Zest Protocol is a decentralized borrowing and lending protocol built on Stacks, enabling users to earn yield or access liquidity using Bitcoin-backed assets. The protocol offers two core markets: the Stacks Market (live) and the Bitcoin Market (coming soon). It is designed with a strong emphasis on Bitcoin-native principles, using Clarity smart contracts and integrations that prioritize Bitcoin’s security and decentralization.

Borrowing Overview

Zest Protocol Borrow enables overcollateralized borrowing using sBTC and other supported tokens. Users can lend or borrow directly through the Stacks Market, which operates in a non-custodial and permissionless way. The system draws inspiration from Aave v3 and supports perpetual borrowing terms, isolation mode for collateral management, and two borrowing types: traditional borrowing and E-Mode (efficiency mode).

Traditional Borrowing

Users supply assets like stSTX, STX, or aeUSDC, which may be eligible as collateral (indicated in the app UI). Once collateral is supplied, users can borrow up to 50% LTV, with liquidation occurring if LTV reaches 70% (plus a 10% penalty). Collateral usage is currently limited to one asset at a time under isolation mode.

E-Mode Borrowing

E-Mode allows borrowing up to 80% LTV when using highly correlated assets like STX and stSTX. Liquidation occurs at 85% LTV with a reduced 5% penalty. E-Mode must be manually activated in the interface and only applies to designated collateral types.

Liquidation

If a user’s LTV breaches the threshold, a liquidation event is triggered. Liquidators can repay the borrower’s loan and claim a portion of the collateral at a discount. Zest provides open documentation for setting up liquidation bots.

Yield and Supplying Assets

Lenders earn continuously compounding yield by supplying assets to Zest. Rates are dynamic and based on the pool's utilization rate. The UI displays current APYs and borrowing interest rates, which adjust as supply/demand shifts.

Oracles and Risk Management

Zest uses Pyth Network for price feeds with tight staleness limits (3 minutes) and confidence interval protections. Risk classification of assets follows three categories:

• Collateral assets (e.g. STX, stSTX, sBTC)

• Borrow-only assets (e.g. aeUSDC, USDA)

• E-Mode assets (deep liquidity & correlation)

BTCz and BTC Yield

Zest Protocol Earn (now deprecated) allowed users to mint BTCz by staking BTC via Babylon. BTCz was a liquid SIP-10 token on Stacks, representing staked BTC. BTCz could be deposited and withdrawn using dual-chain wallets like Leather. It may return if native BTC staking becomes more widely supported.

Bitcoin-Native Architecture

Zest is Bitcoin-native by design:

• Collateral and yield are BTC-based (e.g. sBTC, BTCz)

• Built entirely on Stacks L2, secured by Bitcoin

• Smart contracts can read Bitcoin state directly

• Uses no custodians or wrapped Ethereum tokens

• Supports self-custody and Clarity-based trust-minimized logic

This architecture allows users to unlock liquidity and earn yield on BTC without compromising Bitcoin’s core principles of decentralization, transparency, and sovereignty.