In the endless and rapid evolution of DeFi, the skyrocketing algorithmic stablecoin is just a carnival for a few people?
In recent days, Bitcoin has been unable to beat the 20,000 mark for a long time, and the market has made players who play Bitcoin or a mainstream currency very uncomfortable. Some can’t stand the small-scale shocks. The player who fell, turned to the embrace of the contract. What greeted them was naturally the result of a sudden drop in the previous few days and the explosion of billions of dollars.
The DeFi sector is also stunned. Except for the good performance of the AC series Cover and KP3R, the major mainstream DeFi currencies are not particularly eye-catching. However, just a few days ago, the track of algorithmic stablecoins suddenly broke out. In addition to AMPL, which was not low before, a large number of imitators ranged from the old YAM to the rookie ESD, and the market value of Basis, Based, etc. just released. It’s all soaring.
And judging from these hot coins, the investment threshold of blockchain is rising rapidly. Don’t believe me, take a look at the algorithmic stable coins mentioned in this article. How many do you know?
AMPL, YAM, ESD, DSD, Basis, Base…
If you are familiar with it and have made money on it, congratulations, basically you have reached the level of DeFi old farmer!
01
Distressed 2020 newcomers one second first
Sometimes some people feel distressed about the newcomers who entered the circle in 2020, thinking that that year, that is, the last bull market-in 2017, when they were attracted by the money-making effect, they can now be regarded as a group of old investors. Such a situation:
In the 17th meeting, the circle was very simple. New investors spent a few days to understand what decentralization is and what is mining. They basically figured out BTC, and then they learned about smart contracts, and then they probably understood ETH. , Think that BTC is expensive to buy LTC, think that ETH is expensive to buy EOS, NEO, quantum chain and other so-called “ETH killers”, and then everyone uses the blockchain as a hammer to see that everything is a nail, and want to give everything to the center The birth of the love of Western Europe, random buying.
However, regardless of whether it is the primary market, the secondary market, buying BTC, ETH, this “old token” or EOS, this new token, everyone can basically make money, and the so-called many discussions, it is nothing more than PoW or Which PoS is better? Is DPoS more advanced? These are now basic things that cannot be more basic…
New investors who have entered the circle for 20 years and have gone through the DeFi era, if they come later and nothing else, but DeFi has gone through the 6th and 7th generations in this half-year iteration, and you have to understand the evolutionary feeling of these generations. Months…
For example, there is a DeFi classification method like this:
The first generation: MKR, KNC, ZRX-DAI was born, DEX entered the field of vision, the most classical DeFi!
The second generation: LEND, SNX, REN-lightning loans, derivatives, cross-chain appeared!
The third generation: COMP, CRV, AMPL-liquidity mining kicks off! AMPL is here!
Fourth generation: YAM, YFI, CVP-liquidity mining gameplay upgrade! The revenue and governance aggregator appears!
The fifth generation: HEGIC, LIEN, BarnBridge-high-end complex derivatives appear! The concept of graded funds and bonds is here!
The sixth generation: KP3R, COVER, AXIE-Developer crowdsourcing, blockchain native insurance, game + DeFi + NFT…
Seventh generation:…
DeFi is still evolving endlessly…
This year, from 312 to the present, it can be regarded as a bull market. Bitcoin has risen by 5 times. However, the DeFi field stepped on Thundercoin. Because of the loss of liquidity mining, the timing of entry was wrong and it was attacked by hackers. After a series of events, many investors not only did not make money, but also lost a lot.
Unlike in 17 years, what you will buy or increase, any project basically depends on what the vision of the white paper is, what the team is, and who the investment institution is, and then spend money to finish it. There is no technical or conceptual innovation, the only highly popular EOS, the pros and cons of a DPoS mechanism has been raised by everyone from the beginning to the discussion until the mainnet launch, for a whole year! Nowadays, a new DeFi project, even a star project, can last for a month or two, even if it is very good.
It is too difficult for new investors in 2020…
02
Segmentation of algorithmic stablecoins
DeFi has evolved so many generations in less than a year, and as a new investor, what is desperate is that if you take out the small branch of stablecoin in DeFi separately.
You will find that this branch itself has several generations of evolution and iteration…Oh No…
There is nothing to be iterated in the legal currency mortgage type, nothing more than USDT and USDC.
Cryptocurrency mortgage types, starting from the earliest MKR, began to develop in a more complex direction, such as RSR and Terra, both of which are dual Token regulation + a basket of currency mortgage pool types. Lien has even introduced four Tokens and tiers in a “crazy” manner. Advanced financial model of bonds.
Algorithmic stablecoins can be extracted separately from stablecoin iterations (the dolls are both visually sensitive). In the past few months, they have evolved at least three generations:
Generation: AMPL, YAM, Based;
Second generation: ESD, DSD;
Three generations: Basis;
Four generations: There will definitely be…
Generation: AMPL, YAM, Based, Base Protocol
Basically everyone knows that AMPL is the representative, simple and rude flow, that is, the target price of AMPL is $1, then the nominal exchange rate is higher than a certain threshold, and the agreement will increase the number of tokens for all users year-on-year;
If the AMPL price is lower than a certain threshold of the target price, the agreement will reduce the number of tokens held by the user.
AMPL’s biggest contribution is the introduction of the concept of Rebase (flexible adjustment of Token supply)-Tokens are given to you when the price is high (inflation, print money to you), and your Token is deducted when the price is low (deflation, Token is recovered) , Once every 24 hours, until the market reaches a relative balance again, and the AMPL price stabilizes at around $1.
This simplicity of AMPL is both an advantage and a disadvantage. The advantage is that everyone can basically understand it, and the participation is very high. Just as BTC’s PoW is also the most “simple and rude” mode now, it is simple, intuitive, and therefore solid and safe. BTC has been in operation for more than 10 years, and it can be said that there has never been a security problem.
Disadvantages, everyone who has played knows that, the price rises and falls sharply, it is too exciting! When it’s inflation, it’s like turning on a money printing machine every day, lying down and counting money, don’t be too cool…When you are in deflation, watch the coins in your wallet deduct a little less every day.
So in fact, many advanced players who understand AMPL’s mechanism often choose to buy when the upward trend breaks 1 o’clock, and the downward trend breaks 1 o’clock to leave the market, neither enjoying long-term inflation nor putting themselves in a deflationary phase. This is what people commonly call, the master eats the body of the fish instead of the head and tail. Although the profit is less, the risk is also reduced exponentially.
This feature also causes AMPL to look more like a speculative token than a stable currency at present, but as the first generation of algorithmic stable currency, the birth time is too short to be able to conclude the conclusion.
YAM is famous for two things:
One is to bring liquidity mining to a climax;
The second is that famous contract loophole, which caused the project to almost abort.
The mechanism of YAM is similar to AMPL and can be regarded as an imitation of AMPL. The difference is mainly in two points:
One is the fair issuance of liquidity mining;
The second is that 10% of each inflation goes into a treasury fund for community governance. This fund can derive many uses through governance. The simplest is to avoid a long-term death spiral when YAM enters deflation.
Based is also an imitation of AMPL, using liquidity mining distribution similar to YAM, but anchoring the Synthetix stable currency sUSD as the benchmark, there is no unique innovation.
The Base Protocol, which has been extremely popular in the past two days, is actually a generation in nature. It only changed the anchor from 1 US dollar to one trillionth of the total market value of the cryptocurrency, but it was inexplicably promoted and made money by the big V Suddenly, it became popular, with more than 100 million U.S. dollars traded every day. However, in essence, it is still just a generation of imitation disks. Therefore, after two or three days of fire, a group of people entered the deflationary stage, and basically no one cared about it.
Second generation: ESD, DSD
Compared with AMPL, the biggest innovation of ESD is the introduction of the concept of bonds in an attempt to avoid the death spiral caused by long-term deflation of AMPL.
The rebase cycle of ESD is not 24 hours, but 8 hours. The inflation model is the same as AMPL. During deflation, the system launches bonds, allowing users to obtain discounted bonds by destroying ESD (equivalent to buying ESD Tokens at low prices and anchoring them in the future. Priced to sell), when it returns to inflation, the additional ESD will give priority to satisfying all bonds, and then other users.
Of course, bonds also have risks, because the validity period is only 30 days. If the deflation ends within 30 days, the bonds you get by burning ESD will be zero, so the risk is still relatively large, after all, no one can 100% guarantee 30 The system will definitely return to inflation within days.
As an imitation of ESD, DSD has modified many parameters, including the rebase cycle from 8 hours to two hours, single change limit of Rebase, bondholder/LP (liquidity provider) reward ratio, etc., but in essence Said they are all similar structures.
Three generations: Basis Cash
The predecessor was the famous Basis. If it were not for legal restrictions, the first generation of algorithmic stablecoins might have been Basis instead of AMPL. After Basis was cool, the anonymous team took over the project and changed its name to Basis Cash.
Basis Cash has made the Rebase mechanism more complicated and introduced three kinds of Tokens, BAS, BAC, and BAB.
BAC is the stable currency anchored to $1, BAB is the deflationary bond in ESD, and BAS is the “dividend token” during inflation. In other words, the extra BAC from Rebase is not directly distributed to BAC. Holders, but distributed to BAS holders.
BASIS’s liquidity mining is also very interesting, which is reflected in the design of two 2-pools, which are mutually exclusive and absorb each other:
• BAC-DAI pool mining BAS
• BAS-DAI pool also digs BAS
It seems that BAS will bear the selling pressure of two major takeaways, but holding BAS will be assigned to BAC, and the selling part will be transferred to BAC. BAC has the function of digging BAS and mating each other…
A friend who is proficient in algorithmic stablecoins commented on Basis:
“The dual currency design of BAC+BAS solves the problem of ESD single currency hindering liquidity. Because BAC does not have the potential of Rebase, it can be better circulated to a wider range of applications.
The simplest analogy is that BAC=USD, BAB=USD Treasury bonds, BAS=Federal Reserve stocks. The ingenious design of this design is that it has moved the entire US dollar issuance system to the BASIS design. In the design of ESD, ESD simultaneously plays the role of the U.S. dollar and the Fed stock.”
As for the future of stablecoins, he also has an inference, that is, algorithmic stablecoins may go through three stages:
1. Pure Rebase stage, such as Ampl (above generation algorithm type);
2. Simulate the USD bond mechanism stage, such as ESD, BASIS (the second and third generation algorithm types above);
3. Mixed phase: Partial mortgage + part of bond market adjustment (the integration with mortgage-based stablecoins can be the 4th generation that has not yet appeared above).
It can be seen that just to understand the stablecoins in the DeFi ecosystem, you have to understand all the above types of stablecoins, from mortgage to algorithm. With algorithmic tokens alone, you have to know the operating mechanism of Rebase, and have enough knowledge about bonds, USD issuance, liquidity mining and other knowledge points to really understand what the project is doing and find a suitable entry Time to share the pie. It is not difficult to see that from AMPL to ESD to BASIS, this wave of algorithm-based stablecoin players who have eaten meat are all those with a deeper understanding of finance.
03
postscript
Generally speaking, it is like buying a coin 17 years ago and doing nothing. The possibility of suddenly getting rich in two years is getting lower and lower. Perhaps only BTC and ETH can continue this kind of “laying profit”. But its market value is also destined not to grow hundreds of thousands of times as before, and can only get Beta income. To get Alpha income, you must cross the threshold of countless technical and financial knowledge in DeFi.
But don’t get me wrong, it is actually a good thing to have a threshold. When others can’t make it, you can make money that they can’t make. Otherwise, in this blockchain investment field where everyone can get rich easily, what can you guarantee that you will be the second of the two-eighth law, what do you think?
