Recently, there have been more and more discussions about algorithmic stablecoins in the market. Why are there so many discussions about algorithmic stablecoins? I think the reasons may be:
1. The stablecoin market is large and profitable. For those who were previously held by institutions, rebase seems to have torn a hole, and everyone can go in and take a look;
2. Algorithmic stablecoins, due to instability, large fluctuations, stories and space for speculation, there will be topical issues. If they are stable, it is estimated that there will be no discussion.
In the track of algorithmic stablecoins, the rise of amplifier has brought the topic of defi native stablecoins into everyone’s eyes. Ampl opened the door to rebase tokens. The market value of hundreds of millions of dollars has opened up the imagination of rebase tokens. There are already many players. Up.
Let’s talk about it, the ESD algorithm stable coin.
1. What is the ESD algorithm stablecoin?
In the ESD project document, they claim that ESD is a “decentralized self-stabilizing dollar”
Robert Leshner, founder of Compound Finance, called it “a new algorithmic stable currency”;
In the ESD white paper, it is also called “Elastic Supply Stable Coin”.
Empty Set Dollar, referred to as ESD, is a synthetic asset, just like MakerDAO’s DAI or Synthentix’s sUSD, the goal is to keep the price stable by tracking the value of the dollar.
The implementation method is to adjust the supply to balance through the rebase mechanism, so ESD is also an algorithmic stable currency and an elastic supply stable currency.
The basic core of ESD is “anonymity” and “selfishness”, which is always consistent with USD.
ESD has a USDC-ESD liquidity pool on Uniswap that will be used as an ESD price prediction machine.
Second, the difference between ESD’s rebase mechanism and AMPL
The ESD algorithm stabilizes the coin, and improves the rebase mechanism of AMPL for better stability.
AMPL’s rebas mechanism is: higher than 1.05 dollars, there will be inflation; below 0.95 dollars, there will be deflation, all AMPL holders are treated equally, and common inflation or deflation.
In the rebase mechanism of ESD’s algorithmic stablecoin, changes have been made:
1. ESD is higher than 1 knife, rebase new ESD. But for all ESD currency holders inflation, but regular inflation to ESD trading pair liquidity providers, the purpose is: to ensure the stability of ESD, but also to ensure the liquidity of ESD;
2. If the ESD is less than 1 dollar, a coupon (coupon) will be issued. Users can use ESD to purchase coupons from the system, and hold coupons in exchange for more ESD when the ESD is greater than $1 in the future.
Note: Bonds are time-sensitive, and time-sensitive is 90 rebases, that is, 30 days after the purchase. If the coupon expires and the ESD does not return to more than $1, the coupon will be destroyed.
3. After ESD generates debts, the new ESD will not be rebase until the “bonds” are paid off. Therefore, when the ESD price returns to above 1USD, the “bond” will be repaid first, and the new ESD will be rebase after the repayment.
3. The purpose of ESD “bonds”
In ESD, buying “bonds” is a game process. If the ESD fails to break through $1 before the expiry of the “bond” and the debt is paid off, it means that all the ESD they have invested to purchase the debt will be lost. If you bet on the right, you will make a lot of money. The income includes:
1. (Below face value) the difference between the ESD transaction price and $1;
2. The additional ESD brought by the “coupon” discount.
The benefits of “bonds” for ESD:
1. Self-created demand: Investors who buy “bonds” can create their own demand. ESD believes that only those with a large amount of capital can effectively use “bonds”: they buy tokens to push up prices and keep prices at anchor Above the exchange rate, until the debt is paid off and the “bonds” are redeemed.
2. Destroy ESD: If after buying a “bond”, before the “bond” expires, the ESD price cannot return to more than $1 and the debt is paid off. The “bond” purchased with ESD expires, which means that the ESD is destroyed by changing directions. Thereby increasing the price of ESD and achieving a stable effect.
ESD is more like a system that combines algorithms with stimulating user behavior to achieve price stability. Therefore, ESD “bonds” are not suitable for small users to play.
AMPL is the originator of algorithmic stablecoins, and ESD is an improved version based on AMPL. AMPL means that all participants can enjoy the inflation and deflation of Rebase, that is, the fluctuation of volume and price; while the rebase of ESD is more designed for large customers to keep the quantity and price of ESD in the hands of ordinary ESD holders stable.
For AMPL and ESD algorithm stablecoins, which one do you prefer?
