review. The audit trail is summarized in chapter Ηʹ.
3The three assets
| Asset | Role | Properties |
|---|---|---|
| L-BTC | collateral | Liquid bitcoin, the POLICY asset. Locked explicitly (unblinded) in vaults and in the stability reserve so the covenants can read amounts. |
| OBOL | debt token | USD-pegged, fixed non-reissuable supply of 100,000,000. Debt is denominated in cents. The whole supply lives in the pot; it leaves only against a health-checked vault and returns on repayment, liquidation, and redemption. |
| Identity token | mint authority | A separate one-unit non-reissuable asset held only by the issuer covenant. Deliberately not OBOL's reissuance token - a reissuance token is minting power, and none exists. |
4The four covenant families
All protocol state lives in four families of taproot UTXOs. Their internal key is a nothing-up-my-sleeve point, so the key path is unspendable and the Simplicity leaf is the only way to move them.
| UTXO | Holds | One-line rule |
|---|---|---|
| Vault (one per position) | L-BTC collateral | State (debt, owner, freshness height) is committed in the address itself; every operation must reconstruct a correct successor or close the vault against a full repayment. |
| Pot (one, constant address) | the OBOL supply | Grows freely; shrinks only when the issuer's identity token co-signs the transaction by being spent alongside it. |
| Issuer (one, singleton) | the identity token | The only covenant that reconstructs vaults; every mint and every bad-debt attestation serializes through it. Carries the global mint-freshness anchor. |
| Stability reserve (one, constant address) | L-BTC backstop | Grows from fees; shrinks only for an issuer-attested bad-debt event, and only within a per-vault cap. |
The map of how these reference each other - and why the reference graph must be a DAG - is the subject of chapter Βʹ. An interactive diagram of the whole system accompanies this spec.
5How to read this specification
This specification is the source of truth for STYX v1. It is the narrative synthesis of the design, audit, and economics record behind the frozen covenant, and every behavioral claim in it was verified assert-by-assert against that source before the freeze. Any implementation must match what these chapters state. The covenant source itself ships with the deployed artifacts and is pinned exactly by the golden CMRs in chapter Θʹ; cross-references in the text look like vault.simf:346 and point into it, so a reader holding the covenant files can re-verify any claim.
The v1 covenant source is frozen as of 2026-07-03. The freeze is enforced by a golden-CMR test: any change to covenant behavior flips a commitment Merkle root and fails the gate. The five frozen CMRs are recorded in chapter Θʹ. This site documents v1; a future v2 gets its own versioned spec, not an edit of this one.