Tinder Research Institute: Mining strategies, experience and trend judgment on algorithmic stablecoins

Source: Tinder Research Institute--BitHelios 

Original title: "Algorithmic Stablecoin · Review of the First Chinese Roundtable"

Rhythm BlockBeats Note: December 30th afternoon , Tinder Research Institute BitHelios joined hands with seven guests including Bill, Jayson, Bruce, xy, Chen Mo, Cao Yin and Super Jun to hold an online roundtable sharing, the topics include new changes in algorithmic stablecoins, mining strategies and experiences, future trends and Afterwards, the Tinder Research Institute conducted an overall review of the content of the round table. An excerpt of this sharing is as follows: 

Bruce (MC/Guest)

Welcome to the Tinder Community Algorithmic Stablecoin Roundtable, this It is also the first algorithmic stablecoin roundtable in Chinese! I sincerely thank all the guests for coming. You are the pioneers and trendsetters of algorithmic stablecoins.  

 

Bill (guest)

Hello everyone, thank Tinder Research Institute for giving me an opportunity to share with you some personal views on algorithmic stablecoins. These views are purely personal and will be Focusing on the three topics of 1. New changes in algorithmic stablecoins 2. Mining strategies and experience 3. Future trends and developments. If it is incorrect or needs to be improved, you are welcome to point it out.

1. The new situation of algorithmic stable currency

Let’s first review the development stages that algorithmic stablecoins have experienced.

The first stage: The embryonic stage of development represented by AMPL. In this stage, the elastic currency (rebase coin) adjusts the currency balance of the holder's wallet according to the currency price. This way of balance change cannot adapt to the development of stable currency Basic needs: It is impossible for users to hold a currency whose balance changes every day for consumption and transfer and other basic functions required by stablecoins. But AMPL has successfully tried a possibility on the blockchain to dynamically adjust the money supply according to market demand.

The second stage: The initial stage of development represented by ESD/DSD, ESD is the first algorithmic stable currency that introduces the bond model to solve the problem of deflation. This method can ensure that the balance of the user's wallet remains unchanged and is stable for the future The expansion of currency application scenarios has laid the foundation for development. During the inflation period, users can obtain more inflation tokens by staking tokens. During the deflation period, speculators can buy coupons and destroy tokens to achieve deflation.

ESD/DSD is an algorithmic stable currency with a single currency, That is to say, both inflation and deflation are accomplished through this single currency. During inflation, pledge tokens to get more tokens, and during deflation, destroy tokens to obtain coupons with different premiums, which reduces the cost of token holders to use tokens for circulation. Willingness, its more important use is speculative profit, which to some extent limits the long-term development of stablecoins. Stablecoins without circulation value have no long-term development value.

On the other hand ESD/DSD adopts a similar fund The development model of the market, the earlier the entrants are, the more profitable they will be. The rapid riches effect has triggered a frenzy in the market. The crazy development compared with the inability to expand the application scenarios may bring a huge potential crisis to the development of ESD/DSD. In the digital currency When a market enters a bear market, it can crash quickly. Investing in this stablecoin requires extra risk control.

The third stage: The mature development stage represented by BASIS, BASIS uses three tokens to simulate the US dollar issuance system, and the three tokens correspond to the three core tools in the US dollar issuance system: BAC corresponds to the currency in circulation For US dollars, BAS corresponds to the equity of the Federal Reserve, and BAB corresponds to US dollar treasury bonds.

Based on years of stable operation experience in the US dollar currency issuance system, BASIS The development has also achieved great success. Since its official launch, BASIS has been widely recognized by the market. It has continued to be in a period of inflation, and more and more traditional financial funds have begun to enter the BASIS stablecoin system.

BASIS design completely separates the stable currency BAC and the equity currency BAS , to solve the problem that the circulation of a single currency is difficult to strengthen. Investors and speculators focus on the investment transactions of BAS and BAB. Users can complete the basic functions of stable currency such as daily payment, consumption and transaction through BAC.

BASIS, as the pioneer of three-coin separation, in the mode There are still many areas to be improved, which brings opportunities to newcomers. These areas to be improved include: 1. A more equal launch and distribution mechanism ensures that more people enter, instead of only allowing the earliest entrants or Big funds get the most benefits 2. Equity currency BAS needs to introduce lock-ups and provide liquidity at the same time to help the long-term development of the ecology.

The essence of the algorithmic stable currency is to challenge the legal currency issued by the country. After the development of stablecoins to a certain stage, it will definitely lead to national resistance. This has clearly seen the government's intervention power when the prototype of BASIS, basis.io, was forced to close by the US government. Therefore, algorithmic stablecoins must be developed and operated in an anonymous manner. At the same time, it is necessary to consider the various impacts that may be brought about by the government's strong supervision.

2. Mining strategy and experience

Algorithmic stablecoin mining is to participate in the almost zero-cost coinage business. It is the investment method with the highest return in the current market, so it has attracted a large number of investors to enter the field of stablecoin mining, but this This kind of investment is too early and the model is not perfect, so the currency price may fluctuate violently. Using the wrong investment strategy may make you return to zero overnight.

Common mistakes in mining include:

(1) After entering the black market, all funds are returned to zero. There are a large number of them, such as digging so-called top mines through community invitations, which eventually lead to the loss of all principal. Learning how to identify scams in social media such as Telegram, WeChat, and Twitter is a basic skill for digital currency investment.

(2) Failure to understand the rules of the game leads to losses or failure to make profits, Various stablecoins have different operating rules. For example, in ESD/DSD, the DAO pool and LP have different coin production conditions and unfreezing time. If you enter without carefully studying the rules, you may see others continue to produce coins and you The embarrassing situation of being locked for a long time and unable to produce coins.

(3) Choose the wrong strategy for mining and buying and selling coins , There may be different stablecoin mining pools when using stablecoin lossless mining, and each pool will have different mining speeds. Choosing a suitable stablecoin mining may have a large output difference. For many small funds For investors, directly buying share coins can often increase the return on investment, but the price of share coins fluctuates greatly. How to choose the right price to buy and sell is very important, otherwise you will lose money when everyone makes money.

(4) Blindly entered into the project by pyramid schemes or Buying and selling in the opposite direction leads to losses. We may be familiar with various WeChat groups to swipe the screen to encourage everyone to stud. This kind of follow-up after being brainwashed often becomes a group of takers.

Mining experience

(1) Follow the right community and the right people. In a good community, everyone learns from each other and keeps improving, and eventually everyone becomes an investment expert. In a bad community, pyramid schemes are used to brainwash people every day. Everyone becomes brainless leeks, and after a batch of leeks lose money and leave the market, they continue to cheat a batch of new leeks to come in and continue cutting. Try to avoid pyramid-style communities and group owners who don't think or learn.

(2) Continuously strengthen the understanding and awareness of the financial system , learn more technology. Most of the applications of digital currency are based on the application system of the financial system. Only with a deep understanding of the financial system and its rules can we quickly understand the various applications of digital currency and DeFi and quickly seize opportunities. The upstarts rising in this DeFi boom are almost all financial people with a deep understanding of finance.

(3) Learning more blockchain technology at the same time can also Let us avoid various pitfalls and quickly seize opportunities, such knowledge includes reading information on the chain, wallet tracking technology, manually operating smart contracts, reading and comparing smart contracts, etc.

(4) Learn more about understanding and analyzing people, There are real people behind every project. Before investing our hard-earned money, we must carefully analyze the people behind the project we invest in. Is it a criminal with evil intentions or an entrepreneur who is striving for ideals? A 14-year-old with no business ideas or a serial entrepreneur with a lot of entrepreneurial experience? These human analysis capabilities can help us maintain the greatest success rate throughout the entire investment process.

(5) Do more rational analysis and independent judgment to avoid brainwashing impulse. The most taboo thing when choosing an investment target is to blindly follow the wealth secrets of the so-called big coffee teachers, and make an independent, objective and rational analysis of all the information obtained before making investment decisions. In the unregulated blockchain financial market, most of the so-called industry experts are leek experts who make a living by absorbing coins at low prices and selling them to brainless leeks at high prices.

(6) Do not blindly judge projects with emotion Item remains a curiosity. The most common comment we hear is: Don't touch this spicy chicken imitation plate. But in fact, most of the excellent projects started from Ethereum. You can see how many Ethereum imitations have achieved great success. So I will not jump to conclusions on any new project, and continue to study each new project with a curiosity.

(7) Control positions, no stud, no gambling, reasonable Configure the investment ratio for each project. Betting on dogs seems to have become a fashion in digital currency investment. It does not look at the fundamentals of the project, does not analyze the potential, but only looks at the stud of public sentiment, but this is not investment, but gambling. The difference between investment and gambling is that gambling is a bet on a purely mathematical probability, while investment is a business model with an increasing probability of success. But even a seemingly good business model may have a black swan event, such as the hacking of the COVER project in the past two days. This kind of uncertainty can only minimize the loss caused by the problem by reasonably controlling the position.

(8) Learn to take profit at the set profit stop point Quit, not greedy for the last penny. There is no shortage of regrets around us. The most common one we hear may be that we regret not selling at a high point or buying at a low point. If we observe the investment behavior of investment masters, we will find that no master can always grasp the highest and lowest points to complete the transaction, and a greater proportion of their transactions fluctuate around the middle range. It is a necessary ability for a mature investor to make a profit and exit at the profit point set by oneself and then not look back.

3. Future trends and development

Just as the Bank of England emerged from the tussle of private mints to help create the glorious history of the British Empire, we are witnessing today a A coinage war based on blockchain technology will eventually produce a batch of decentralized algorithmic stablecoins that replace centralized stablecoins.

These algorithmic stablecoins are completely unsecured like ESD/DSD Algorithmic stablecoin, or a partially mortgaged algorithmic stablecoin like FRAX is trying, or an algorithmic stablecoin that uses disguised mortgages such as LP lock-up mortgages? It is all possible, and it is also possible that a variety of different forms of stablecoins coexist.

What we need to do as investors is to keep learning , stay curious about all kinds of new things and keep trying, only in this way can you seize this opportunity with the greatest development potential. You may have missed Bitcoin, you may have missed Ethereum, but just grab this once-in-a-lifetime opportunity and you will have the kind of success you had mining Bitcoin with your PC 10 years ago!

Jayson (guest)

Hi everyone! Thanks to the Tinder Research Institute for the invitation! Bill shared very well and structured. I will share from my experience. It might be a bit messy, but it's guaranteed to be real.

Let me introduce myself first, many friends in the currency circle know me Because of the Decentraland (MANA) project. I was an early investor in the project, and later joined the team as the head of China. I left the MANA team last year and have been mostly working on my own business. In fact, it has been more than a year since I left the currency circle. Before entering the currency circle, I was a traditional investment banker. I worked for Goldman Sachs 15 years ago. In Melbourne, I mainly do secondary market investment. Later, when I returned to China, I started my own business and worked in 2 companies, one of which raised 3 rounds of financing, and the other successfully exited after 15 years.

Like many old leeks, I have experienced Defi scams --> The process of Defi is really fragrant, but it's just a matter of getting on the bus early and late. I participated in Defi at the end of September. The first mine I dug was SWRV, and I basically missed the whole Defi.

I learned that ESD is about October, which is relatively early in China learned about this project. After knowing the mechanism of this project, I took a heavy position. Then it took about 1 month to study. Now everyone has a better understanding of the mechanism, etc., but there were very few materials at that time, there were no Chinese materials at all, and there were only a few articles in English. I hang out in the ESD Discod every day asking questions. I have also experienced it except for the first time, and it has been 4 cycles so far. Another interesting thing about ESD is that after I discovered this project, I went to the AMPL group to promote it, and then I was scolded by the group friends as a liar, and then I was kicked out of the group. At that time, the market value of ESD was about 40 million. Now ESD The market value has far exceeded AMPL.

About Basis Cash, I have been paying attention to it before. In fact, before Basis went online, the popularity was very low. Before his Telegram went online, there were only 300-400 people. To be honest, I didn't expect Basis to be as popular as it is now. Because I invested in these two projects relatively early, I established several groups. At the beginning, the esd group had only about 40 people, and it lasted for more than a month. At the beginning of December, it suddenly became popular.

This is my own mental journey of participating in the project. In fact, when I first participated, I was not so firm and full of doubts. But after spending a lot of time researching the past two months, the future is becoming clearer.

In terms of the general environment, the U.S. government sanctioned these non-compliance A centralized stablecoin is a sure thing. Everyone has seen XRP, and the next one is USDT. The entire Defi is basically built on USDC and Dai. Both of these have their own problems. USDC is compliant, but centralized, he can seal your account. As for Dai, its volume is relatively small, and its capital utilization rate is very poor. So in fact, the market urgently needs a decentralized stable currency as a spear.

OK. There is no problem with the track, so the next problem is the selection of chips.  I personally think that the underlying structure of algorithmic stablecoins has been established. ESD and BAS have obviously run out. ESD's vault has more than 10 million yuan, and BAS's vault has more than 400,000 yuan.  Once the project party has money, they can do many things. ESD can obviously feel a lot faster recently. For example, V2 is already in the works, and it will be launched in February. Then the specific staff members are also relatively experienced in the industry. I will post it so that everyone can feel it.

·Andy Chorlian - ex-MakerDAO smart contract developer, YFI strategist

·Dan Matthews - PieDAO, Audit DAO

·Austin Williams - OpenZeppelin auditor and creator of Coupon Clipper

·Scott Lewis - DeFi Pulse, Slingshot and mechanism designer

·Will Price - crypto data scientist and mechanism designer

A rich community , coupled with the speed of rapid self-evolution, will quickly stand out from competitors. BAS is also working on BAS V2, but what is more interesting is that a certain imitation disk launched today (I will not mention the name, so as not to advertise them) has already realized part of the functions of BAS v2 in advance. Boardroom is LP pledge instead of single currency pledge, which solves the problem of insufficient liquidity of BAS. These competitive and innovative imitation disks are also urging the continued evolution of the leading projects.

As for other non-innovative imitation disks, they all become ESD and BAS nourishment. As for whether a single currency is better or multi-coin is better, there are many debates. I personally think it is too early to make a judgment before it has passed the test of time. There are relatively few players on the track at present, so I bet on both of these.

At present, for ESD and BAS, the most important thing is to find use case, to support his current size and future development. In the past few days, we can see a large number of imitation disks using ESD and BAC appearing, which has increased everyone's demand for use. In the next step, LP trading pairs based on ESD and BAC, mortgages, and other peripheral tools will be launched, and the market value will continue to be confirmed. As the real usage rate increases, the market value will continue to increase.

About foam

My personal investment covers real estate, stocks and coins. I have fully experienced the 2008 financial crisis and the two big bull markets of A shares.  

What I want to say is that every revolution comes Sometimes, there will be huge bubbles, and many people will make money at an unimaginable speed. Only bubbles can attract capital and talents to quickly enter this industry. There are many smart and brave people who embraced the bubble and gained huge wealth, and many people chose to stay away from the bubble and gained wisdom.

The industry has developed to this day, and it has always been blindfolded and running wildly , until now, everyone has discovered that 70-80% of the entire industry is built on the very unstable foundation of USDT. Everyone knows that the collapse of USDT is only a matter of time, and many people want to solve this problem in the same way. But it is difficult for you to hit the opponent in the same way, it must be a dimensionality reduction strike. I personally believe that decentralized stablecoins are the future and the general trend. This is a track worth tens of billions or even hundreds of billions of dollars. It is worth our heavy position and continuous betting.

Bruce (guest)

Hello everyone, I am Bruce from the Tinder community. I used to be a blockchain VC analyst and also participated in Internet project financing.

I mainly want to talk about mining strategy, especially Basis . I am interested in algorithmic stablecoins and make money on AMPL. It is a bit late to pay attention to ESD DSD at the beginning of this wave

Thanks for sharing Bill, I am After reading his tweets, I quickly realized that this wave can work. Before Basis appeared, I also felt that it was a bit of an idea, but Basis was different. I basically thought it through on the 14th, and wrote it on Twitter on the 15th. Many things I wanted to say had already been written on the 15th.

 

New changes

For an algorithmic stablecoin to be successful, it must meet three points: stability, decentralization, and sudden wealth.

We look at ESD, etc., the integration of stock and currency, everyone wants More is pledged rather than used, and this high volatility is a good speculative target.

But Basis is split, let's see: Bac for the first time Under the water, it fell below 0.9 and quickly pulled back, and now the premium is only about 20%. Compared with other coins that have been underwater for a long time, Basis has not even seen BAB.

Why there is no underwater, why there is no BAB, the reason is very simple , BAC supply is less than demand. In the future, if the supply of BAC exceeds the demand, its volatility will drop and remain stable. The income of BAS satisfies those who want to get rich.

Decentralize this, in the future by combining the BAS pool and Boardroom Merge, provide sufficient liquidity for BAS trading, and achieve decentralization through high volatility. But high volatility is not a risk in itself.

In the long run, BAS will gradually flow from speculators Holder in hand. Underwater BAC is a mining machine with a price below the cost, and a large amount of money comes in to buy it, reducing supply. Then BAB is first come, first served, rushing to exchange, further reducing the supply. Long-term investors will buy the bottom of BAS when BAC is underwater, raise the price, and maintain the stability of BAS price, or support the bottom.

 

Mining Strategy

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80% of my funds are allocated in BAS BAC, 20% in DSD, and I did not go to other imitation disks. The logic is the barbell strategy, with Basis allocated with large funds at one end, and DSD allocated with small funds and high risks at the other end

I have a vague way to judge the good buying point of BAS: look at BAS Compared with the market value of BAC. If the market value of BAS is less than or close to BAC, it is suitable for buying, and the greater the deviation, the more suitable for heavy positions. If the market value of BAS is greater than BAC, and the deviation is too large, it is not suitable for buying in the short term, but it is not recommended to sell your own BAS. Because if the mining income of BAC attracts funds, the additional issuance of BAC will keep up with the market value of BAS.

Everyone had a great time playing imitation disk today, I have limited energy, I feel that there is no consensus on the imitation disk, and it is impossible to judge some hidden traps.

 

Future trends and development

Some people say that algorithmic stablecoins are a zero-sum game, but I think Basis is a non-zero-sum game. When there is a negative spiral, someone will buy the bottom and keep the price stable.

I think the current algorithmic stable currency is DeFi in June , a higher level of competition has just begun. There is a lot of mainstream prejudice. It is best for everyone to think rationally and independently, and don't take it for granted that it is just a disk. Don't be disturbed by excessive information. If you are very impetuous, it is recommended to go for a walk and breathe the cold air.

When BAC achieves unsecured price stability, there must be pioneers use. At that time, it was the curvature engine, and the entire encryption ecology was the driving force of Basis, realizing the development of the speed of light

This may be the first time in human history to realize the algorithmic central bank , to achieve decentralized stable currency issuance. Letting the market determine the supply of money always automatically matches market demand. In the future, everyone will put down the old mortgage stablecoins and use advanced algorithmic stablecoins.

Finally, I want to share with other partners who don’t know , a little calmer, not too aggressive.

 

xy (guest)

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Hello everyone, I am xy, and I will share these three topics next!

New changes in algorithmic stablecoins:

Just now I read that Bill’s sharing is divided into three stages, and I agree very much. In the first stage, AMPL provided a long-term vitality, and its rebase method was very violent and single. Although it did not form a leading stablecoin project in the end, it did make a good start for the algorithmic stablecoin , there is a stable currency project that is now recognized by more people.

 

I think both Basis and ESD are Phase 2 projects, like ESD The price of the currency is relatively stable, and it has also been recognized by core DeFi ecological projects such as AAVE. Basis is in a period of rapid development. If BAC is to enter the external ecological expansion, it still takes time to consider. But the most exciting thing is that the successful cold start of Basis has also brought a good rate of return, which has brought a wave of enthusiasm among algorithmic stablecoin investors.

Let’s talk about the DSD project again, it is an algorithm currency, but From the current point of view, the time setting for its ecological expansion is still at an excessively fluctuating frequency. Compared with DSD, ESD is a relatively healthy adjustment rhythm. The adjustment rhythm of DSD is not at all like a stable stage, and the structures of the two communities are not the same.

 

The third stage, in my personal opinion, is a considerable The direction is FRAX and ESD2.0, including Basis2.0 is also making a healthier and more stable stable currency product plan. For example, the method of turning Rebasecoin into Rebase pledge rate is an ideal method. Although it may not bring you a more intense development cycle like ESD or Basis, I think this method is relatively healthy. .

 

ESD2.0 and Basis2.0 are doing something similar to FRAX For the plan, they got a relatively good cold start through the second stage. In a relatively short period of time, it has a large market value and a very good community. The current development speed of FRAX is not as fast as ESD and Basis. This is also a different approach, but I think they will all lead to the same goal in the end, and I think they will all lead to a more convergent solution in the end.

 

Mining strategy and experience

It took me a while to study this type of project, and I was attracted by its scheme and model. After most people are exposed to new things, they will not have a relatively fundamental value investment consensus in the early days like Jayson and Bruce. My suggestion is to understand and then choose the method of participation. An obvious advantage of algorithmic stablecoins is that their data is all on the chain and can be checked. If we treat him as an investment target, there are fundamentals to look at. For example, through the data analysis on the official website, we can calculate the number and total amount of Redeem this time, how much the price of ESD in stablecoins needs to rise, and whether there is more room for Redeem to drop coupons. And time, when you figure this out, it becomes easier to play.

 

Some other wild mines and new imitation discs, my personal The point of view is to seek stability. Use consensus stablecoins (such as ESD, Basis stablecoins) to mine, try not to mine the second pool, digging the second pool is equivalent to short-term, so it’s best to keep an eye on the market, don’t take it lightly, I am not a short-term one It is not recommended to watch the market, these are two different ways. If you want to be stable, it is to put the single-currency stable currency into it for mining. The above are some risk warnings.

 

Future trends and development

This topic is divided into two different directions. The first level is in the development of ecology. Currently, in these algorithmic stablecoin projects , the one that runs faster is ESD. We see that the ESD community has a group of very energetic people, and they are crazily united. The projects in the DEFI ecosystem that currently support ESD as a financing asset are also the most and most recognized assets. Secondly, I think an asset that is easier to accept may be FRAX, because FRAX is relatively more in line with the definition of stable currency.

Basis why should I rank it third ? Of course, its plan is very good, but it is still in a relatively accelerated cold start stage. It has not yet completed the cold start of its fundamentals, and the currency price is also relatively crazy and violent. So at present, it is better for us to regard Basis as a currency speculation or investment target. If you want to participate more deeply, you can be a contributor to its core community and make some contributions to it, and you can get some better returns.

Algorithmic stablecoins are more exciting. I am in another I also said in the field sharing that I think its appearance is inevitable, and even its significance as an asset can be regarded as an idea on par with BTC and ETH. It is a native encryption that only appears in the field of blockchain Assets directly point to the financing, lending and currency issuance methods in the traditional financial world.

 

Through some simple mathematical models, the In the traditional financial world, huge forms of financing and currency distribution are consumed. I don't intend to look at it as an experiment, it will definitely have a real impact on the financial structure, what we see now is just the tip of the iceberg, this is my view on algorithmic stablecoins.

 

Chen Mo (guest)

Hi everyone! I'm Chen Mo, from the Bitouq community. Thank you for the invitation from the Tinder Research Institute. I will discuss learning algorithmic stablecoins with you. My personal views are not financial suggestions, and are only for learning and exchange!

The previous masters have already discussed the development history of algorithmic stablecoins, products The iteration has been analyzed in detail, so I won't repeat it here. In order to save time, I will briefly summarize the three topics together:

Since the development of algorithmic stablecoins, I think the whole pattern has basically taken shape, that is, led by Basis and ESD to occupy the main market. Well, there have been a lot of "imitation disks" recently. In fact, everyone should have expected such changes. Referring to DEFI's early liquidity mining, it also started from layers of nesting dolls. Most of the appearance of imitation disks The coin of the leading product will be selected for nesting dolls. In fact, this method not only creates competition to some extent, but also stimulates the development of top-level products. This is the current situation in the entire market.

For the current investment strategy, the income from the imitation market will definitely increase in the early stage It is more impressive, but it should be noted that it is to prevent being cheated, and fancy leek-cutting routines. I still prefer the method of no pre-mining and no reservation for this kind of products, and the time period of rebase is set neutrally. It can speed up but not too fast. For the two major "positive offers", what needs to be paid attention to is the high volatility of equity coins and the lock-up time of the lock-up mechanism.

The last and most critical point, if you are not Under the premise of understanding Rebase, don't enter the market! Because this is not a game that can be copied, do your homework, otherwise you will die miserably. The future development trend, according to my personal understanding, the current investors of algorithmic stablecoin products are divided into two categories:

The first category is that although they do not believe that algorithmic stablecoins can be truly "stable", they are willing to invest in early high returns, or speculate.

The second category is long-term optimism that algorithmic stablecoins can truly serve as Stablecoin usage.

So as far as the existing product types are concerned, ESD has lock The characteristics of liquidity are more speculative. Basis separates equity coins and circulation coins, making it easier to break through in application scenarios. The Basis-based stablecoin mining mechanism is the fairest and lowest-risk option, which is also verified by the market. For users with low risk preference, direct digging and selling for free is the option with the lowest risk. Those who have a good understanding of the whole mechanism and have risk tolerance can continue to enter 2 pools and 3 pools. No matter what kind of supporter it is, I think it will be helpful to the future of algorithmic stablecoins. The specific future development is created and determined by us and the market.

 

Cao Yin (guest)

Hello everyone, I am Cao Yin, I joined the currency circle in 2015, and I was still working in China Cinda at that time!

In April 2015, I took the initiative to ask the leader Established the blockchain business department and became the first blockchain technology analyst in China's state-owned financial institutions at that time. Later, he led and participated in the blockchain projects and plans of relevant departments in many countries, and wrote several books.

I should be regarded as the first batch of Chinese to start investing and using DeFi In 2017, an angel invested in Loopring, the earliest and most successful DeFi project in China, and has been writing DeFi-related articles. Then in 2019, he started All in DeFi, not only investing in DeFi projects, but also deeply incubating DeFi projects by himself. Known as the jewel in the crown of Polkadot. Acala.Network, and YFII, the most active DeFi community-based project in China that has been listed on Coinbase Custody, etc.

Next, I will talk about why I think the competition of algorithmic stablecoins Tao is bound to succeed.

In the process of investing and researching DeFi, especially when I When I participated in the design of Acala products in the early days, I deeply realized that although the current DeFi world is developing rapidly and the ecology is becoming more and more mature, it just lacks the most important cornerstone of a mature financial system: pure currency.

 

Now our DeFi world mainly uses two types of assets as currency , 1.USDT, USDC and other centralized stablecoins backed by fiat currencies; 2.DAI, over-collateralized decentralized stablecoins, fiat-backed centralized stablecoins are the most unreliable, and Tether has been targeted by the SEC for a long time. USDC can also freeze user accounts at any time, and DAI, an over-collateralized stablecoin, not only has the problem of low asset utilization, but more importantly, over-collateralized stablecoins are only one of the historical forms of currency from the perspective of currency history evolution. one.

The names of currency in Chinese are relatively uniform, and they are all called currency, but In English, the forms of currency in different periods have left different names, such as Bank Note and Fiat Currency.

Staking stablecoins are actually Bank Notes, similar to ancient Chinese Bank notes, and the algorithmic stable currency is a more modern Fiat Currency, but the supply and demand are not regulated by the central bank, but are automatically adjusted by the mechanism of the algorithmic stable currency according to the supply and demand of the money market.

 

You can regard the expansion and stability adjustment mechanism of the algorithmic stable currency as a A precision-designed machine, the current expansion of this machine is driven by human greed, and in the future, when the algorithmic stablecoin market matures, the scale is large enough, and there are a large number of DeFi applications based on algorithmic stablecoins, it will drive this machine. The stability of the machine is the arbitrage demand from professional institutions.

This is like the development of Uniswap, now there is A large number of professional investors do arbitrage among centralized exchanges to achieve price parity of decentralized trading pairs on Uniswap. In the early days, the price of Uniswap followed the centralized exchange, but now the price pricing hub of many tokens has actually been transferred from the exchange to Uniswap, and the migration of this pricing hub was actually realized in just one year.

But the difference between algorithmic stablecoins and collateralized stablecoins like Dai There is no conflict between them. Even now, the currency issuance of central banks is based on the dual model of national credit + reserve assets. However, there is a clear ceiling for collateralized stablecoins, which is the market value of collateral that can be mortgaged. However, it is still far away from the ceiling, and the market value bottleneck will not be encountered until it grows 100 times, and the collateralized stablecoin is actually a kind of debt, similar to treasury bills and various commercial papers. The algorithmic stable currency is a purer currency and an asset. Therefore, the two are different in attributes, so there is a reason for their existence at the same time. In the future, the development direction of the two will be different. The mortgage-type stable currency will continue to expand the scope of mortgage assets, especially in the direction of physical assets. For example, Maker recently launched a plan to issue DAI for real estate mortgage financing. The algorithmic stable currency will continue to expand as the real native currency of the DeFi world with the needs of the cryptocurrency market.

Finally, I am studying various algorithmic stablecoin mechanisms Some final thoughts:

How to design a better algorithmic stablecoin Mechanism, taking into account expansion and stability.

1. Be sure to stay away from equilibrium

The so-called staying away from the equilibrium state is actually to find a way to stimulate the energy and material exchange between the algorithmic stable currency system and the external system, that is, to increase the transaction volume and expand the cooperation with other DeFi agreements asset portfolio size.

Currently, the indicators for evaluating algorithmic stable currency systems are very immature. In addition to Market Cap and TVL, transaction data should also be introduced. In my opinion, transaction data is even more important than TVL. Some algorithmic stablecoin projects, such as the second-generation algorithmic stablecoin ESD, deliberately designed a lock-up distribution system, which seems to reduce This reduces the selling pressure and increases the price stability of ESD. However, this artificial lock-up stability actually limits the trading volume of ESD, and even increases the entropy of the entire system. On the other hand, Basis, the third-generation algorithmic stablecoin without lock-up, has a significantly larger transaction volume than ESD when Basis’s BAC is smaller than ESD. This also makes BAC’s scale and stability bound to exceed ESD in the future.

2. Increase the number of internal subsystems of the stablecoin and give birth to a "self-organizing system"

Due to the rebase mechanism of the algorithmic stable currency, there is a gap between the price of the token and the balance of the token circulation, and the speculative preferences of token investors. Strong reflexivity, and due to the incompleteness of investors' cognition and information, the original randomness of algorithmic stablecoins is caused. Through the dynamic mechanism between the subsystems of the algorithmic stablecoin, the Brownian motion of a single investor behind this randomness is amplified and guided, and meaningful mutations are generated, resulting in "emergent complexity" or "self-organization system” (self-organizing system)

Therefore, it can be said that Algorithmic stablecoins with a single system are bound to be unable to be stable and orderly, and algorithmic stablecoins with more internal subsystems are more likely to achieve stability and orderliness. Early algorithmic stablecoins, such as Ampl, Yam, etc., are algorithmic stablecoins with a single currency and a single system. There is no interaction between systems at all, no robustness, and a one-way death spiral that cannot be escaped unless the external environment of the market changes .

The second-generation algorithmic stablecoin ESD has added Coupon tokens, It plays a bond-like role, but the Coupon is only valid for 30 days, which can only be regarded as 0.5 subsystems. The third-generation algorithmic stablecoin Basis.Cash is currently the most advanced algorithmic stablecoin with the most subsystems and the most advanced dynamic mechanism design between subsystems. It is also the algorithmic stablecoin that is most likely to realize "system self-organization" through the random interaction of internal subsystems .

Basis Cash has three subsystems: BAC, BAS, BAB, BAC It is a stablecoin against the US dollar, BAS is a stock with governance rights and dividend rights, and BAB is against central bank bonds. The relatively complete abstraction of these three subsystems reproduces the current central bank monetary policy dynamics system. From the current From the point of view, it can be said that among all algorithmic stablecoin dynamic systems, the design of orderly self-organization is most likely to be realized.

3. Intentionally exacerbate the volatility of algorithmic stablecoins to achieve price anchoring and balance expansion

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In the early stage of the project, there is no need to worry about the instability of the price of the algorithmic stable currency. As long as the transaction volume is enlarged, the fluctuation of the price will promote Algorithmic stablecoins are an important means to achieve order at a higher energy level. Of course, the premise is that there are inherent conditions for the formation of an orderly structure in the algorithmic stablecoin system. If there is no orderly structure system like AMPL, even if the price of AMPL fluctuates into the sky, order will never be achieved, and Basis. Projects like Cash, which have an inherent orderly structure, can achieve the final convergence to the anchor price in the price fluctuation of tokens.

But price convergence is only one of the goals of algorithmic stablecoins, The market value of the algorithmic stablecoin is also very important, and it is necessary to achieve currency value anchoring under high energy level conditions. This should exacerbate the price fluctuations of algorithmic stablecoins, rather than limit fluctuations, and then realize the convergence of price anchoring through price fluctuations under an orderly structure, and at the same time realize the continuous expansion of the scale of algorithmic stablecoins. Comparing the existing algorithmic stable currency projects, only ESD and Basis.Cash have a certain inherent orderly structure, while ESD's lock distribution mechanism and Coupon validity period artificially limit the price fluctuation of ESD. Price convergence at low energy levels, or disorderly price collapse at higher energy levels.

Basis token inflation is not locked, and BAB is not Set an expiration date and fully embrace fluctuations. In addition, the price of Basis's bond BAB = the square of BAC. This design can be supported when the price of BAC is low, and it cleverly realizes the implied inflation during deflation. When the BAC price returns above the inflation line, the mechanism design of BAB can honor the implied inflation and amplify the price fluctuation of BAC.

This design not only does not limit the fluctuation deviation of BAC, but Very cleverly replaced the deflationary period deviation with the inflationary period, and amplified it, which helps BAC to achieve price convergence on the inflation line faster in the random price fluctuation, that is, the random rise is more than the random fall, This will allow BAC's market capitalization to continue to expand.

The last point is to enter negative entropy, and the algorithm stable currency Output entropy outside the system. I won’t expand on this point, as the expansion may be scolded by others, so you can understand why you want to export entropy to the outside world.

Finally and finally, to sum up:

1. Algorithmic stablecoins will be the brightest track in 2021

2. Algorithmic stablecoins will continue Iteration, but currently the most promising is Basis.cash

3. The pursuit of algorithmic stablecoins is not stability, but order

< p align="justify" line="DQxU">4. Embrace chaos, don't be afraid of chaos

Super Jun ( Guest)

Hi everyone, I am Super Jun. I bought coins in 2012 and started my business in the circle in 2013. Engaged in mining, wallets, exchanges, etc., became a freelancer in 2018, exploring the most cutting-edge new gadgets in the blockchain, from the Dapp era to the DeFi era.

The beginning of the article is clear, I think the algorithmic stable currency track is in addition to The third big track besides Bitcoin and Ethereum, the specifics Mr. Cao and Bill have already explained very clearly.

According to past views, I think it is something concise and powerful, Only the evolution of consensus is required. Algorithmic stablecoins are such things. Among all the current algorithmic stablecoins, I am only optimistic about BAC. I think the others have shortcomings. So for me, I also mine BAC, hold BAS, and have nothing else. There is no point in copying disks, and the DeFi world rewards original creators.

Ms. Cao’s analysis just now is very beneficial, for each algorithm stable currency The analysis is very consistent with my point of view, so I won't repeat it here. My focus is on the consensus evolution of algorithmic stablecoins. The evolution of consensus does not happen gradually, it may trigger some black swan events, and at the moment when the old order collapses, it will suddenly spread and quickly invade the human mind. Looking back, Bitcoin and the blockchain have never been more developed than this.

This year may become the starting point for the explosive development of algorithmic stablecoins, and it may be It has a lot to do with the external environment. If the Federal Reserve prints money at will, the blockchain technology has matured, so stories about the “underground Fed” such as algorithmic stablecoins can spread and attract people to participate. Get everyone's approval.

The underlying foundation of the blockchain has become more and more perfect, and the promotion of products Power is the direction for the further development of algorithmic stablecoins. At present, BAC has not actually expanded externally, and it is purely playing the game of issuing coins. Of course, external expansion is not possible now. After all, mining has a daily profit of 2%, which may Then the income will drop, and there will be more BAC products in the ecology, such as lending, OTC, trading pairs, etc...

  ;

All in all, in my opinion, algorithmic stable currency is currently the most imaginative defi project, and it is also the field that needs the most risk. I am optimistic about this field , has also invested in this field. That's all about the time relationship today.

Bruce (MC/Guest)

Thank you for sharing, 2020 is an unforgettable year, witnessing history.  Tomorrow is the last day of 2020! In 2021, how huge will algorithmic stablecoins grow in the accelerated world of DeFi, and what huge changes will happen in the blockchain world? It's really exciting!

 Don't overestimate the short-term progress, and don't ignore the long-term trend. I have heard the sound of the huge wave of the algorithmic stable currency, and the rhythm of the tide. Today's roundtable sharing is the first wave of pioneers. In the future, everyone will ride the wind and waves together!   

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