Algorithmic stablecoins are hotly discussed, and a look at the operating mechanisms of Ampleforth, ESD and Basis Cash

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The trading volume of algorithmic stablecoins rose rapidly, and the daily trading volume of BASE and Basis Cash on Uniswap was close to 30% of the total trading volume.

Recommended reading: ” Selected Chain News | Understanding Algorithmic Stable Coins: Ampleforth, Basis Cash, ESD and Terra

Original title: “Uniswap No. 1 in Trading Volume: List of Nine Algorithmic Stable Coins”
Written by: BlockBeats

Careful farmers found that the trading volume of algorithmic stablecoins on Uniswap has risen rapidly recently. Among them, Base Protocol’s algorithmic stablecoin BASE has reached 103 million US dollars in the past 24 hours, accounting for 21.72% of Uniswap’s daily trading volume. Basis Cash, the stable currency of the Basis Cash project, and the ownership token Basis Share entered the top ten in terms of trading volume, and together they accounted for 8.04% of Uniswap’s single-day trading volume.

Source: CoinGecko

In addition, AMPL, which had a monthly return of 510%, began to inflate and doubled its assets within 12 days. Its single-day trading volume reached US$5.43 million on Uniswap, ranking 12th.

Rhythm BlockBeats sorted out the algorithmic stablecoins and their respective rebase mechanisms.

Ampleforth (AMPL)

The AMPL stablecoin design mechanism adopts a flexible mechanism. AMPL has a target price. If its target price is $1, and its nominal exchange rate is higher than a certain threshold, the agreement will increase the number of tokens for all users year-on-year; if the AMPL price is low At a certain threshold of the target price, the agreement will reduce the number of tokens held by the user.

The AMPL official website will rebase according to the current target price of AMPL and the price of the oracle (Rhythmic Note: It can be understood as the rebalancing of the token supply). The rebase will be carried out at 10:00 Beijing time every day.

Algorithmic stablecoins are hotly debated, a look at the operating mechanisms of Ampleforth, ESD and Basis Cash

Through the mechanism of AMPL, it can be found that AMPL is not a stable currency in the traditional sense but a way to stabilize its price through game. There is no upper limit on the total number of tokens. If the price is always higher than the target price, the number of tokens will keep increasing. This shows that the market value of AMPL can better reflect the value of AMPL tokens, and users are not buying a constant AMPL token but a share (percentage) of AMPL’s market value.

The special setting of AMPL determines that once falling into the mood of mass price fomo, AMPL’s rapid rise and fall will occur frequently. Through the market value of AMPL, we can also find that, at this stage, AMPL is more like a speculative token than a stable currency.

Algorithmic stablecoins are hotly debated, a look at the operating mechanisms of Ampleforth, ESD and Basis Cash

Empty Set Dollar (ESD)

In the white paper, ESD claims to be a “flexible supply stablecoin”, but its mechanism is more complicated than AMPL. ESD considers itself a decentralized and self-stabilizing dollar, and uses the mechanism of “debt” and “coupons” to make ESD prices closer to the dollar.

In the ESD system, 8 hours is an epoch. After a period, the smart contract will check the price of ESD tokens (through the time-weighted average price algorithm).

When the ESD price exceeds 1 USDC (equivalent to 1 U.S. dollar), the smart contract judges that the market demand for ESD tokens is too high, and more ESD will be issued until the ESD price returns to 1 USDC.

When the ESD price is lower than 1 USDC, the system encourages users to burn ESD tokens by launching “coupons”. Coupons can be purchased at discounted prices. This is a voucher for redeeming ESD in the future (Rhythm Note: The coupon is valid for 90 cycles, which is equivalent to 30 days.) In other words, when the ESD is lower than 1 USDC, traders can lower Buy ESD tokens at a price and sell them at anchor prices for profit. The profit calculation is based on whether the difference between the current market price and the dollar is maintained for a longer time than the trader expected and the ESD has not returned to the dollar. The debt mechanism provides enough time for the system to calculate the decline in demand so that the system can estimate how many “coupons” to issue. Once we return to the fixed exchange rate, the debt will be reset to zero and no new “coupons” can be issued at this time. If the ESD price falls below the anchor exchange rate again, the “coupon” cycle will start again, and debt will accumulate from zero. At this time, the discount of the “coupon” will also become lower.

Currently. The ESD price was 0.98 US dollars, the total debt was 37.38 million ESD, and the total coupon value was 26.64 million ESD.

Algorithmic stablecoins are hotly debated, a look at the operating mechanisms of Ampleforth, ESD and Basis Cash

Base Protocol(BASE)

BASE is the token of Base Protocol, but it is not a USD stable currency, but a cryptocurrency market value stable currency. BASE anchors the market value of cryptocurrencies through a ratio of 1:1000000000000 (1:1 trillion). If the market value of a cryptocurrency is 500 billion USD, then the value of BASE is 0.5 USD.

The target price of BASE is one trillionth of the total market value of all cryptocurrencies: (total market value of cryptocurrencies) x 0.1 ^ 12. When BASE=(cmc x 0.1 ^ 12), the baseline is in equilibrium. When this balance is disrupted, the token supply will be adjusted.

When BASE> (total market value of cryptocurrency x 0.1 ^ 12), inflation causes the price of BASE to fall;

When BASE <(total market value of cryptocurrency x 0.1 ^ 12), deflation causes the price of BASE to rise.

The mechanism of BASE is similar to AMPL. The difference between the two lies in the difference in anchoring assets. However, from the market perspective, the mechanism of deflation and inflation cannot get a good feedback in BASE. For now, the hype of BASE is greater than its actual value.

Basis Share (BAS), Basis Cash (BAC), Basis Bond

The predecessor of Basis Cash was Basis. The original idea of ​​Basis was to create a fair economic system suitable for everyone, and then the project was abandoned due to legal restrictions. After Basis gave up, the anonymous team took over the project and changed its name to Basis Cash.

Basis Cash contains three tokens:

  • Basis Share(BAS)
  • Basis Cash(BAC)
  • Basis Bond

Basis Cash was launched on November 30. Like most stable currencies, BAC is pegged 1:1 with the U.S. dollar, and its price will be managed by two other crypto assets: Basis Bond and BAS. Starting from the end of November, 50,000 BACs will be distributed within 5 days (10,000 per day) to users who deposit five stablecoins (DAI, yCRV, USDT, SUSD, and USDC) into their smart contracts. Daily rewards will be distributed proportionally, and users can retrieve assets at any time.

When the BAC price is less than $1, users can purchase Basis Bond at a certain discount, and users who purchase Basis Bond through the discount will get a certain profit when they redeem their tokens in the future.

When the BAC price is higher than $1, the smart contract will allow the Bond redeemer to directly redeem the Basis Bond. If the transaction price of BAC is higher than $1 after the Basis Bond is redeemed, this will lead to an increase in BAC demand, then new BAC tokens need to be minted, and these tokens will also be distributed to BAS holders.

Algorithmic stablecoins are hotly debated, a look at the operating mechanisms of Ampleforth, ESD and Basis Cash

Although BAC is anchored 1:1 with the US dollar, from the price point of view, it seems that the market does not consider it a stable currency. Pan Chao, head of MakerDAO China, once wrote that Basis is a more dangerous scam than Bitconnect. Basis Bond is not a bond, but Basis’s long futures. Once Basis’s funds are broken and confidence is lost, Basis will enter a cycle of death. Since there is no asset or any credit endorsement, no one believes in Basis and no one buys bonds. Basis is easy There was a run to zero.

YAM (YAM)

YAM is essentially a cryptocurrency with flexible supply. Its supply expands and contracts with market conditions. The initial target is 1 YAM anchored to 1 USDC. On August 13, Yam minted a large amount of additional yCRV during rebase due to a loophole in the flexible supply adjustment contract. Subsequently, YAM announced that it would migrate and hand over the project to the community.

YAM’s current price judgment is based on the time-weighted average price of the two trading pairs YAM/ETH and ETH/USDC on the Sushiswap platform.

When YAM> 1.05 USDC, YAM supply will increase;

When 0.95 <YAM <1.05, YAM will not take measures;

When YAM <0.95 USDC, the supply of YAM decreases.

Based Money($BASED)

Similar to YAM, Based Money also uses an elastic supply mechanism, and $BASED rebases every 24 hours. Unlike most stablecoins that use USDC as the benchmark, $BASED uses the Synthetix stable currency sUSD as the benchmark.

When the price difference between $BASED and sUSD is greater than 5% (ie $BASED-sUSD>5%), a rebase will be triggered and the token supply will increase. If the price difference between $BASED and sUSD is greater than 5%, the rebase will continue to be triggered. For example, if the price of $BASED is 1.20 sUSD on Tuesday night, and the price of $BASED is 1.15 sUSD on Wednesday night, the rebase event can restart.

When the price difference between $BASED and sUSD is less than 5% (ie $BASED-sUSD<5%), then the supply of $BASED will decrease.

Dynamic Set Dollar (DSD)

DSD is mainly improved on the basis of ESD, and its principles are mostly similar. The main differences are:

period time:

ESD takes eight hours as a cycle, while DSD takes two hours as a cycle.

rebase:

The maximum change of ESD token supply in a rebase is 3%, and DSD has removed the percentage limit. At the same time, DSD and ESD are different in the establishment of bond holders and liquidity providers. 80% of the ESD rewards are given to bondholders and 20% to liquidity providers; 60% of the DSD rewards are given to bondholders and 40% to liquidity providers.

Supply/Reward Mechanism:

The formula for ESD supply is:

Algorithmic stablecoins are hotly debated, a look at the operating mechanisms of Ampleforth, ESD and Basis Cash

The formula for DSD supply is:

Algorithmic stablecoins are hotly debated, a look at the operating mechanisms of Ampleforth, ESD and Basis Cash

Coupon validity period:

ESD coupons are valid for 90 cycles, and DSD coupons are valid for 360 cycles. (Rhythm Note: Both are valid for 30 days).

Debase(DEBASE)

There are two tokens in the Debase system, the stable currency DEBASE with elastic supply and the governance token DEGOV. The total supply of governance token DEGOV is 25,000, allowing users to propose new proposals and vote on proposal changes.

The price of DEBASE uses DAI as the benchmark and is queried through the Uniswap v2 oracle machine. When the price difference between DEBASE and DAI exceeds 5% (ie |DEBASE-DAI|>5%), the supply will increase; when the price difference is less than 5% (ie |DEBASE-DAI|<5%), the supply will decrease. Every 24 hours, the contract is rebase. If the price difference exceeds 5% within 24 hours after rebase, the rebase will be performed again.

RMPL(RMPL)

RMPL is a fork project of AMPL, and it also uses an elastic supply model. Its design goal is to finally achieve a stable price of 1 dollar. When the price is higher than $1.05, the total supply will increase. Each shareholder now has more RMPL, which in theory should increase selling pressure and push the price closer to $1. The higher the price, the higher the percentage of the adjusted base. If the price is lower than $0.95, supply will decrease and buying pressure should push the price up to nearly $1 again.

The difference from AMPL is that RMPL rebase uses random time, and RMPL rebase always occurs randomly within 0-48 hours after the last rebase. The average frequency of RMPL rebase occurs approximately once a day.

to sum up

This article introduces a number of algorithmic stablecoins, but from the perspective of the price of the tokens, it seems that they have failed to achieve the effect of stablecoins. It is more like an experiment in the crypto world. Behind the sudden rise and fall is more evidence that the market has not yet reached equilibrium, and the use of game methods such as rebase cannot well make the tokens reach a state of less volatility and tend to be stable.

Perhaps, using pledged mainstream coins to mint stable coins is still the best way to generate stable coins.

Source link: www.theblockbeats.com