Can the popular algorithmic stablecoin really realize Satoshi Nakamoto's ideal?

Recently, algorithmic stablecoins such as ESD, BAS, and RER have risen against the trend, driving a wave of new trends in their own way.

When the hot spot is DeFi, it is rising, when the hot spot is NFT, it is rising, and when the hot spot is mainstream currency, it is still rising.

The recent performance of these algorithmic stablecoins is simply against the sky, but people only follow the currency price, and I think most people do not understand what is an algorithmic stablecoin and its actual value.

First of all, let us take the White House as the target again. A few days ago, US lawmakers drafted a bill related to stablecoins, requiring stablecoin issuers to obtain a banking license. After that, the U.S. President’s Financial Market Working Group issued a new statement on the regulation of stablecoins. The document stated that stablecoins must meet appropriate anti-money laundering and supervision requirements, and currency holders should accept user identity verification KYC.

This range covers almost all people who use stablecoins, but obviously, it is due to the upcoming release of Libra that regulates the behavior of the entire stablecoin market.

Stablecoins with mortgage-anchored models like USDT still rely on centralized issuers after all (even the second-generation stablecoin DAI has to sacrifice decentralization to a certain extent, and introduce centralized assets in mortgage assets to ensure stability. sex).

This is doomed to its vulnerability in the face of regulation. For the decentralized encryption market, stablecoins that can be "regulated" to a certain extent have gradually become rigid needs.

Compared with traditional USDT, USDC, DAI and other different types of stablecoins, the biggest difference between algorithmic stablecoins is that they completely abandon the mortgage anchoring model, but only establish a currency system through market supply and demand relationships, without a specific center Publisher.

Algorithmic stable currency is the most important effort in the pursuit of native stable currency in the encryption field. It does not need to be generated through asset mortgages, but is realized by making full use of people's profit-seeking characteristics. At the same time, it has features that previous stablecoin experiments did not have. It is crypto-native and has the opportunity to realize a truly decentralized stablecoin for the first time.

Since the end of last year, the surge of ESD, BASIS, RSR, etc. led by AMPL has shown us that the market acceptance of algorithmic stablecoins is constantly increasing. People have expressed doubts about the continuous issuance of traditional stablecoins such as USDT. Decentralized stablecoins The demand for stablecoins has doubled, and this year's stablecoin reform will become the focus of attention.

The logic of the existing three algorithmic stablecoin projects is as follows:

If AMPL is greater than 1, it will be issued to holders, if it is less than 1, all holders will deflate.

If the ESD is greater than 1, additional issuance will be made to holders and LPs, if it is less than 1, bond repurchase will be used to reduce the flow, and the next additional issuance will be given to bondholders first.

If the Basis is greater than 1, the additional issue will be issued to the shareholders, if it is less than 1, the bond repurchase will be used to reduce the circulation, and the next additional issue will be issued to the bondholder first.

Although the distribution method has changed slightly, the logic is basically the same. The rapid rise of algorithmic stablecoins is not unreasonable. It solves the principle that existing stablecoins are issued by companies, solves the problem of decentralization, and also solves the problem of Dai and other mortgages. The impact of similar stablecoins when encountering currency price fluctuations. It cannot be ignored that this is just the beginning, and now there are even suspicions of hype, and its outbreak and large-scale application are far from coming.

It is believed that in the next period of time, bills on stablecoins will continue to emerge in various countries, and more algorithmic stablecoin projects will also emerge. Who can fight to the end in the stablecoin market where the masses compete, still needs to wait and see what happens, and must not enter the market blindly.