How Does Avalon CeDeFi Work?

Bitcoin-collateralized lending with fixed 8-10% borrow rates, using FBTC (1:1 BTC-pegged asset) as primary reserve backing

First major CeDeFi platform offering fixed-rate BTC-backed loans at institutional scale. Fixed rates contrast with variable DeFi lending rates but require centralized rate management and counterparty trust.

USDa is a Bitcoin-backed stablecoin minted via overcollateralized debt positions against BTC collateral, providing instant liquidity without selling BTC

USDa peaked at $530M TVL. Unlike DAI or LUSD which use ETH collateral, USDa is specifically designed for BTC holders seeking stablecoin liquidity. Fixed borrowing rate differentiates from variable-rate CDP protocols.

CeDeFi lending platform bridges centralized finance yield strategies with on-chain BTC collateral management, partnering with Bybit Earn for distribution

CeDeFi model means yield generation involves off-chain strategies that are not fully transparent or verifiable on-chain. Bybit integration provides distribution but introduces CeFi counterparty dependency.

Automated liquidation algorithms sell BTC collateral when positions become undercollateralized, with fixed threshold triggers

Liquidation engine is critical for USDa peg stability. BTC price volatility means liquidation cascades can be rapid and severe during flash crashes.

AVL token with aggressive deflationary mechanism — 80M tokens burned (44% of circulating supply) in June 2025

Massive burn reduced supply significantly but such aggressive deflation raises questions about long-term tokenomics sustainability. 20% of supply was airdropped to early supporters.

Deployed across 20+ blockchains while remaining Bitcoin-native, using FBTC as reserve asset across all chains

Multi-chain reach provides broad access but creates massive attack surface. Each chain deployment requires independent security monitoring. FBTC peg integrity across 20+ chains is a significant trust assumption.

Off-chain yield generation is opaque — if centralized counterparties (Bybit or institutional borrowers) default on obligations, on-chain collateral cannot cover the gap. Users trust that the 8% fixed rate is sustainable without visibility into the underlying strategies funding it.

A sudden BTC crash (30%+) triggers mass liquidations of BTC collateral backing USDa. Cascading liquidations in a falling market could push BTC prices lower, creating a doom loop between collateral value and stablecoin stability.

FBTC's 1:1 BTC peg must be maintained across 20+ chains. A bridge exploit on any single chain could create unbacked FBTC, diluting the reserve ratio for all FBTC holders across the ecosystem. Attack surface grows linearly with each new chain.

Fixed 8% borrow rate assumes sustained institutional demand. If market rates drop significantly below 8%, borrowers have no incentive and revenue collapses. If rates spike above 8%, the protocol bears the spread loss. Rate mismatch risk is asymmetric.

Burning 44% of circulating supply creates short-term price support but may leave insufficient tokens for future governance participation and protocol incentives. Aggressive deflation prioritizes current holders over long-term ecosystem health.