Base Protocol (BASE) is one of the most popular currencies recently. Today I will briefly talk about the basic model and investment logic of this currency.
First of all, I want to show my attitude. I like algorithmic stablecoins very much. Even though algorithmic stablecoins lack some theoretical support in the sense of traditional economics, the mathematical model of algorithmic stablecoins is very interesting.
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Image data time December 10, 2020 16:04
The difference between Base and AMPL, or the difference between Base and other algorithmic elastic coins is that it does not benchmark against 1 dollar (or the relevant parameters of the US CPI, which is 1 dollar in simplified understanding, which does not affect the investment for the time being), but the benchmark as a whole The market value of the encrypted market, such as 0.552USDT and the encrypted market value of 552 billion US dollars (the target price shown in the picture) is this correspondence. If the encrypted market value grows to 600 billion US dollars, the target price is 0.6 US dollars.
Crypto market value ÷ 1 trillion = BASE target benchmark adjustment price.
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Violent Springs: Rapid Profit (or Loss)
Ampleforth is the originator of algorithmic elastic currency, which has been introduced in previous articles. There is a bug in the design of the Base currency. This bug or this feature causes everything about it to be accelerated—accelerated death or accelerated growth. It only takes a moment between the ascent and the descent.
AMPL is the daily adjusted inflation-deflation coefficient, ten-day average. That is, when it is 2 US dollars, it is 100% more than 1 US dollar, then the next morning when the inflation is about 10% (100% divided by 10 days, 10% a day).
Base is done in one day, at 6:00 a.m. Beijing time every day, in one go.
That is to say, if the currency is not held, it may increase or decrease after six o’clock every morning, and the fluctuation may be very large, because the consensus in the early stage of the project is not unified (don’t worry, it will be difficult to unify later) .
For example, if the current price remains unchanged and the base price remains unchanged, then the 1,000 base coins in your hands tomorrow morning will become 1-17%=83%, which will be reduced to 830 coins. In fact, it's hard to say, because I don't know what kind of fluctuations there are at night.
The picture above shows all the inflation and deflation data given by Base’s official website. The overall inflation is 24.66 times higher than the initial circulation on the upper right of the picture.
What does it mean? It means that on the first day of launch (before the first rebase, that is, before 6:00 am on December 3), I invested 100 US dollars, bought 200 coins at the currency price of 0.5 US dollars, and sold them at 0.5 US dollars this morning, and got 2466 dollars. The profit is 2366 US dollars. The base has also changed from the initial 200 to the current 200*2466%=4932.
To verify the mathematical logic of website data. I make the following form:
On the morning of December 10 (this day), we experienced a deflation (-8%). After December 10, the inflation rate will be 0, and it will be adjusted in real time every day.
The calculated 2472% is similar to the 2466% of the official website, and the official website is fairly credible.
It can be seen that if you invest money before December 3rd and sell it at the same price after 6 am on December 6th (there is always a chance, the currency price fluctuates like a rabbit every day), how much will 1 yuan become? ?
236%*140%*280%*410%=37.9 times
1 dollar turned into about 38 dollars.
Maybe there is such a master, 38 times in 4 days.
Regarding Base's arbitrage method, various arbitrage methods such as grid trading and intraday trading have appeared in the market, but even after investing and holding it, the profit is more than 20 times. The risk lies in whether the market value of this currency can continue to expand. Just judge As the market value continues to expand, you can ignore the amount of coins in hand, as long as you remember how much money you have invested. The lower the market value, the more you can cover your position.
Because one of the characteristics of algorithmic stable coins is that the moment the funds are invested, the ratio between the amount of coins in hand and the total amount of coins is determined to be constant. As long as the market value expands, more coins and less coins (referring to abandoning the observation of daily quantity fluctuations) can be profitable. Of course, the premise of market value expansion is that the total amount of coins will also continue to expand, spiral upward, and the coins in hand will definitely increase. (if the base market value becomes larger).
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Can Base expand its market cap in the future?
There are innovations, but there are also bugs. This bug is that the inflation and deflation are too fierce. Even before the rebase, it can be used to manipulate the price of the currency to manipulate the expansion and contraction of the spring (referring to the inflation and deflation of the elastic currency). In terms of model, it is not as robust as AMPL. Yes, in front of BASE, AMPL is really stable.
