AMPL, holding a gain of 88 times in a month!
I believe anyone who has experienced the DeFi bull market from July to September 2020 will not be unfamiliar with AMPL.
And if you missed AMPL, you would not think that you will continue to miss a series of algorithmic stablecoin projects such as BASE, ESD, Basis Cash and so on in the future.
And there are still many people who are confused about the algorithmic stablecoin, after all, the threshold for DeFi operation is too high.
No time to explain, get in the car! Feel the joy of the instability of algorithmic stablecoins with Mok.
1st generation patriarch AMPL
AMPL (Ampleforth) is the first generation algorithmic stablecoin.
AMPL was issued on the Bitfinex exchange in June 2019 by means of IEO. Since the end of the IEO, AMPL’s price performance has been mediocre. Until June 2020, it announced the opening of its liquidity mining program-Geyser. With the increasing popularity of Defi, its market value will reach in 2020. 2500x increase.
AMPL is designed as an asset anchored to the U.S. dollar. The supply of tokens is adjusted through the Rebase algorithm to ensure the anchoring of its price. The Rebase mechanism of this “flexible supply” cryptocurrency is as follows:
If Pc < Pt-δ, the money supply shrinks, and the amount of all wallet balances will decrease proportionally.
If Pc>Pt+δ, the money supply expands, and the number of all wallet balances will increase proportionally.
If Pc is in [Pt-δ, Pt+δ], no Rebase will occur and the money supply will not change.
Target price Pt, threshold δ and current price Pc. The target price Pt is determined based on the consumer price index CPI in 2019, the current Pt=1.021, and the current price Pc of AMPL is determined by the weighted average (TWAP) of multiple oracles in the market.
Rebase is not a dilution, because all account balances are adjusted proportionally, whether it is a positive adjustment or a negative adjustment. Therefore, the proportion of AMPL held by users to the total amount will not change.
Hierarchical adjustment of supply mechanism:
When a Rebase occurs, the AMLeforth protocol will calculate the target supply based on the current price, and in order to avoid overcorrection, the protocol will not adjust the supply to the target value at one time, but adopts a hierarchical adjustment of the supply strategy.
The above simple explanation of leeks is: if AMPL exceeds 1U, additional issuance will bring the price back to 1U; if the price of AMPL falls below 1U, it will deflate and bring the price back to 1U.
AMPL is not actually an algorithmic stable currency. The accurate definition of AMPL should be a flexible supply of digital currency. AMPL is indeed unstable. Due to human nature issues, when additional issuance, due to the lagging nature of the market, the price will not be corrected immediately. At this time, the holder’s coins increase again, which becomes a double profit situation where the holder’s coins increase in price. This greatly stimulates holders to continue to hold and attract new capital. As long as the consensus is not broken, the market value growth will be multiples of the capital inflow. But conversely, when the price of the currency drops below 1, deflation will occur. At this time, the holder will face a double loss of the currency’s price drop. This will greatly stimulate the holder to sell and curb new growth. Entry of funds.
Under the distortion of human nature, the AMPL mechanism is more like a split disk than a stable currency. This mechanism is very much in need of FOMO emotions. In fact, Mocha participated in AMPL’s IEO at Bitfinex in 2019, and understood this mechanism, but because there was no Fomo at the time, the positive spiral of the mechanism failed. After AMPL launched Uniswap in 2020, in fact, due to the constant product formula of AMM DEX, and the amount of AMPL included Uniswap’s LP pool during rebase, the price will be corrected immediately at the moment of daily rebase. However, the power of human nature has overcome this correction by far. On the contrary, the leeks think it is cheaper and continue to buy, which brings more buying. It is not the mechanism that turns stones into gold, but the Fomo emotions induced by the mechanism.
After the explosion of AMPL, there were a large number of imitation disks. On the basis of AMPL, the anchor objects were modified, the cycle was adjusted, or other micro innovations were carried out. A large number of imitation disks such as RMPL, XMPL, TMPL, REBASE, xBTC, sBTC, etc. gush out.
BASE, which exploded in December, made two major changes:
1. Change the classification adjustment of Rebase to immediate adjustment, and it becomes an accelerated version of AMPL, which brings great excitement.
2. Anchoring the market value of the crypto market brings greater volatility, and volatility makes Rebase more frequent and intense, which intensifies the game.
This change in Base can not help but reminds people of the dividends of decentralized gambling in 2018. The stimulation frequency continues to increase from week to day to hour. Rebase is not a coin, it is the electric shock button of the brain, long live the pleasure of dopamine!
Rebase is so successful that projects like YAM that do not target algorithmic stablecoins also borrowed the Rebase mechanism.
AMPL and its imitation plate grandchildren are considered the first generation of algorithmic stablecoins.
1.5 generation: ESD
ESD is currently the second currency in the market value of algorithmic stablecoins. Its form is between the first generation AMPL and the second generation Basis Cash, so we define it as the 1.5 generation.
ESD has made the following improvements on the basis of AMPL:
1. After rebase, if additional tokens are issued, the additional tokens will not be distributed to AMPL holders directly and evenly like AMPL. ESD holders need to pledge to obtain the newly issued ESD. There are two staking modes, staking a single coin ESD into DAO, DAO will get 77.5% of the newly allocated ESD, and unlocking requires 15 epochs; or staking ESD-USDC-LP into the LP Reward Pool, which will get the newly allocated ESD 20%, 5 epochs are required to unlock. (1epoch=8hours)
This ingenious design requires ESD holders to provide liquidity or reduce their own liquidity in order to get rewards. It is not “for nothing”. This reduces the dumping pressure and improves the stability of ESD. And the number of ESD in Uniswap’s ESD-USDC pool will not be affected by Rebase, and it is easier to drive the positive cycle. Mok thinks this is a better design than AMPL.
2. After rebase, if deflation is needed, do not deflate, and absorb excess liquidity in the market through bonds. These excess liquidity buy Coupon, and the value of Coupon to the purchaser is when ESD is reissued , Will be given priority to Coupon holders.
It is worth noting that there is a one-month time limit for Coupon. After the time limit is reached, it will be invalid if it is not issued. Although the community believes this is a mechanism that hinders user entry. But for the system, this is another degree of correction.
The bond model actually uses future earnings to fill the current shortfall. Bond buyers save the system’s shortfall by sacrificing their own liquidity and get future rewards.
One thing that has been criticized in the design of Basis is that when encountering extreme market conditions, deflation and then deflation, if a large number of bonds are generated, the system may not be able to rely on self-repair to generate positive rebases to fill the gaps in these bonds. A large number of shortfalls will panic the newly entered funds. A Dead Time for bonds may be one way.
2nd generation: Basis Cash
Basis Cash is the second-generation algorithmic stable currency. It is not actually a new thing.
Basis is an algorithmic stablecoin project that raised more than 100 million U.S. dollars in 2018. It was originally named Basecoin, and it was later withdrawn due to the issue of US SEC regulation.
Basis Cash draws on the design of Basis and adopts YFI’s fair distribution model based on it.
The Basis Cash agreement includes three tokens (Basic Cash (BAC), Basis Share (BAS), Basis Bond), Basis Share and Basis Bond aim to move Basis Cash towards the price of 1 U.S. dollar. It uses three tokens to achieve inflation and deflation: BAC against real-life U.S. dollars, BAS against stocks with Fed voting rights and dividend rights, and BAB against U.S. dollar bonds. At the same time, it introduces the stalemate caused by the design of ESD bonds. Bond dividends. The mechanism is as follows:
When the trading price of Basis Cash is lower than 1 USD, users will be able to purchase Basis Bonds bonds at the price of BAC*BAC to ensure the stability of BAC prices. The purchased bonds can be redeemed at a ratio of 1:1 when the price of BAC is higher than $1.
When the trading price of Basis Cash is higher than US$1, the contract will first redeem the Basis Bonds to adjust the price of BAC. If the price of BAC is still higher than US$1, the contract will cast a new BAC and redeem it first. BAB is then allocated to users who pledge BAS in Boardroom.
In YFI’s distribution model, we call the pool of YFI deposited in stablecoins as pool 1 and the pool that deposits in YFI-DAI-LP as pool 2.
The Basis Cash model is a pool of 5 stablecoins that lasts for 5 days, then the 2 pools produce BAS for BAC-DAI-LP, and the 3 pools produce BAS for BAS-DAI-LP. The output cycle of 2 and 3 pools is 1 year.
Staking BAS can get additional BAC rewards. We will find two links:
Holding BAC market-making output BAS;
Hold BAS pledged dividend BAC.
Isn’t this the “Ladder Cloud Vertical”, left foot on the right foot, right foot on the left foot, the To the moon elevator, the inner loop of the Russian doll, the Mobius belt, the endless cycle of wealth.
On the other hand, because BAB=BAC*BAC, when the price of BAC oversold, there will be great arbitrage space. This arbitrage space will curb the decline of BAC. We call it “Tizyunzong 2.0” above. The self-feedback enhancement design like Basis Cash has attracted a lot of speculators.
Of course, there is an implicit risk. The greater the arbitrage space of BAB, the greater the deficit generated by the system, and the more funds that need to be subsequently entered. When the system arbitrage deficit is too large, the system may be the same as ESD Cannot repair itself.
The Davis double-click (kill) effect of all algorithmic stablecoins is particularly powerful, and all require a strong consensus to support the positive cycle, or there is a strong financial behavior to reverse emotions. In Basis we see a Mingzhuang, Huang Licheng (founder of SWAG/CREAM/MITH). We witnessed that when BAC first crashed to 60DAI, Huang Licheng’s address was crazy buying. At that time, almost everyone in the community thought it was about to collapse, but when the price of BAC stabilized, BAC and BAS returned to the positive feedback link.
We are not encouraging readers to get on the ESD or BAC and BAS now. These projects are full of huge gaming and risks (returns). Therefore, we do not intend to share the arbitrage strategy of algorithmic stablecoins in this article. Years of experience in the cryptocurrency circle tells us that the crypto world rewards those pioneers. YFI once collapsed, but then 1YFI>1BTC; LEND was once no one cares, but after Nirvana was reborn, it created 100x glory. At the beginning of 18 AMPL, no one thought that it could make a comeback. Although there are so many imitation disks after AMPL, without exception, it has become AMPL’s nourishment. Innovation is value, and delivering innovation is also a value.
In the DeFi era of blockchain, funds are more enthusiastic to return these projects that bring real value. We are swimming on the cusp of blockchain innovation, and what we can convey is very pale. Talking about too many blockchains is not as profound as buying the first BTC. The taste of love can never be conveyed by words. Don’t trust, Verify.
Ironically, these so-called algorithmic stablecoins have never been stable. It doesn’t matter, no one cares. After all, under the name of the so-called algorithmic stable currency, the restless hearts of you and me are surging. The designers of these algorithmic stablecoins did not expect that their designs would eventually become our hype tools.
Funds never sleep.
