From price speculation to market value speculation, one article to understand the concept of Internet celebrity-algorithmic stable currency

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This may be a bull market that does not need leeks so much.

Hello, everyone, I’m Pepe. After two months of baptism, the defi market has gradually recovered, but now the core thing of defi is not a new thing. Not to mention the old coins, just mortgage eth in the maker to generate dai Has been in business for several years. Farm has driven the popularity, but it is still a variant of “XX means mining”.

When it comes to innovations in 2020, it may be none other than “algorithmic stablecoins.”

In this summer, the amplifier became a hit, letting the wine and food know that there are still such magical currencies in the market. No need to look at the price, as long as the market value increases, it can multiply increase and earn ten times the income. Here seems to be re-issued:

从炒价格到炒市值,一文了解网红概念——算法稳定币

Special note: This aunt has nothing to do with the Hot Wheels community.

After ampl, a lot of imitations were not unexpectedly popped up, and some improved coins appeared in the past few months, forming an algorithmic stable coin sector. Today, let’s take advantage of this enthusiasm and talk about such projects on the market. To see what is the difference between them.

Algorithmic stable currency, some people call it flexible cryptocurrency, unsecured stable currency, it is a kind of Kazakhstan, one of its goals is to solve the pain points of the stable currency market.

Stable coins, if you have read our first two articles, you should understand the importance of stable coins to the crypto world. It can be said that a large part of our hundreds of billions of market value is built on stable coins, but many people will It is said that the centralization like USDT is opaque and there are regulatory risks, while those like DAI that are generated through collateral have a chain of liquidation risks.

Is it possible to say that we use machine algorithm smart contracts to build a currency that anchors the value of legal currency? Today’s algorithmic stable currency is an attempt in this direction.

To talk about the mechanism of algorithmic stablecoins , we must understand one word: rebase , which means that the market price tends to the target price by updating the circulation.

The setting of most projects is that when the currency price is greater than $1.05 (this standard is slightly different for each project), it is believed that the market demand will increase, and a certain percentage of the currency price will be issued to restrain the market price.

When the price of the currency is less than US$0.95, it is considered that the supply exceeds demand, and a certain percentage is reduced to increase the price.

Through repeated rebases many times, the currency price approaches the dollar price.

For investors, the focus of this type of currency is not to buy low and sell high, but to the compound interest generated by continuous issuance when the price enters a positive cycle of micro-inflation. You may see that the currency price has been 1.1, 1.2U but The asset prices of the back holders have doubled five or six times, so this type of project needs to pay more attention to market value fluctuations rather than just prices.

To understand the algorithm currency currently on the market, you can view it from the following link of coingecko:

https://www.coingecko.com/en?category_id=rebase-tokens&view=market

从炒价格到炒市值,一文了解网红概念——算法稳定币

Currently, there are about 11 types of transactions included. Today we will talk about the main ones.

1. AMPL

Needless to say, this should be familiar. Regarding AMPL data, one is:

https://www.coin-tools.com/ampl/ampl-rebase-history/

从炒价格到炒市值,一文了解网红概念——算法稳定币

Here is a record of the increase and decrease ratio of daily rebase (once a day at ten in the morning), like today is +2.63%, that is, the currency volume of all currency holding addresses directly increases by 2.63%, here does not involve transfer and distribution, it is directly through the contract Change the amount of currency held in the address.

The other is the databoard of the official website:

https://www.ampleforth.org/dashboard/

There are a lot of data in it, if you are interested, go and take a look. The picture below shows a change in market value:

从炒价格到炒市值,一文了解网红概念——算法稳定币

The death cycle lasted for two months. It started to pick up in early November and has now grown to a market value of 350 million. Of course, this is somewhat related to the team and community actions. In addition to the development of multi-chain, a project called Geysers was also opened last month. (Geyser) plans to allocate 3.9 million AMPL from the ecological incentive part of his tokens to the liquidity market makers on the three platforms of SushiSwap, Balancer and Uniswap.

从炒价格到炒市值,一文了解网红概念——算法稳定币

The above is a rate of return of the current market making, but note that this does not calculate the free loss caused by price fluctuations.

2. YAM

The market value of AMPL once surprised the audience, but his family still had a lot of design problems, so some “imitation disks” with micro innovation appeared. Among them, one of the most popular in the community is the sweet potato coin YAM. .

从炒价格到炒市值,一文了解网红概念——算法稳定币

At that time, it was the defi agricultural mining boom. Maybe many of my friends only cared about the income. They ignored that what his family did was actually a flexible currency, but compared to the traditional private equity financing method of amplifier (early investors, team, ecology, etc.). To 70%), Sweet Potato is taking this year’s most popular community mining route without pre-mining and no fundraising.

In addition, the rebase is twice a day (4 am and 4 pm). At the same time, YAM has also added a reserve mechanism in the design. 10% of the additional issuance will be replaced by ycrv (the lp token of the stable currency trading platform curve) as a community reserve enough for follow-up Development and use, and YAM also adds governance functions.

However, it’s a pity that not long after the launch, I encountered a rebase vulnerability, which resulted in a large number of YAMs being cast in the reserve. During that period of time when fresh miners were generated every day, the opportunity for Internet celebrities was fleeting, which made Sweet Potatoes directly from The king fell to bronze. The following picture shows the trend of YAM:

从炒价格到炒市值,一文了解网红概念——算法稳定币

YAM has always been supported by the community. Recently, due to the influence of algorithmic stablecoins, the price has returned to just above 1U.

3. ESD

The full name of ESD is Empty Set Dollar, which is currently the second largest unsecured stablecoin by market value. It was very popular two months ago, with the highest price reaching $15.

His home is rebase three times a day, once every eight hours, the middle section is called an EPOCH.

The biggest difference between esd and amplifier is that neither additional issuance nor reduction does not change the number of each account through the contract, that is, if you buy esd, it is the same as buying other erc20 tokens. When additional issuance, only the mortgage is on the official contract address. The currency can be distributed to the income, and the income also needs to be collected by yourself.

In the case of deflation, it will not directly deduct the currency in the account. There are two concepts here. One is debt debt . When the esd is less than $1, the system will form debt according to the reduction ratio, and wait until the price returns to less than $1. On the other hand, the amount of additional issuance is used to offset these debts until the debt is cleared before starting to allocate additional issuance to currency holders.

The other is Coupons coupons , which give different discounts relative to the current price of esd according to the length of time the price is below 1U. The longer the time, the greater the discount, and users in the system can buy the esd in their hands. This coupon can be used to redeem the esd to earn the discount difference after the issuance cycle. The main purpose of this design is to use speculative driving force to prevent staying under 1 dollar for too long and the system generates too high debt.

从炒价格到炒市值,一文了解网红概念——算法稳定币

The above is data from the esd debt and coupon market, which is still struggling in a debt cycle.

One of the benefits of this design of esd is that there is no traditional rebase to increase or decrease tokens. Relatively speaking, the scalability is better. It can participate in mortgages, liquidity pools, etc. like any other non-algorithmic tokens (this is still very important) , And the access of amplifier to any third party will be a bit more complicated. For example, when the amplifier/eth is rebase in Uni every day, the amount of amplifier will change, but the eth will not change, which will also cause instant arbitrage behavior. Although ampl is very popular so far, it is doing liquidity mining and has not really penetrated into the defi lending field.

The other is relatively mild. It won’t be said that when the currency price drops again, the currency in the account is still decreasing.

However, the pit of esd is also very deep. Its discount coupon has a mechanism much like an option. There are only 90 EPOCH, which is a 30-day validity period. After buying, if the currency price does not rise back to 1U within one month, it will be directly returned to zero. Up.

This is a bit of using gamblers to reduce the “bubble”, but according to their original idea, they should not buy coupons for wine and vegetables, but for large buyers who can buy, and they are confident that they can bring the price back to buy. The coupon is very cool, but goose, reality is possible. .

从炒价格到炒市值,一文了解网红概念——算法稳定币

Judging from the evaluations of people close to the community, it seems that there is a force deliberately holding down the price, that is, hoping to directly harvest those who bought the coupons. So this project, at present, has some features and advantages, but the water is still deep. .

4. Basis Cash

从炒价格到炒市值,一文了解网红概念——算法稳定币

This is an algorithmic stablecoin project that has been particularly popular recently. His family has three coins, bacbasbab, and many friends say they don’t understand it. In fact, if you look at esd about it, it is easy to understand, because it is based on esd. Improved.

Depositing the esd to the official address to obtain additional issuance and debt mechanisms were made into two currencies, bas and bab, respectively. bac is the main currency and anchored at 1 dollar. If it is exceeded, the issuance will be reduced. The additional issuance will only be given to Bas. Holders, when it is reduced, BAB is similar to esd coupons, which can be bought and redeemed after the price rises.

According to community experts, this is expected to alleviate the current dilemma that esd is facing, but it is only the first wave of mining, and it has not started to increase or decrease, so whether it is the optimal solution or not, still needs to be practiced.

Of course, pay special attention to the current price of more than 170 U of bac, which will eventually anchor 1U. . There shouldn’t be much to say here, besides, I feel there are pictures in my mind.

And the reason why it is so popular is because the initial issuance took the same number of communities as YFI. It was mined through stable coins such as DAI, yCRV, USDT, SUSD and USDC, and BAC only had a starting amount of 50,000. With 2 pools opened, BAS can be obtained by using BAC for liquidity. BAS is also a hard-to-find dividend coin, and the initial issuance of such a high bac price will be very high. It will naturally be crazy that so many conditions are intertwined.

But what happens in the end depends on the fight of the big players. I remind once again that although this project is a popular fried chicken, it is very risky.

Conclusion

Regarding algorithmic stablecoins, there are some. For example, there is a little hot recently called base. It is not anchoring stablecoins, but anchoring the total market value of the encrypted market. There is also a DSD, which is an imitation of esd. The space limit will not be detailed one by one. Those who are interested can check it.

1. Opportunities for algorithmic stablecoins, one is that they are basically not listed in the big stocks at present, which is a potential hype point, and the other is to look at the market value, and bet they can float. Wave, but this is also the coexistence of risks and opportunities. Small projects may have strong explosive power, but they are not as strong as the consensus of hundreds of millions of dollars like amplifier. The probability of death cycle is greater, and those with large consensus may be able to come back to life. Can’t tell.

2. Regarding algorithmic stablecoins, no matter what they are anchored to, and no matter how big their ambitions are, they are now one in the early stage and the other is very speculative. Many people like bac and recent base may not even know what it does. Just rush in. The more apparently high-yield, the more it can kill people intangible. Especially now, there seems to be a trend that no matter what you do, initially set a very small amount and an exaggerated increase. Friends of the two articles should know that those big investors with low-cost leverage on the Ether, who have no funds or information advantages, are more likely to participate in a social experiment with real money.

3. The goal of algorithmic stablecoins. Ambitious projects will not stop at speculation. It is to replace traditional stablecoins, at least partially, but these coins also have various mechanism problems, which are still in the experimental stage. Who is good and who is not, I don’t think there is a final conclusion, and it is possible that this road will not work. The problem now is that not only did they not really solve the death spiral, but also did not solve the problem of the moat, because every stability depends on The funds behind the consensus, but if many copies pop up all at once, it is possible to diversify market funds.

There is also a concept given by the milk kings that the dynamic increase and decrease of algorithmic stablecoins can maintain purchasing power, but for users who buy at different market value stages, there is obviously a big difference, although their costs may all be around 1U.

And if they can actually participate in the most core mortgage lending in the future (not currently involved, I don’t know because this is not a wave of people, or some contract conditions), whether it is used as collateral or borrowed like U, This may become a way of printing money based on market value. Although many fiat currencies are not fully anchored, I don’t know if this is appropriate or if there are regulatory risks. It’s just that if that’s the case, the insiders There is more money, so we say that this may be a bull market that does not need leeks so much.