How Does Granite Work?
Granite is a Bitcoin-native lending protocol on Stacks that lets you borrow stablecoins against your Bitcoin (sBTC) without giving up custody. It uses a soft liquidation model that only partially liquidates positions to restore solvency, reducing the impact on borrowers. The protocol has completed multiple audits, runs a bug bounty program, and integrates Pyth oracles for price feeds.
TVL
$16M
Sector
Lending
Risk Grade
B-
Value Grade
D+
Core Mechanisms
6.1.1
Over-collateralized sBTC-backed stablecoin loans; borrowers deposit sBTC and borrow stablecoins with flexible repayment as long as LTV stays healthy
Standard over-collateralized lending model; no rehypothecation of sBTC collateral
6.3.3
NovelSoft liquidation mechanism that only liquidates back to the point of borrower solvency rather than full position closure
Novel: partial liquidation to restore solvency reduces borrower impact while maintaining protocol health; gentler than full-liquidation models
6.2.2
Interest rate model for stablecoin lending pool; rates adjust based on utilization to balance borrowing demand and LP supply
Standard utilization-based interest rate curve similar to Aave/Compound
6.4.1
Pyth Network oracle for BTC/USD price feeds on Stacks; first protocol to bring Pyth to the Stacks ecosystem
External oracle dependency; Pyth provides push-based price feeds on Stacks
5.2.3
Timelock on sensitive protocol functions; protocol-level safeguards for parameter changes
Standard timelock pattern providing delay before critical changes take effect
8.1.1
sBTC dependency — non-custodial Bitcoin-backed asset secured by Stacks validators via threshold signature on Bitcoin L1
sBTC is the bridge between Bitcoin L1 and Stacks; threshold signature model reduces custodial risk vs centralized bridges
How the Pieces Interact
If sBTC depegs from BTC due to bridge vulnerability or validator failure, all sBTC-collateralized loans become undercollateralized simultaneously, triggering mass liquidations
Soft liquidation relies on accurate pricing to determine solvency boundary; stale or manipulated Pyth price feeds could cause over- or under-liquidation
At high utilization, interest rates spike but LPs may still be unable to withdraw stablecoins; liquidity crunch during market stress
Partial liquidation sells sBTC on thin Stacks DEX markets; slippage during liquidation may be significant, causing bad debt if liquidation proceeds are insufficient
Timelock prevents rapid parameter adjustment, which is generally positive but could delay emergency response if Pyth oracle malfunctions
What Could Go Wrong
- Granite depends on sBTC — a non-custodial Bitcoin-backed asset on Stacks secured by Stacks validators via threshold signatures; sBTC bridge security is a critical dependency
- Pyth oracle integration for Bitcoin price feeds on Stacks introduces oracle dependency; any price feed staleness or manipulation could trigger incorrect liquidations
- Stacks blockchain has lower throughput and longer block times than EVM chains, which could delay liquidation execution during rapid price declines
sBTC Depeg Causing Mass Liquidation Cascade
TailTrigger: sBTC loses its 1:1 peg to BTC due to a bridge vulnerability, validator failure, or loss of confidence in the Stacks threshold signature model
- 1.sBTC depegs from BTC on Stacks DEXs — All sBTC-collateralized loans instantly become undercollateralized relative to actual BTC value
- 2.Mass soft liquidations triggered across all borrower positions — Liquidation cascade sells sBTC into thin Stacks markets, amplifying the depeg
- 3.Liquidation proceeds insufficient to cover stablecoin debt due to sBTC discount — Protocol accumulates bad debt; LP stablecoin deposits partially unrecoverable
- 4.LPs rush to withdraw remaining stablecoins — High utilization prevents full withdrawals; bank run dynamic on lending pool
Risk Profile at a Glance
Overall: B- (30/100)
Lower score = safer