Algorithmic stable currency is a false proposition? AMPL is not an algorithmic stable currency?

The term algorithmic stable currency has been mentioned more and more times since June 2020, and projects related to algorithmic stable currency are also emerging in an endless stream.

Many people are not so unfamiliar with algorithmic stablecoins. After all, algorithmic stablecoins have gone through 5 generations, as follows.

Generation 1: Rebase, such as AMPL, base, etc.

Generation 2: Introduce bonds, such as ESD, DSD, etc.

Generation 3: Introduce the bond + equity model, such as BAS, BAGS, etc.

Generation 4: partial reserves, such as FRAX, etc.

Generation 5: PCV mode, such as FEI, etc.

So is there a future for algorithmic stablecoins? The stable currency track is a big track, and it is also a very important part of the ETH financial system.

For ether, once it has an independent stable currency, ether can have a truly independent banking system. Non-anchored stablecoins can be invested in DeFi currency markets and yield aggregators. It's like the banking system in the traditional financial system, where individuals and institutions deposit their currency in banks in exchange for deposits that the bank promises to return at any time.

The circulation of TRON’s decentralized algorithm stablecoin USDD has exceeded 200 million: According to the latest news, the circulation of TRON’s decentralized algorithm stablecoin USDD has exceeded 200 million.

USDD (Decentralized USD) is a decentralized algorithmic stablecoin initiated by TRON’s joint reserves and blockchain mainstream institutions. USDD runs on the TRON network and is connected to Ethereum and Binance Chain through the BTTC cross-chain protocol, and will be connected to more blockchains in the future. USDD uses TRX to peg to the U.S. dollar (USD) and maintain its price stability to ensure that users can use a stable, decentralized digital dollar system that guarantees financial freedom. [2022/5/7 2:56:49]

Here is an intuitive comparison between the Ethereum currency system made by Zhang MESSARI and the dollar system under the gold standard, as shown in the figure below.

The average increase of algorithmic stablecoins today is 1.00%: Jinse Finance and Economics quotes show that the average increase of algorithmic stablecoins is 1.00% today. Of the 8 currencies, 6 rose and 2 fell, among which the leading currencies were: BAC (+6.78%), ONS (+4.42%), and LUNA (+4.11%). The leading currencies are: MITH (-3.86%), FRAX (-3.72%), BAGS (-1.51%). [2021/9/12 23:19:38]

An independent stablecoin is of great significance to the Ethereum ecosystem, and its future market value is also very large. This is why many people believe that the stablecoin track will be a trillion-level market in the future.

Two points to discuss next:

1) Do algorithmic stablecoins have a future? Personally not optimistic

2) AMPL is not an algorithmic stable currency, a low-volatility currency, and has the opportunity to explode again.

Before discussing, let’s briefly describe the situation of algorithmic stablecoins:

Algorithmic stablecoins have an average increase of 4.14% today: Jinse Finance and Economics quotes show that algorithmic stablecoins have an average increase of 4.14% today. Among the 8 currencies, 8 rose and 0 fell, among which the leading currencies were: RSR (+13.28%), MITH (+12.51%), and LUNA (+12.25%). The leading currency is: BAC (-20.88%). [2021/7/21 1:07:34]

1. AMPL, with a circulation market value of 340 million US dollars and a unit price of 1.2 US dollars;

2. ESD, the circulation market value is 82 million US dollars, and the unit price is 0.15 US dollars;

3. BAS, its stablecoin BAC has a circulating market value of USD 16 million, with a unit price of 0.29, and its equity currency BAS has a market value of USD 15 million, totaling USD 31 million;

4. FRAX, its stable currency frax has a circulating market value of 113 million US dollars, with a unit price of 1 US dollar, and its equity currency FXS has a market value of 59 million US dollars, totaling 172 million US dollars;

The average drop of algorithmic stablecoins today is 0.01%: Jinse Finance and Economics quotes show that the average drop of algorithmic stablecoins today is 0.01%. Among the 8 currencies, 4 rose and 4 fell, among which the leading currencies were: LUNA (+23.04%), FRAX (+3.32%), RSR (+0.95%). The leading currencies are: ONS (-16.88%), AMPL (-5.42%), BAGS (-4.14%). [2021/2/8 19:13:43]

5. FEI, its stablecoin Fei has a market value of US$1.495 billion in circulation, with a unit price of US$0.73, and its governance token TRIBE has a market value of US$435 million, totaling US$1.930 billion.

For the first to third generations, only AMPL can return to $1.

Frax of the 4th generation is partially mortgaged and can be redeemed, so the price is relatively stable at $1.

The fifth-generation Fei has become a water prison, locking a large amount of funds in the agreement. Since its launch, the price has not returned to $1.

Huobi ecological chain algorithmic stablecoin project BAG lock-up exceeded 150 million US dollars within 24 hours of its launch: data on the Huobi ecological chain Heco chain shows that the locked-up amount of algorithmic stablecoin project BAG on the ecological chain has exceeded 1.5 within 24 hours billion dollars. [2021/1/7 16:37:35]

From this point of view, only AMPL and Frax can still play.

From another perspective, what is important for stablecoins? Personal understanding:

1) Reasons for use: Why choose you instead of USDT;

2) Usage scenario: The larger the usage scenario, the larger the market value, such as USDT and USDC.

3) Consensus establishment: The consensus of USDT is larger than that of USDC.

For algorithmic stablecoins, it is difficult to satisfy the first rule, why?

For stablecoins, what everyone is planning is his stablecoin, which does not fluctuate; for BTC, ETH and other currencies, everyone is planning to increase by 10 times, 100 times, etc.

For algorithmic stablecoins:

1) Unstable, as can be seen from the above data, only FRAX can maintain a small fluctuation below 1 for a long time;

2) Fluctuate, but only fluctuate downward, such as Frax, Fei, etc., because when the upward fluctuation exceeds 1 dollar, someone will arbitrage the price.

Can it be said that holding an algorithmic stablecoin and enjoying one-way fluctuations, that is, fluctuations in the direction of losses, does everyone still have the motivation to hold it and use it? It is estimated that it is difficult. A stable currency that no one uses, even if it is really stable, what is the use?

It should be noted here that AMPL is not an algorithmic stable currency. It is a low-volatility currency. If the market value expands, it will be a currency that looks like a stable currency.

AMPL is called the first-generation algorithmic stable currency, but AMPL is not an algorithmic stable currency. AMPL is a base currency with low unit price volatility.

In the official introduction of AMPL, it looks like this:

1) AMPL is like Bitcoin, except it can be used in contracts.

AMPL is a cryptocurrency and financial building block. Like Bitcoin, it is algorithmic and unsecured. However, unlike Bitcoin, AMPL can be used to name stable contracts.

2) AMPL vs Stablecoins

Since the goal of the decentralized finance movement is to create an alternative financial ecosystem that is beyond the reach of politics. "

Stablecoins either 1) rely on traditional banks, or 2) rely on lenders of last resort. "

AMPL is an independent financial primitive that does not rely on centralized collateral or lenders of last resort. Just like Bitcoin, the difference is that it can be used in contracts. "

AMPL is not an algorithmic stablecoin, but if AMPL wants to explode, someone still needs to use it. If it is used in DeFi, the more scenarios it uses, the bigger the explosion will be. A logic for this personal analysis:

The core of BTC is the consensus, which is the consensus of scarcity. It is halved every 4 years. Halving means that the scarcity is stronger, and there will be an outbreak cycle;

The core of AMPL is consensus, which is the consensus of usage scenarios. One application scenario will be released in one year, which means that the usage scenarios will become larger, and there will be an outbreak cycle

There is also a question to answer for AMPL, will users use AMPL?

First of all, AMPL is not a stable coin, but a low volatility coin. Using AMPL may be like hyping currencies such as BTC for profit.

Secondly, what can users do with AMPL? This is the problem that the project party needs to solve, to find more application scenarios for AMPL and increase the market application of AMPL.

The first application scenario that the project party is looking for for AMPL: liquidity mining, which is also the first liquidity mining in the DeFi ecosystem.

The project team is looking for the second application scenario for AMPL: lending + cross-chain. At present, both lending and cross-chain have been developed and passed the audit, but they have not been launched yet, and it has been entrusted for a long time.

Is there any difference between AMPL's lending analogy and USDT? Borrowing 1 AMPL and repaying 1 AMPL + corresponding interest at maturity, that is to say, if AMPL is higher than 1, then a large amount of AMPL can be arbitraged. After all, AMPL will eventually return to around $1. If you buy AMPL from the market around $1 and return it back, you can complete an arbitrage. If there is arbitrage, there will be demand. What other tricks can you play with borrowing? Look at the creativity of the market.

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