Deep Dive into Thala Protocol: The First DeFi Protocol Built on Aptos' Native Stablecoin
TechFlow Selected TechFlow Selected
Deep Dive into Thala Protocol: The First DeFi Protocol Built on Aptos' Native Stablecoin
Starting from stablecoins themselves, create more product features, use cases, and collaboration opportunities.
Navigating Web3 tides with focused insights
Looking back at the crypto market over the past month, signs of recovery seem to be emerging. Amid various narratives and sector rotations, the performance of the new public chain Aptos has been particularly impressive: in just 20 days starting from mid-January, Aptos’ price surged from $4 to as high as $20, with trading activity—especially in Asian markets like South Korea—becoming notably intense.
Under the axiom of “pump equals justice,” attention tends to focus on market sentiment, with endless discussions about when to get in or out of Aptos. However, in stark contrast to the market frenzy, the actual development of the Aptos chain remains relatively quiet.
Statistics from DefiLlama show that the total value locked (TVL) on Aptos is only $53 million, ranking 31st among all public chains. Moreover, metrics such as the number of ecosystem projects and native stablecoin supply significantly lag behind those of other popular new blockchains.
Longitudinal data comparisons clearly highlight Aptos’ current ecosystem weaknesses, especially the lack of native DeFi and stablecoins. PancakeSwap alone accounts for more than half of Aptos’ total TVL, while USDC dominates the stablecoin market share on-chain with nearly 80%.
By contrast, major blockchains and DeFi platforms such as BSC, Curve, and Aave are actively developing their own stablecoins as part of strategic growth to gain competitive advantages.
Native stablecoins serve as a value anchor within a blockchain’s ecosystem, capable of unlocking liquidity and generating yield—critical elements for building successful DeFi applications and attracting users. The absence of such an anchor on Aptos poses a long-term competitive disadvantage. But where there's a problem, there's also a solution: Thala Protocol has emerged as the pioneering project filling this gap.
Built using the Move language, Thala has launched MOD—"Move Dollar," Aptos’ first native stablecoin, complemented by its own AMM and Launchpad to form a relatively comprehensive product suite.
When Aptos performs strongly in the market, value is more likely to spill over into its ecosystem projects. And repeated patterns in the industry suggest that early movers who fill critical gaps often present higher opportunities—making them worth watching closely now.
On February 25, Thala launched its testnet. After hands-on testing, the full picture of Thala Protocol is gradually coming into view, which we will now unpack in detail.
Stablecoin MOD: Thala’s Value Anchor
In Thala, the stablecoin is the foundation of the entire protocol. To address the lack of a native stablecoin on Aptos, the protocol introduces MOD—"Move Dollar." As the name suggests, MOD is built on the Move language and serves as a store of value, medium of exchange, and unit of account on-chain. It is primarily designed to serve the Aptos ecosystem, enabling seamless interaction with other DeFi protocols within it.
Beyond the name, however, MOD’s underlying design mechanisms are even more noteworthy.
Unlike algorithmic stablecoins such as UST, MOD adopts a DAI-like model based on collateralized debt positions (CDPs) and over-collateralization to manage stablecoin issuance and redemption. CDPs—commonly known as vaults in DeFi—are essentially smart contract-based lending systems.
When users wish to mint (borrow) MOD from the protocol, they must deposit eligible assets as collateral into a vault. When users repay (burn) MOD, they can reclaim their previously deposited collateral. If the total value of the collateral drops below a certain safety threshold, liquidation occurs. Importantly, this collateralization is over-collateralized: users can only borrow less MOD than the value of their collateral, and each MOD maintains a 1:1 peg to the US dollar. For example, to borrow 1 MOD, the required collateral might be worth $1.50.
So, what specific assets qualify as collateral within the Thala Protocol?
According to official documentation, MOD supports both native Aptos and cross-chain assets, with ongoing support for yield-generating collateral types, including but not limited to liquid staking derivatives, liquidity pool tokens (LP tokens), and deposit certificates.
From the current product interface, supported collateral includes USDC, APT, ETH, and BTC. Users can select any vault and click "Manage" to deposit or redeem assets. Additionally, the real-time collateralization ratio displayed in the top-right corner stands around 146%, indicating that the total value of collateral exceeds the total amount of MOD minted.
With an understanding of MOD’s design, we can now map out the broader workflow related to MOD, analyzing its creation, circulation, utility, and stakeholders:
-
Users deposit assets into vaults and mint/borrow MOD via over-collateralization, reclaiming collateral under normal conditions;
-
Holders of MOD can earn yield through staking or rebase mechanisms;
-
Fees generated from borrowing, redeeming, or liquidating MOD—including interest, redemption fees, and liquidation penalties—are directed to Thala’s treasury and distributed to holders of THL, the protocol’s native token;
-
If collateral prices fall below a threshold, liquidation is triggered. At this point, the vault lacks sufficient collateral to cover the borrowed MOD, resulting in a shortfall.
-
To cover the shortfall, the “Stability Pool” comes into play: during liquidations, collateral prices have dropped. Other users can deposit MOD into this pool to purchase the discounted collateral at a discount.
The MOD used to purchase the collateral fills the deficit caused by liquidation, and these MOD providers act as LPs in the Stability Pool, earning rewards in return. On the product’s Stability Pool page, users can see multiple asset rewards available for staking MOD, and simply clicking "Claim" allows them to capture these liquidation-related yields.
Zooming out from MOD’s technical design to its strategic value, its role as a value anchor becomes increasingly evident: starting from the stablecoin itself, Thala creates additional product features, use cases, and collaboration opportunities.
For the Thala Protocol itself, MOD gives users stronger incentives to engage. Whether it’s earning yield in the Stability Pool or leveraging borrowed stablecoins for further yield generation, all activities occur within Thala. Furthermore, transaction fees from borrowing, repayment, and liquidation are distributed to THL token holders, forming a key mechanism for value accrual.
For the broader Aptos ecosystem, the minting and supply of MOD can provide liquidity sources for other DeFi projects, spawning new use cases and utilities. However, it’s important to remember that MOD is still an over-collateralized stablecoin. While fulfilling its anchoring function, it may still face the classic “stablecoin trilemma”—where no stablecoin can simultaneously achieve price stability, decentralization, and capital efficiency.
MOD’s over-collateralization and Stability Pool mechanisms aim to maintain its $1 peg and ensure decentralization through smart contracts. However, over-collateralization inherently reduces capital efficiency, as the excess portion of collateral carries opportunity costs. Once locked up, can these assets generate additional yield and liquidity?
Clearly, Thala recognizes this challenge and aims to address the trilemma through Thala Swap—a DEX built on automated market maker (AMM) mechanics.
Thala Swap: Providing Liquidity for the Stablecoin
To enhance MOD’s capital efficiency, improve liquidity, and expand use cases, Thala has introduced another product: Thala Swap, an AMM-based decentralized exchange (DEX).
Within Thala Swap, MOD serves as the base asset and is integrated into three distinct pool types to generate liquidity, yield, and interactivity under different structural rules.
Weighted Pools: Permissionless Creation with Customizable Token Weights and Counts
Typical AMM pools usually contain only two assets with equal 50% weights. In contrast, Thala’s Weighted Pools allow users to permissionlessly create pools with varying numbers of tokens and customizable weights. For instance, as shown below, users can create a pool with THL, MOD, APT, and wETH, each weighted at 25%.
A key advantage here is increased swap options. With four assets in one pool, each can trade against the others, meaning there are six possible trading pairs among THL, MOD, APT, and wETH. More trading paths theoretically increase user engagement and trading fees, benefiting liquidity providers (LPs).
Additionally, MOD added to these pools has no strong price correlation with other assets, making it a safer choice for pool composition. Since Weighted Pools are permissionless, MOD is more likely to be included in diverse pools, enhancing its liquidity and expanding user strategy options.
Stable Pools: Designed for Pegged Asset Swaps
Traditional AMM pools perform well for diverse asset swaps but struggle in specific scenarios. For example, swapping between wETH and ETH, or stETH and ETH—assets of equivalent value—is inefficient in standard AMMs.
Thala Swap’s Stable Pools take inspiration from Curve’s design, optimized specifically for pegged assets such as stablecoins, synthetic/wrapped tokens, and staking derivatives, enabling low-slippage, low-fee swaps.
As shown below, users can find a MOD-USDC Stable Pool in the Swap interface. Both stablecoins are USD-pegged and typically trade at 1:1. Users can provide liquidity to earn yield or swap one stablecoin for another.
For non-native stablecoins entering the Aptos ecosystem, swapping into MOD via the Stable Pool offers a convenient onboarding path. This effectively facilitates cross-chain liquidity migration into Aptos.
Liquidity Bootstrapping Pools (LBPs): Permissioned Weighted Pools for New Token Launches
The flexibility of Weighted Pools—with customizable asset allocations and weights—makes them ideal for launching new tokens. Similar to Balancer’s LBP design, these special pools guide user participation by adjusting the initial and final weights of two assets over time, influencing price discovery dynamics.
Experienced DeFi users will quickly recognize that this mechanism functions as an improved Dutch auction: if the new token starts with a lower weight, its relative price is higher. As trading progresses, market forces gradually reduce its price until both assets reach equal weight in the pool.
This LBP model enables fairer and more efficient token distribution compared to traditional IDOs, increasing appeal among Aptos ecosystem projects. When new projects seek token launches, the LBP functionality effectively turns Thala Swap into a Launchpad:
Aptos-based projects can directly launch LBPs on Thala Swap, configuring parameters like weights and duration for quick deployment. From the user’s perspective, an LBP represents a live token auction.
As shown above, users can access the Thala Launchpad to view project details, links, token distribution schedules, and participate in auctions using specified assets under prevailing market conditions.
The Launchpad acts as a force multiplier for Aptos’ ecosystem growth: given the ease of pool creation and MOD’s integration, projects are incentivized to launch on Thala Swap, further embedding MOD across the ecosystem.
One plausible vision is that Thala Protocol could evolve into a comprehensive on-chain DeFi platform integrating stablecoin issuance, primary and secondary markets, leveraging MOD and the Launchpad to deepen collaborations with other Aptos projects, attract users through diverse pooling strategies and yield opportunities.
Outlook
Thala’s testnet has only been live for a few days, yet it has already attracted over 25,000 participants. While it’s too early to judge its long-term success, the current momentum suggests Thala has strong potential to refine its product offering.
Even during the market downturn in October last year, the project secured a $6 million seed round led by Shima Capital, White Star Capital, and Parafi Capital, with participation from strategic investors including BECO Capital, LedgerPrime, Infinity Ventures Crypto, Qredo, Kenetic, Big Brain Holdings, Karatage, Saison Capital, and Serafund.
Looking ahead, one undeniable truth is that competition among new blockchains extends far beyond performance narratives. Ultimately, a chain’s strength must be judged by its ecosystem and applications. Thala Protocol, by providing Aptos with a stablecoin, liquidity infrastructure, and ecosystem development tools, is directly addressing Aptos’ most pressing shortcomings.
From a product and design perspective, MOD achieves decentralization and stability through over-collateralization, while Thala Swap enhances capital efficiency—pushing the boundaries of the stablecoin “impossible trinity.” Moreover, the combination of MOD + Swap + Launchpad reveals an inward-outward value flywheel:
-
Internally, MOD gains utility and yield-generating mechanisms, encouraging diverse trading pairs and driving adoption within the protocol;
-
Externally, Thala incentivizes Aptos ecosystem projects to integrate MOD into their treasuries, promoting wider usage across the ecosystem.
As more applications deeply integrate with MOD, Thala will list more trading pairs, deepen liquidity, and host more primary market token launches on its Launchpad—potentially becoming a foundational pillar of the Aptos DeFi ecosystem, with a promising future ahead.
Join TechFlow official community to stay tuned
Telegram:https://t.me/TechFlowDaily
X (Twitter):https://x.com/TechFlowPost
X (Twitter) EN:https://x.com/BlockFlow_News
CryptoDada
