Original author: Jiang Haibo, PANews

Starting from 2019, Eco, which has raised $94.5 million in funding from 5 rounds of financing (source), has recently made new progress. On July 27th, Eco announced the launch of a cryptocurrency wallet called Beam, which integrates account abstraction and can be used for payments on layer 2 solutions like Optimism and Base.

Eco has a strong background. The CEO, Andy Bromberg, is a co-founder of the cryptocurrency platform CoinList. The project has received investments from top crypto institutions such as a16z Crypto, Coinbase Ventures, Pantera Capital, Founders Fund, and Lightspeed Venture Partners. After 4 years since the project started and obtained funding, Eco finally tweeted for the first time on July 16th. PANews will further explain the mechanism of Eco in the following text.

Eco and two tokens: an experiment with currency

Eco is a reserve and payment currency designed to be a decentralized alternative to fiat currency. The system does not have a stablecoin pegged to the US dollar and aims to "maximize wealth in Eco" through governance. Eco can be seen as a "currency experiment" and if the experiment succeeds, Eco will become a monetary game of common victory for all participants in the ecosystem.

The basis of Eco's experiment lies in two tokens: ECO and ECOx.

ECO is the base token of the Eco protocol, used for daily savings and payments. Its initial supply is 10 billion, but the supply can be adjusted based on the currency policy set by the "delegates" elected by users. The ECO token is developed using the "Weird ERC 20 Token" framework, which includes some unique features:

• Supports rebase functionality. The owner's balance can be adjusted based on the "linear inflation factor" specified in the contract. This means that ECO, like stETH, cannot be directly used in many DeFi protocols and requires a wrapped version similar to wstETH.

• Can be upgraded. The ECO token can be managed through a proxy and the core logic of the token can be modified through governance at any time.

• Can be paused. There is a circuit breaker that can be activated to pause the token in case of bugs.

• Rollback capability. Transfers or approvals to the zero address or failed transfers can be rolled back.

• Allowance can be updated. The allowance can be changed through decreaseAllowance and increaseAllowance, and the transferFrom method also emits an Approval event to update the allowance.

ECOx is a deflationary token with a maximum supply of 1 billion and is transferable. Each ECOx represents a certain percentage of the ECO supply and allows holders to share in the growth potential of Eco.

ECOx can be burned to mint ECO, but this process is irreversible. Both ECO and ECOx are tradable on Uniswap. As of August 2nd, 1 ECOx can be converted to 9.8 ECO. According to CoinGecko, in the secondary market, the price of ECOx is approximately 20 times the price of ECO, with prices of 0.348 USD and 0.017 USD respectively.

Governance and Monetary Policy

One of the features of Eco is its flexible monetary policy, which can adjust the money supply of ECO through governance. Both ECO and ECOx can participate in Eco's governance, with ECO having a voting weight of 1 and ECOx having a voting weight of 10.

Users can delegate their voting weight to "trustees" after staking ECO or ECOx, and can change the delegation at any time. Trustees are the creators of the monetary policy in Eco, and before qualifying as trustees, they need to connect their wallet to Discord or Twitter, forge an Eco ID, and make themselves known to others.

Currently, Eco's official website has announced over 20 elected trustees, who come from founders in the DeFi industry, former Federal Reserve employees, bank researchers, cryptocurrency researchers, and operators, etc. The official website has published their LinkedIn or Twitter links. Monetary governance is conducted by this group of elected trustees in cycles to maximize the total wealth held in Eco.

Users can delegate all of their voting weight to a single trustee, and in this case, transfers can be made without canceling the delegation. It is also possible to delegate only a portion, in which case transfers can only move the undelegated funds.

The Eco governance page shows that the currently effective monetary policy only includes the base interest rate. During the period from July 22, 2023, to November 21, 2023, locking ECO can earn an annualized return of 7%, similar to a bank fixed deposit.

In addition, Eco also has some pending monetary policies, including:

Base inflation rate, which changes the balances of holders proportionally through monetary policy.

Random inflation, randomly distributes ECO tokens to certain addresses, similar to a lottery;

Transaction fees, ECO transfers generate transaction fees paid with ECO tokens, which accumulate in the staked ECOx and delegates can also charge an additional transaction fee based on this through monetary policy.

Launch Three Products to Promote Eco Currency Adoption

Based on the Eco currency, Eco, Inc., the development company of the project, has also developed the Eco App and sponsors others to develop various applications to increase the adoption of Eco currency. Currently, the following three applications have been announced on the official website:

Eco App: Positioned as a fintech company, it has payment, savings, and remittance functions. Users can also make payments or send Eco points through it, earning points and receiving cashback from partners during payments. Eco App has partnered banks that provide insured deposit services.

Beam Wallet: A digital wallet that allows you to make payments to anyone at any time and can be used on Optimism and Base. Users need to link their Twitter accounts and add a password to the wallet. They can then make transfers using ECO or USDC. Users can also spend 600 ECO to register a domain name on Beam and use it during transfers.

Tender: Provides instant encrypted payment functionality for merchants through a simple and user-friendly interface.

Roadmap

As a project that started in 2019, the progress of Eco has indeed been disappointing. According to the official website, the project went live on October 28, 2022, and updated its roadmap in November 2022, stating plans to upgrade Eco to be compatible with Uniswap V2, create a wrapped version of the ECO token, activate trustee elections and monetary policies, initiate grant programs, and enable temporary governance functions. Currently, these plans have been mostly implemented.

The long-term roadmap includes several potential system upgrades and research areas.

In the first phase, Eco will initiate the distribution of ECO tokens, including allocation to partners and individuals. For example, the points previously distributed to users in the Eco App can be exchanged for tokens.

In the second phase, it will upgrade the monetary policy, improve governance flexibility, and expand from Layer 1 to Layer 2. As mentioned earlier, the current effective monetary policy only involves locking the ECO token for a period of time to obtain a fixed base inflation.

In the third phase, there will be extensive governance improvements, novel economic designs, an upgrade to Eco ID V2, and the initiation of public product funding.

Summary

Eco aims to create a currency system that is different from traditional products, not anchored to the US dollar, and maximizes wealth within the ecosystem through governance. Its goal is to initially become a medium of exchange and evolve over time into a store of value. The distinguishing feature of Eco may be its adjustable monetary policies, which are determined by trustees through governance decisions and can be adjusted based on actual economic conditions.

In terms of positioning, Eco aims to become a store of value similar to certain algorithmic stablecoins. However, both ECO and ECOx tokens are not anchored to the US dollar, which introduces significant uncertainty.

During the few years from fundraising to product launch, Eco missed the golden period of development for algorithmic stablecoin projects. Even with endorsement from top VCs, it remains challenging to introduce a new and highly volatile token in the current environment and have it widely accepted as a means of payment and store of value.