The new OEC ecology is in full swing, and algorithmic stablecoins are making a comeback

OEC (OEC) User Guide

Further reading:OEC (OEC) User Guide

As a firm believer in the crypto bull market, we insist that the short-term decline after May, affected by policies and other factors, is far from being a bear market, and at most it is just a "cold spring". The market before May was already in full swing; the market after May should be regarded as "plum rain";

The hot spot in July is undoubtedly the Gamefi track represented by Axie Infinity. Gamefi's "Play-to-earn" model has changed the traditional DeFi model of exchanging assets for tokens to a certain extent, but implements the model of "assets + time for tokens". Even because of the existence of institutions such as YGG, users only need to pay their own time. This greatly lowers the threshold for chain games, thereby attracting the attention and participation of a large number of ordinary users and even users outside the circle.

As a result, not only the income of Axie Infinity has skyrocketed, but the price of the token AXS has skyrocketed in a short period of time. AXS skyrocketed from $3 to around $50 in about a month, bringing about a huge wealth effect. In the past 30 days, the Axie Infinity protocol revenue of the Axie game itself was 166.2 million US dollars, 7.5 times the total revenue of the top 2-10 protocols in the entire network, and these surpassed protocols include Pancake, Metamask, Synthetix, Sushiswap, AAVE and other well-known project.

However, in August, the popularity of Gamefi has declined. Gamefi tokens represented by AXS and SKILL have dropped a lot, and the activity of corresponding games has also declined.

Judging from the current situation, Gamefi, which closely combines games and making money, is a sharp weapon for the blockchain to go out of the circle, and its vitality is undoubtedly extremely tenacious. It’s just that for capital without loyalty (this is not a derogatory term) who has already made a lot of money (or jealousy) on the Gamefi track, finding the next target that can be deployed has become a top priority. At this time, the OEC, which had repeatedly bounced tickets, went online. Although facing strong supervision, its DeFi ecology still has a lot of room for development.

Oklink data shows that as of August 2, the locked-up volume of OEC has reached 1.67 billion US dollars.

At the same time, according to Oklink’s data, the TVL of Cherryswap and KSwap, two leading projects on OEC, have reached US$900 million and US$595 million respectively, which is on par with some first-tier DeFi projects. CherrySwap's token CHE has increased twenty-fold in just a few days.

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The Evolution of Algorithmic Stablecoins

For the DeFi world, there are three tracks that belong to infrastructure: transactions, lending, and stablecoins. Among them, stablecoins are the most widely used and belong to the foundation of the foundation.

At present, stablecoins can be mainly divided into three categories.

The first category isFiat-backed stablecoins, that is, the stable currency issued by the centralized institution as collateral for legal currency assets such as US dollars held by the central organization, typically represented by USDT, USDC, TUSD, and PAX. A big hidden danger.

The second category isCryptocurrency-collateralized stablecoins, the most typical one is the DAI issued by MakerDAO. Such assets have the "orthodoxy" of the blockchain world, but are also limited by the price fluctuations of the underlying assets.

The last category isUnsecured StablecoinsAlgorithmic StablecoinsAlgorithmic Stablecoins. The model of the algorithmic stablecoin is relatively simple at the beginning, which is to adjust the total amount of market currency according to the algorithm, increase the market supply when the price of the stablecoin is higher than the anchor price, and recover the supply when the price of the stablecoin is lower than the anchor price, or To provide arbitrage space to balance stable currency prices. And this is exactly the model of the first-generation algorithmic stablecoin AMPL.

However, the AMPL model is too simple, resulting in the prevalence of speculation and the extreme instability of stablecoin prices.

On the basis of AMPL, the second-generation algorithmic currency represented by Basis Cash and ESD appeared. There are three tokens in the Basis Cash system: stablecoins BAC (Basis Cash), BAB (Basis Bond), and BAS (Basis Share); these three tokens correspond to U.S. dollars, bonds, and stocks respectively.

• When the BAC price is lower than $1, users can use BAC to purchase the bond BAB at a low price (BAB price = the square of the BAC price), thereby reducing the circulation of BAC and increasing the price of BAC

• When the BAC price is higher than $1, users can exchange BAC for BAC; if BAC needs to be issued after the repurchase of BAB, the additional issuance will be distributed to BAS holders as dividends; increase the circulation of BAC through the above methods , to lower the BAC price.

Basis Cash's stablecoin design mechanism simulates the central bank's open market operations. However, Basis Cash’s final performance was a bit “hip stretching”. The fundamental reason is that Basis Cash’s role as a central bank has not been fully exercised. In the Basis Cash system, Basis Bond is designed as an option, and the option can only be exercised when the BAC price reaches one dollar. Therefore, when investors buy Basis Bond, their confidence is not based on the debt repayment of Bond itself when it matures, but on the betting that the price of BAC will return to above $1 in the future, which is the market's confidence in BAC. And the so-called confidence, especially the confidence of investors in new projects, is often fragile.

So the algorithmic stablecoin evolved again, and the semi-collateralized stablecoin FRAX appeared. To put it simply, users can exchange 1 FRAX for USDC and FRX worth $1 at any time. The algorithm only controls the system's mortgage rate and the rate of FXS issuance, so the price of FRAX can remain basically stable. However, due to the high value of collateral, FRAX is somewhat similar to the compromise of algorithmic stablecoins to fiat currency-backed stablecoins.

In July, Frax recently closed a strategic round led by Dragonfly Capital, with participation from Electric Capital, Robot Ventures, Balaji Srinivasan and Stani Kulechov. In "Why do we invest in the algorithmic stable currency FRAX?" "In the article, Dragonfly Capital partner Haseeb Qureshi concluded: "FRAX is very unique; it is the most central bank-like algorithmic stable currency I have seen."

Also in July, AMPL, which has been silent for a long time, experienced a short-term skyrocketing and plummeting due to a proposal from the AAVE community. It turns out thatsecondary title

KYSWAP and KYCash: The combination of DEX and algorithmic stablecoin

The OK Research Institute once pointed out that the fundamental reason for the paradox of "market size-price stability" in various algorithmic stablecoins is that the launch of algorithmic stablecoins is not carried out according to the current or future wealth scale, which is easy to cause speculation. The consequence of realizing the expansion of the stablecoin scale is the extreme instability of the currency value and the unsustainability of the project.

In the final analysis, if wealth cannot be created continuously, the wealth brought by speculation can only be short-term and fragile. andThe way to create value for an algorithmic stablecoin is to organically combine it with other businesses, such as the other two infrastructure tracks: trading and lending.

What KYSwap is trying to do is to combine the Basis Cash model with DEX on OEC.

In the DEX part, in addition to normal liquidity mining, KYSwap also adopts transaction mining to encourage the participation of early users. Its platform token, KYI, uses 80% of its tokens for mining incentives in a "fair start" manner.

As for the algorithmic stablecoin KYCash (KYC), KYSwap has in-depth cooperation with the Basis Cash community to use DEX, a mature track, to solve the problems of excessive speculation and too fast expansion of the algorithmic stablecoin, and provide real income for the stablecoin.

The initial KYC (set size is 50K) will be allocated to users who provide liquidity for KYI/USDT/USDC/DAI and other currencies on the KYSwap platform.

When KYC>$1.05, the minting mode is turned on, and users who pledge KYI will get 60% of the minted KYC; the remaining 20% ​​will enter the treasury and be automatically converted into USDT, which will become the protocol-controlled assets and be used in KYCRepurchase KYC at <$0.95; the last 20% enters KYC capital for ecological cooperation and foreign investment.

In general, through the deep binding of KYSwap and KYCash, on the one hand, it provides multiple practical application scenarios for algorithmic stablecoins, and on the other hand, it also provides certain financial support for additional stablecoins through DEX actual transactions, which will greatly enhance The vitality and stability of algorithmic stablecoins.

As of press time, KYSwap has been launched relatively smoothly. The official tweet shows that TVL has exceeded 100 million US dollars, and it has performed extremely well on OEC, and has formed a cooperative relationship with leading platforms such as CherrySwap.

In total,The combination of KYSwap and KYCash is an improvement based on the experience and lessons of Basis Cash, and is a relatively new attempt in the field of algorithmic stablecoins.And the OEC provides a fitting arena for this new endeavor. All this is at the right time.