At 4:00 pm on December 31, 2020, BlockArk's chief analyst, Mo Ke, conducted a year-end sharing live broadcast of "Interpretation of Algorithmic Stablecoins" in the Uniswap Chinese community. This live broadcast event is supported by BlockArk, and supported by ChainNews, Odaily, and BlockBeats media. The live sharing content is organized as follows:
Mo Ke: Well, today I am here to share with you. No need to introduce yourself, I'm not an outsider. Please be quiet during this period, and there will be a communication time at the end.
1. What is an algorithmic stablecoin?
There are two types of stablecoins
Mortgage Stablecoin Centralized USDT/Decentralized DAI
Algorithmic Stablecoins Based on algorithms/consensus, AMPL, ESD, BASIS, FRAX
The algorithmic stablecoin AMPL became popular probably during the DEFI wave in July this year.
After the DEFI tide passed, ESD probably became popular in November, and then Basis in December.
In fact, the logic of these algorithmic stablecoins is similar.
Basically, it revolves around the anchored price 1USD, and uses additional issuance, deflation, bonds, dividends and other tools to solve the problem of anchoring 1.
If AMPL is greater than 1, it will be issued to holders, if it is less than 1, all holders will be deflated.
If the ESD is greater than 1, additional issuance will be made to the holders and LPs. If it is less than 1, bond repurchases will be used to reduce the flow, and the next additional issuance will be given to the bondholders first.
If the Basis is greater than 1, the additional issue will be issued to the shareholders. If the Basis 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.
We will analyze the in-depth logic later, and first use Mith as a model (not a buying recommendation) to demonstrate how to play algorithmic stablecoins.
Usually we say that 1 pool is a pool that can use stable coins, or a single currency for free. These pools usually generate Cash (theoretically anchored to 1U).
The 2 pool is for LP (the liquidity market maker of the decentralized exchange, there is a risk of impermanent loss, simply put, it is smashed when making the market), here we can see that MIC-USDT produces MIS , and MIS-USDT produced MIS (I personally like to call this 3 pools).
2/3 pools usually have a high annual rate. The daily rate of the mic-usdt pool reached 600% yesterday, but the risk is that if someone keeps smashing MIC and MIS, you will lose money. This is the famous 2-pool trap.
This is the first way to make money, 1/2/3 pool.
The second way to make money is to pledge BAS, share shares, and get dividends during inflation.
This is the dividend that people who play basis will say every day. The profit point is to use BAS to lock the position and divide BAC, and the risk point is the sharp drop of BAS price.
The third way to make money is to buy a bond (bond) when the BAC (cash) price is lower than $1, and wait for it to be greater than 1 to exchange for cash, which is equivalent to buying cash at a discounted price. The risk is that the price of cash will not rise back1.
Using solidus as an example here, we can see that the bond price is very cheap, but this project is almost dead, and the SOC (cash) price cannot go back, and those who buy bonds will lose money.
Sorry, several projects are mixed together, because different projects have different functional stages, for better demonstration, but basically all such projects are three coins, cash (anchor 1), share (share), bond (bonds).
Then we usually need to use the APY tool to play this kind of mining. The commonly used one is this:
There are two projects with finer-grained tools
After watching the APY, you will naturally know whether it is suitable for you to play, but the annualization of the 2 pools is of little significance. The 2 pools mainly depend on whether the price can be stabilized. If it is stable, there will be no big selling pressure. Only when the positive cycle consensus is re-established can you get on the car .
2. The Essence of Algorithmic Stablecoins
In essence, the algorithmic stable currency is not a stable currency, but a ZJP in this name.
But because this concept is too strong, everyone sees that the basis is so strong, but it does not mean that the imitation market will always be strong. Although there are many imitation disks of basis, it is recommended that you treat them with caution, or be prepared to lose money.
I said a paragraph in the article I wrote before, which is the best summary of this ZJP model.
So I really want to pour cold water on everyone and think carefully about the imitation disk.
Refer to YFI YFII and the following piles of mining,
Refer to sushi, a bunch of mining after sushi,
In the end, only the master disc survived, along with other very innovative projects.
The Fed discussed in the group, just listen to it. You just need to figure out one question.
Who will really use AMPL, ESD and BAC as payment tools, or value storage tools?
Of course, as ZJP’s algorithmic stablecoin, it also has the most potential to make money. What projects are more capable than fomo and ponzi?
3. Algorithmic stablecoin competition comparison
The new and more common algorithmic stablecoins are now divided into three categories:
ESD (DSD) needs to pledge LP and single currency, and has a time limit for unlocking, so the circulation is less and more stable. It was once ridiculed as a stable currency
Basis (a series of imitation disks) is actually more unstable than ESD, but the expansion and contraction caused by this instability personally feel that it will make it grow faster than ESD. I shared this view in the middle of the month, but Basis has not been watered. The next (below 1U) has been verified.
Frax (with pledge attribute) has a heavier pledge attribute. Compared with basis, it is more like a transformation of DAI/MKR into basis. This project will be more stable than basis because of the existence of pledge. But it is a pity that there is no dividend, so there is no positive cycle, and there is no fomo in the short term. But in fact, there is a more circuitous repurchase and destruction mechanism. And because there is a private placement in front of it, not a fair launch, many people dare not enter the market.
4. Here we will explain to you why Pool 2 is so dangerous
It is the so-called APY trap, why Nianhua will lose money tens of thousands of times. Annualized 36500%, daily 100%, hourly 4%. It seems that the annual rate is very high, but in fact, all your profits can be eaten up as long as it falls by 4% per hour, that is, no matter how high your profit is, the principal will not fall as fast. If the principal falls, the profit rate will be higher. The profits are not high.
Take a math question.
There are 100BAC+100USDT in the AMM pool. This is the unit price of 1USDT. May I ask what the price will be if 100 BACs are all smashed?
The correct answer is 0.25U. Friends who don't know much can look up what "constant product" means.
So yesterday, as long as people with this common sense calculate the MIC emissions of MITH for a day, they will not buy MIC, even if the annualized rate of MIC-USDT is very high.
ESD and Basis have already blown the wind. Basis has almost 10x income in the last 20 days. This sudden wealth effect will bring more players, so this forum must continue to pay attention.
It's a pity that although I was optimistic about the basis project very early, I didn't wait for my suitable position to enter the market and missed a big wave of profits. And because of the risk of the 2 pools, I will not push the project with you. It is more about sharing. After all, it is too difficult to determine the degree of human fomo.
Simply sort out the projects in the Basis mode, these should have no major code problems (the problem is not responsible for this sentence)
https://basis.cash/In the mother market, the price of BAS dropped from 500 to 100 and then returned to close to 1000. I've been a bit too fomo lately. If you're a friend who just saw what I shared, I wouldn't suggest you to enter the venue live, but you can keep watching. Let me add one more point, why I personally prefer basis. Because the dual currency mechanism of basis cuts the volatility, it is more suitable for listing on the exchange. For me personally, I will still wait for the underwater opportunity to enter the market, because I hate losses.
This project has a very interesting time point, that is, during the first wave of crashes, Huang Licheng bought frantically under his real name and survived the first wave of crises. So this also proves how important the consensus is for an algorithmic stablecoin. The second wave of consensus is the 3AC address buying, which gives everyone confidence.
https://basisdollar.fi/The first imitation disk, suspected to be made by Uncle 5’s team, used Value as an exchange, which caused trouble for myself to buy. New leeks still use Uniswap more, forcing their own exchange to cause trouble for themselves.
http://solidus.cash/The imitation disk of Binance Chain cannot be launched.
https://mith.cash/Huang Licheng's imitation disk has 1 billion funds being mined, and a pool of small funds cannot move. If the price drops very low, you can consider buying it. After all, Huang Licheng's plate is so rushed.
https://bdollar.fi/banksBinance imitation disk, more than 1 million funds locked, mini disk, no in-depth research.
https://basiscoin.finance/It is more like the imitation disk of basis, with a pool limit of 20,000 U, preventing large players, and the improvement point is that the boardroom (dividend pool) uses LP. Personally, I think it is not a particularly strong improvement, but the popularity is not bad.
https://onecash.finance/There is a lot of pre-mining, and there is no 1 pool for others, so I skipped the first death test. It seems that MLM and the people on the plate play a little more, and the community structure is different. I personally dislike pre-mining, so I didn't participate, but this one may have a longer life than Lao Huang's. There is also a maximum adjustment factor of 1.1, so the cash will not change a lot at once.
As a supplementary note, the first death test for many projects is the smashing of the stablecoin 0. If this wave of smashing can’t handle it, basically the project will be cold, like solidus is the most typical. Although onecash doesn't like it personally, it at least solves the first death test.
The ESD model has basically been ignored. The team is said to have a new plan in the design, which is not so detailed. As for Frax, due to the problem of mode design, it has not yet exploded. The 3.5U recommended to everyone in the past should not be a loss. The highest is close to 8U these days. There are more projects, if I see them, I will share them with you, or you are welcome to share them with me.
https://bihu.com/article/1450792780
You can read this article on impermanence loss and read it carefully. If you don’t understand this, you can’t play defi.
【Free question and answer session】
【Free question and answer session】
@楚秀红Frax: I originally wanted to lock it for 14 days, but it ended up being locked for 140 days. . . lock yourself up
Mo Ke: I don’t know the timing of the outbreak of frax, just like I didn’t know that basis would explode so quickly. I knew this project would definitely be popular 20 days ago. I don't know when Frax will explode. I am personally optimistic. I will increase my position with a high probability of 4U. Also, if the lock position of Frax is FXS/FRAX, remember not to lock it for too long, it may be locked to zero.
@Jessie: Thanks Boss for sharing! Is it possible that the 3ac address is the project party? Is it still necessary for the project party to be a village or wild village, so that this type of project can survive the crisis at the beginning?
Mo Ke: No, that was monitored by someone, it is the 3ac address. However, people at this kind of address also know that they are being monitored, so whether they are playing a bright card or a counter-routine, this needs to be analyzed in detail.
@张杰: Can this kind of stablecoin project be considered to enter the market if it is generally underwater?
Mo Ke: No, I usually only consider submerging the master disk. If I take a gamble, it may return to zero. It will be determined by the cost performance at that time.
@Walker: May I ask Mo Ke, what do you think of the future of algorithmic stablecoins, is it possible for capital games to replace usdt/usdc and mortgage stability?
Mo Ke: Pure algorithmic stablecoins are not optimistic. Consensus building is too difficult. So why do you say you need to look underwater? This is the same as BTC. The current consensus of BTC is established after countless crashes. Only by slapping the face can you brainwash others. Algorithmic stablecoins have not yet undergone large-scale underwater verification. From a personal point of view, it is more difficult. After all, no country dares to issue currency based on pure consensus. People have to have the strongest force in the world—physical transcendence, in order to maintain the consensus of currency circulation. And what does an algorithmic stablecoin rely on? Purely by consensus? I find it too difficult.
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