In the endless and rapid evolution of DeFi, the skyrocketing algorithmic stable currency is just a carnival for a few people?
Editor's Note: This article comes fromVernacular Blockchain (ID: hellobtc), Author: Five Fireball Leader, reprinted by Odaily with authorization.
Editor's Note: This article comes from
Vernacular Blockchain (ID: hellobtc)Vernacular Blockchain (ID: hellobtc), Author: Five Fireball Leader, reprinted by Odaily with authorization.
In recent days, Bitcoin has been unable to attack the 20,000 mark for a long time. The market has made players who play Bitcoin or a mainstream currency very uncomfortable. The players who fell turned to the arms of the contract. What greeted them was naturally the result of the sudden drop a few days ago and the liquidation of billions of dollars.
AMPL,YAM,ESD,DSD,Basis,Base……
The Cover and KP3R of the AC series performed well.
However, the major mainstream DeFi currencies are not particularly eye-catching. However, just a few days ago, the track of algorithmic stablecoin broke out suddenly. In addition to AMPL, which was not low in popularity before, a lot of imitators ranged from the old YAM, to the rookie ESD, and the newly released Basis, Based, etc., the market value It's all soaring.
Judging from these hot coins, the investment threshold of the blockchain is rising rapidly. If you don’t believe me, take a look at the algorithmic stable coins mentioned in this article. How many do you know?
If you are familiar with and have made money on it, then congratulations, basically you have reached the level of an old DeFi farmer!secondary titleI feel sorry for the 2020 newcomers in a second
Sometimes I feel sorry for the newcomers who entered the circle in 2020. I think back then, that is, the last bull market - 2017. At that time, they were attracted by the money-making effect. Now they can be regarded as the group of old investors. What they faced at that time was not Such a situation:
In 2017, it was very simple in the circle. It took a few days for new investors to understand what is decentralization and what is mining. Basically, they also figured out BTC, and after understanding smart contracts, they also roughly understood ETH. , Buy LTC if you think BTC is expensive, buy EOS, NEO, Quantum Chain, etc.
New investors who have entered the circle and experienced the DeFi era in the past 20 years, if they come later, let alone other things, but the iteration of DeFi in the past six months has already gone through 6 or 7 generations, and it is necessary to understand the evolution of these generations. a month...
The first generation: MKR, KNC, ZRX - DAI was born, DEX came into view, the most classic DeFi!
The second generation: LEND, SNX, REN - flash loans, derivatives, cross-chain appeared!
The third generation: COMP, CRV, AMPL - Liquidity mining kicks off! AMPL is here!
For example, there is a set of DeFi classification methods as follows:
The third generation: COMP, CRV, AMPL - Liquidity mining kicks off! AMPL is here!
The sixth generation: KP3R, COVER, AXIE - developer crowdsourcing, blockchain native insurance, game + DeFi + NFT...
Seventh generation: …
The fourth generation: YAM, YFI, CVP - Liquidity mining upgrades! Yield and Governance Aggregator Appears!
The fifth generation: HEGIC, LIEN, BarnBridge - High-level complex derivatives appear! The concept of tiered funds and bonds is here!
The sixth generation: KP3R, COVER, AXIE - developer crowdsourcing, blockchain native insurance, game + DeFi + NFT...
DeFi is still in the endless and rapid evolution...
This year, from 312 to now, it can be regarded as a bull market. Bitcoin has increased by 5 times. However, the DeFi field stepped on Leibi, because of the loss of liquidity mining, the timing of entering the market was wrong, and it was attacked by hackers. Waiting for a series of events, many investors not only did not make money, but lost a lot.
Unlike in 2017, when you buy whatever goes up, any project is basically to see what the vision of the white paper is, what the team is like, who the investment institution is, and then spend money to finish the job. There is no technical or conceptual innovation, the only popular EOS, the pros and cons of a DPoS mechanism has been discussed from the beginning of financing, to the mainnet launch, for a whole year! Nowadays, if a new DeFi project, even a star project, can maintain its popularity for a month or two, it is considered very good.
New investors in 2020, it's so hard...
secondary title
Subdivision of Algorithmic Stablecoins
DeFi has evolved so many generations in less than a year, and as a new investor, it is desperate that if you take out the small branch of stablecoins in DeFi separately.
You will find that this branch itself has several generations of evolution and iteration... Oh No...
There is nothing to iterate about fiat currency mortgages, nothing more than USDT and USDC.
Cryptocurrency mortgage types, from the earliest MKR, began to develop in a more complex direction, such as RSR and Terra, all of which are double Token adjustment + a basket of currency mortgage pool types. Lien even introduced four Tokens and classification Advanced financial models for bonds.
Algorithmic stablecoins can be extracted from stablecoin iterations (matryoshka is both visual and visual). In the past few months, it has evolved for 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
Everyone in the generation basically knows that AMPL is the representative, simple and crude flow, that is, the target price of AMPL is 1 US dollar, then the nominal exchange rate is higher than a certain threshold, and the protocol will increase the number of Tokens of all users year-on-year;
If the AMPL price is lower than a certain threshold of the target price, the protocol will reduce the number of Tokens held by users.
The biggest contribution of AMPL is the introduction of the concept of Rebase (token supply elasticity adjustment) - when the price is high, you will be given Token (inflation, print money for you), and when the price is low, your Token will be deducted (deflation, take back Token) , once every 24 hours, until the market reaches a relative balance again, and the price of AMPL stabilizes 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 rate is very high. Just like BTC's PoW, it is also the most "simple and crude" mode at present. However, because it is simple and intuitive, it is strong and safe. BTC has been in operation for more than 10 years, and it can almost be said that there has never been a security problem.
So in fact, many advanced players who have seen through the mechanism of AMPL often choose to buy when the upward trend exceeds 1, and leave when the downward trend exceeds 1. They will neither enjoy long-term inflation nor get stuck in the deflation stage. It is also commonly known as, masters eat fish body, not fish head and tail. Although the profit is less, the risk has also been reduced exponentially.Liquidity miningThis feature also makes AMPL look more like a speculative token than a stablecoin at present. However, as the first generation of algorithmic stablecoin, its birth time is too short, and it is far from the time when it can be concluded.
YAM is known for two things:
One is to put
Liquidity mining
brought to a climax;
The second is the famous contract loophole, which caused the project to almost abort.
The YAM mechanism is similar to AMPL, and can be regarded as an imitation disk of AMPL. There are two main differences:
One is to adopt the fair issuance of liquidity mining;
The second is that 10% of each inflation goes into a community-governed treasury fund. This fund can be used for many purposes through governance. The simplest is that when YAM enters deflation, in order to avoid a long-term death spiral, the treasury can come to the rescue.
Based is also an imitation of AMPL, which adopts YAM-like liquidity mining distribution, but anchors the Synthetix stablecoin sUSD as the benchmark, and has no unique innovations.
The Base Protocol, which has been very popular in the past two days, is actually a generation in essence, but the anchor has been changed from 1 US dollar to one trillionth of the total market value of cryptocurrency, but it is inexplicably affected by the promotion and money-making effect of many big Vs. The download suddenly became popular, and more than 100 million U.S. dollars were traded every day. However, in essence, it is still just a generation of imitation discs. So it became popular for two or three days, and after trapping a group of people, it entered the deflation stage, and basically no one cared about it.
Second generation: ESD, DSD
Compared with AMPL, the biggest innovation of ESD is that it introduces the concept of bonds, trying to avoid the death spiral caused by AMPL's long-term deflation.
The rebase period of ESD is not 24 hours, but 8 hours. The inflation model is the same as that of AMPL. When deflation occurs, the system launches bonds, which allow users to get discounted bonds by destroying ESD (equivalent to buying ESD Token at a low price, and in the future to anchor Priced to sell), when returning to inflation, the additional ESD will first satisfy all bonds, and then distribute to other users.
Of course, bonds also have risks, because the validity period is only 30 days. If deflation ends within 30 days, then the bonds you get from burning ESD will return to zero, so the risk is relatively high. 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 period changed from 8 hours to two hours, the single change limit of rebase, the reward ratio of bond holders/LP (liquidity provider), etc., but essentially It is said that 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 algorithmic stablecoin might have been Basis instead of AMPL. Later, after Basis was cool, the anonymous team took over the project and renamed it Basis Cash.
Basis Cash makes the rebase mechanism more complicated and introduces three types of tokens, BAS, BAC, and BAB.
BAC is the stable currency pegged to $1, BAB is the bond in ESD during deflation, 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.
The liquidity mining of BASIS is also very interesting, which is reflected in the design of two pools, which serve as selling pressure and absorb selling pressure from each other:
BAC-DAI pool mining BAS
The BAS-DAI pool also mines BAS
It seems that BAS will bear the selling pressure of the two major outsiders, but holding BAS will be distributed to BAC, and the selling pressure will be transferred to BAC. BAC has the function of digging BAS, and nests with each other...
A friend who is proficient in algorithmic stablecoins commented on Basis like this:
"The dual currency design of BAC+BAS solves the problem of ESD single currency hindering circulation. BAC can be better circulated to a wider range of applications because there is no potential expectation of Rebase.
The simplest analogy is that BAC=US dollar, BAB=US dollar treasury bonds, and BAS=Fed stock. The ingenuity of this design is that it moves the entire US dollar issuance system into the BASIS design. And in the design of the ESD, the ESD plays both the role of the dollar and the stocks of the Federal Reserve.”
2. Simulate the US dollar bond mechanism stage, such as ESD, BASIS (the second-generation and third-generation algorithm above);
postscript
3. Mixing stage: Partial mortgage + partial bond market regulation (integration with mortgage-type stable currency, which can be the 4th generation type that has not yet appeared above).
It can be seen that just to understand stablecoins in the DeFi ecosystem, you have to understand all types of stablecoins above, from collateralized to algorithmic. Algorithmic Token, you have to know the operating mechanism of Rebase, and have enough understanding of bonds, US dollar issuance, liquidity mining and other knowledge points, so that you can really understand what this project is doing, so as to find a suitable entry Time to get a piece of the pie. It is not difficult to see that from AMPL to ESD to BASIS, this wave of algorithmic stablecoin players are all those who have a deep understanding of finance.
