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When a stablecoin has no anchor target, is it still a stablecoin?



Stablecoins are an important part of the cryptocurrency ecosystem, and they have contributed a lot to the DeFi boom from 2020 to the present, providing most of the liquidity for various DeFi projects. According to The Block's stablecoin report Stablecoins: Bridging the Network Gap Between Traditional Money and Digital Value, in 2020, there will be 110 million stablecoin transactions on the public chain, and the stablecoin transaction volume will exceed $1 trillion. There are currently three main types of stablecoins on the market: fiat currency-backed stablecoins, encrypted asset-backed stablecoins, and algorithmic stablecoins. The Block pointed out in the report that 93.6% of the current total stablecoin supply is fiat-backed, 4.8% is encrypted asset-backed, and only 1.4% is algorithmic stablecoins. Although the market share is very small, the algorithmic stable currency, as an important part of the blockchain ecology, has once again entered the public's field of vision since the summer of 2020, and people have begun to explore more decentralized, higher capital efficiency, and even no Any stablecoin model anchored to the target. The picture comes from The Block's Stablecoin Report Classification of Algorithmic Stablecoins Algorithmic stablecoins are sometimes called non-collateralized stablecoins, but this statement is not accurate. Non-collateralized stablecoins are just one of the algorithmic stablecoins. According to the current market situation, Ryan Watkins, an analyst at Messari, divides algorithmic stablecoins into three categories: Data: 30,000 ETHs were transferred from unknown wallets to Huobi: Golden Finance Report, Whale Alert data shows that 30,000 ETHs (worth about 37,352,747 USD) from an unknown wallet (0x18...a12e) to Huobi. [2022/11/13 12:58:25] Unsecured type, such as ESD agreement holding collateral type, such as FEI user holding collateral type, such as RAI unsecured type-ESD ESD is called Empty Set Dollar, its anonymous The development team ESS (Empty Set Squad) believes that the capital utilization rate of mortgage-type stable coins is low, and it will bring risks to mortgage assets. Therefore, it is hoped that the price can be stabilized at 1 USDC by tracking the USDC-ESD liquidity pool on Uniswap for elastic supply. When the market demand for ESD increases and the price is higher than 1 USDC, ESD will be issued additionally to reduce the price. When the market demand for ESD decreases and the price is lower than 1 USDC, users who are willing to destroy ESD can get coupons (also called bond-type ESD) as rewards. After destruction, the supply of ESD will decrease and the price will rise. Why do coupons motivate users to destroy ESD? Because when the price of ESD is higher than 1 USDC in the future, users who hold coupons can use the coupons to exchange for ESD at a price lower than 1 USDC, thereby making a profit. CoinShares Research Director: Institutional Investors "Continue to Hesitate" About Cryptocurrencies: Jinse Finance reported that in the latest report, CoinShares research director James Butterfill highlighted institutional lukewarm sentiment towards cryptocurrency investment products, the third week in a row. "Small inflow" occurs. "Flows remained low, suggesting continued investor indecision, which was underscored in investment product volumes, which at $886 million for the week were the lowest since October 2020," Butterfill said. According to previous news, the latest report from CoinShares showed that the net inflow of digital asset investment products last week was 10.3 million US dollars, which was the third consecutive week of inflows, of which the net inflows of Bitcoin investment and Ethereum investment products were 7.7 million US dollars and 5.6 million US dollars respectively. (Cointelegraph) [2022/10/4 18:39:17] The interval between ESD issuance/destruction is 8 hours, and every 8 hours is 1 Epoch. The ESD price that determines additional issuance/destruction is taken from the 8-hour weighted average price (TWAP: Time Weighted Average Price) of ESD in Uniswap. But destroying ESD is risky, and the coupons obtained by burning must be used within one month (90 Epochs). If the TWAP price continues to be lower than 1 USDC within one month, the coupons will be invalid. The above is the single-token mechanism design of ESD V1, in which ESD serves as both a stable currency and a governance token of the protocol, and users can participate in governance by holding bond-type ESD. However, after entering 2021, the real market price of ESD has deviated far from 1 US dollar, hovering between 0.1 and 0.2 US dollars for a long time. ESD V2 was originally planned to be launched in August this year, but in order to return to the anchor value as soon as possible, ESD started the development of V1.5 in January. Nick Tomaino, founding partner of venture capital firm 1confirmation, changed his Twitter name to "1492.eth": Golden Financial News, Nick Tomaino, founding partner of venture capital firm 1confirmation, changed his Twitter nickname to "1492.eth" and said that in 1492 Columbus Start your first voyage. At the same time, he called ENS the perfect NFT series. Some people don't think ENS is an NFT, but the fact is that it is the most widely held NFT. As previously reported, 1confirmation launched a US$100 million NFT fund in June. The fund will directly invest in NFT and has a 10-year life cycle. It mainly focuses on investing in new projects of the companies it supports, such as games, art, photography and music. project. [2022/9/5 13:08:41] V1.5 will introduce ESDS tokens and transform into a dual-token model, with ESDS as a governance token and ESD as a pure stable currency. The V1.5 version of ESD will be transformed into a mortgage-type stable currency. Users mortgage USDC to ESD DAO to lend ESD in equal proportions. ESD DAO will use the deposited USDC for liquidity mining to earn income, and part of the income will be used to repurchase ESDS in the market and destroyed. When ESDS goes online, the V1 version of ESD and bond-type ESD will be converted into ESDS in a certain proportion. Due to the large changes in this series of upgrades, the development team recently decided to adjust the version naming from the original V1.5 to V2. Agreement holding collateral type - FEIFEI is named after the stone coin on Yap Island. The indigenous people on Yap Island call the stone coin Fei (Fei). Open the official website of Fei Protocol and you can see a currency in the shape of a stone. . Ruby Protocol announced the completion of financing of 7.3 million US dollars, DFG Group and others participated in the investment: On February 10, the cross-chain privacy protocol Ruby Protocol announced the completion of financing of 7.3 million US dollars, Digital Strategies, DFG Group, SigNUM Capital, D1 Ventures, Global Coin Research, Ocean Foundation, DWeb3 Capital, Maverick Global Ventures and others participated in the investment. According to reports, Ruby Protocol is powered by Polkadot and uses functional encryption (FE) to encrypt sensitive data on the chain, so it can only be decrypted by entities with approved private keys. (Venture Beat) [2022/2/10 9:42:31] The Fei protocol adopts a dual-token mechanism, FEI is a stablecoin 1:1 anchored to the US dollar, TRIBE is the governance token of the protocol, Uniswap’s FEI/TRIBE The liquidity providers of the fund pool can get TRIBE rewards. Users can mortgage ETH to the protocol in exchange for FEI, but the mortgaged ETH will belong to the protocol, which is called Protocol Controlled Value (PCV for short). PCV is used to provide liquidity for the ETH/FEI trading pair on Uniswap. If users want to redeem ETH, they can only go to the secondary market like Uniswap to convert FEI into ETH. The market value of Ethereum has surpassed Tencent: Jinse Finance reported that according to the latest data, the market value of Ethereum has surpassed Tencent. At present, the market value of Ethereum has reached 569.61 billion US dollars, with a 24-hour increase of 1.76% and a 7-day increase of 7.12%; while Tencent’s market value is about $567.84 billion, down 1.04% in 24 hours and up 1.49% in 7 days. According to the current market value of Ethereum, it has surpassed any of the BAT Big Three. [2021/11/10 6:42:18] The FEI protocol anchors 1 dollar through direct incentives. When the user's transaction makes FEI further deviate from 1 dollar, the user will be punished. When the transaction makes the FEI price close to 1 dollar, then Earn minting rewards. For example, a user sells FEI at a price of $0.98 on Uniswap. Since this behavior will cause FEI to further deviate from the anchored $1, the burning mechanism of FEI is triggered at this time, and an additional 4% of FEI stablecoins will be burned, then the user The actual price of the deal becomes about $0.94. However, the direct incentives are only applicable to specific Uniswap ETH-FEI trading pairs, and all other exchanges’ trading pairs and transfer behavior will not be affected. If direct incentives fail to fully correct prices, FEI will initiate a second price correction mechanism—peg reweights. At this time, the agreement will withdraw ETH from the Uniswap fund pool and use it to buy FEI in the open market, allowing it to return to the anchor price. However, the actual situation is not ideal. After FEI went online, due to the selling by giant whales, the price has been underwater for a long time (FEI price < 1 USD is called underwater, FEI price > 1 USD is called above water). Some participating users even ridiculed that the pictures on FEI's official website actually indicated that this is a water prison. Chris Berg and Sinclair Davidson, researchers at RMIT University, believe that the failure of the FEI anchor mechanism is due to the influx of investors far exceeding expectations to purchase FEI to obtain the governance token TRIBE. In a bull market, no one wants to hold a large amount of stablecoins, which triggers the sell-off of FEI. In order to reduce the selling pressure of FEI and bring it back to $1, the community passed the FIP-2 proposal, which mainly includes two items: take out 30w ETH from PCV, and users can exchange FEI for ETH at a price of $0.95. The exchangeable ETH per hour is 5,000 to slow down the release of ETH and avoid economic attacks on the protocol. Increase the reward of the FEI-TRIBE staking pool to 100 million TRIBE, and the reward will decrease linearly within two years. Note: FIP is the abbreviation of FEI Improvement Proposal, that is, FEI improvement proposal. After the FIP-2 proposal was put forward, the price of FEI began to recover slowly. The start-up stage of FEI can be said to have gone through ups and downs. Emin Gün Sirer, the founder of the Avalanche protocol, commented: In the dual-token mechanism of the Fei protocol, FEI is trying to anchor the stable currency of $1, and TRIBE is used to offset volatility. . When the market demand for FEI makes it higher than the anchor value, the measures to make it fall back are simple and effective. Just minting more FEI will bring the price back. But the real challenge is what to do when demand weakens and the price drops $1. User holds collateral type - RAI The issuance method of RAI is similar to Dai, and users over-mortgage ETH to lend RAI. The difference is that RAI does not use the US dollar as the anchor target, so who does it anchor? The answer is no one, RAI has no anchor target. The starting "redemption price" for RAI is $3.14. The market price of RAI is determined by the supply and demand relationship in the market, and the redemption price is set by the system. When the market demand for RAI increases and the market price is higher than the redemption price, the system will lower the redemption price and encourage users to mint new RAI at the redemption price to increase the circulation in the market, thereby reducing the market price of RAI. When the market demand for RAI decreases and the market price is lower than the redemption price, the system will increase the redemption price. After the redemption price rises, on the one hand, the mortgage rate of users will be close to the liquidation line, and users under liquidation pressure will repay part of the RAI; on the other hand, users can get back the collateral at a redemption price higher than the market price. The circulation of RAI in the market will decrease, thereby pushing up the market price of RAI. You might think that when stablecoins no longer have an anchor target, can they still be considered as stablecoins? We are used to judging whether a stablecoin is qualified by whether it is anchored to the legal currency, but there are four problems in this method: it is difficult for the price of the stablecoin to maintain a 1:1 link with the legal currency at all times. Decentralized issuance of U.S. dollar stablecoins has come under increasing regulatory pressure. During periods of loose monetary policy (such as now), stablecoins linked to fiat currency will depreciate along with the fiat currency. Considering the global nature of encrypted assets, it is inappropriate for the main stablecoins in the encrypted digital economy to be anchored to the fiat currency of a specific country. Stablecoins should not naturally be anchored by the US dollar. If encryption technology is to establish a new financial system, then perhaps it should be denominated in its own currency - RAI is an attempt at a native encrypted stablecoin. In order to maximize decentralization, gradually eliminate human control, and make it socially scalable, RAI introduced the non-governance token FLX.


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