Algorithmic stablecoins have been particularly hot recently, especially after the SEC sued Ripple——
Investors’ worries about tightening regulations have further deepened, although in essence it is a distrust of centralized institutions.
And this sense of distrust also spread from Ripple to Tether, which is more important in the crypto world-accounting for more than 90% of the stable currency.
As a stable currency for the transfer between legal currency and cryptocurrency, it can be said to be the cornerstone of supporting the prosperity of the cryptocurrency world.
If one day Tether company thunders, then the entire encryption world will collapse.
This is not impossible.
Tether’s investigations were not less than Ripple, although it did not continue in the end.
But as cryptocurrencies become more and more mainstream financial products, the late financial regulation will come sooner or later.
And so far, the pace has been accelerated.
The significance of algorithmic stablecoins at this time has become more prominent than ever.
2020-test the water
Algorithmic stablecoins are not the only decentralized stablecoins.
In fact, MakerDAO launched the stable coin DAI in 2017, but it requires staking to generate it.
The problem is that the pledged cryptocurrency itself has very large market fluctuations, so it is likely that the user’s assets will eventually be liquidated.
The algorithmic stable currency does not require mortgages, but uses algorithms to regulate the money supply——
When the price fluctuation of the algorithmic stablecoin reaches its pre-set equilibrium point, the contract will be triggered to adjust the supply until the next equilibrium point is triggered.
For example, AMPL, which became popular in the DeFi wave, can be said to be a successful test of the algorithmic stablecoin.
However, AMPL’s stable and flexible supply mechanism is a bit simple and rude-it will increase or decrease the balance of assets in all users’ wallets in the same proportion according to price fluctuations.
Later, Empty Set Dollar (ESD) was adjusted on the basis of AMPL-80% of the newly minted ESD was allocated to people participating in decentralized autonomous organizations, and the rest was allocated to people providing liquidity.
This at least ensures that the balance in the wallet of users holding stablecoins will not fluctuate.
The design of Basis Cash that appeared later was more like a high-end complex financial product.
Basis Cash directly uses 3 tokens to build the entire stablecoin system, allowing stablecoins to belong to stablecoins, and project tokens to project tokens.
Basis Cash is anchored to 1 U.S. dollar, Basis Share is a project governance token, and Basis Bond is a graded income bond.
The three tokens play different roles to meet the different needs of users, investors and speculators, and then maintain the stability of the stablecoin system through mutual coordination.
Rather than like AMPL, “I am optimistic about the algorithmic stable currency, precisely because of its instability.”
It gives speculators a lot of room for short-term arbitrage, but hinders the user experience.
2021-breaking the waves
The evolution of our recovery algorithm stablecoin in 2020 will clearly find that its mechanism is becoming more and more complex, just like traditional financial products.
And because cryptocurrency is still a kind of extra-legal place with experimental nature, the current algorithmic stable currency is more like a fund game.
Getting rich first does not lead to getting rich later, because the price of the former is full of chicken feathers of the latter.
But this is not to sing the algorithmic stablecoin, but the opposite.
Any wave of funding craze comes and goes, it can always wash out real valuable things, just like Polkadot and Filecoin during the ICO period.
According to the current regulatory trend, if nothing else, Tether will be investigated like Ripple in 2021, and is USDT really issued based on a 1:1 reserve guarantee as claimed?
No one knows the answer.
But what we can know is that USDT supply will grow from USD 4 billion to USD 20 billion in 2020, an increase of USD 16 billion.
What we can also know is that almost every time the price of Bitcoin weakens, more USDT will be issued.
At present, almost all the predictions of cryptocurrency in 2021 are optimistic. Then who will fill the gap of USDT withdrawal?
Algorithmic stablecoins are undoubtedly a good alternative.
However, the algorithmic stablecoins that have evolved at this stage are still at a very initial stage, more like a handan learning to traditional finance.
If there is an algorithmic stablecoin that shines in 2021, it must be a stablecoin reconstructed based on the original characteristics of the blockchain——
Just like Uniswap redefines the exchange with 500 lines of code.
The algorithmic stablecoin to ride the wind and waves in 2021, although I don’t know which one it is, it must be the simplest and most returning to the essence of stablecoin.
