Editor's Note: This article comes fromChatting with Xiaozha (ID: xiaonazha88), reprinted by Odaily with authorization.

Editor's Note: This article comes from

Chatting with Xiaozha (ID: xiaonazha88)

, reprinted by Odaily with authorization.

Stable currency is a topic that cannot be avoided in the currency circle, and it is also something that cannot be avoided.

At first, there was no such thing as a stable currency, because it would be very convenient to enter and exit the fiat currency, and the transaction directly used the fiat currency as the transaction pair. However, everything started on September 4, 2017, and things changed, and there are more and more stablecoin players.

Stablecoin players, from institutions to exchanges, to project parties, and then to algorithmic stablecoins, involve all users and fight in the big market of stablecoins.

1. The fiat currency channel is blocked, which has become an opportunity for stable currency

On September 4, 2017, seven ministries and commissions including the central bank took action to officially stop ICO financing. The seven-department notice pointed out that no organization or individual may illegally engage in token issuance and financing activities, and all types of token issuance and financing activities should be stopped immediately, referred to as the 94 Incident.

The fiat currency channel has been suspended, there is no fiat currency channel, and the fluctuations in the currency circle are so large, the demand for stablecoins has suddenly expanded. So USDT began to be pushed onto the stage, and 1 USDT was anchored behind the stable currency of 1 US dollar, which not only solved the safe haven for users when the cryptocurrency fell, but also solved the problem of deposit channels.

The market value of USDT is also expanding step by step, and of course there are more and more competitors.

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2. Four types of stablecoins

According to the current stable currency issuance and practice in the market, it can be roughly divided into the following four types

1. Centralized stable currency

2. Over-collateralized stablecoins

3. Synthesize a basket of stable coins

4. Rebase Elastic Stablecoin

From the perspective of stable currency development, there is also a very interesting idea:

1. Stablecoins are issued from large institutional exchanges in a centralized manner, and the project party MakerDao issues over-collateralized stablecoins DAI;

3. On the collateral, from the stable currency with collateral to the algorithmic stable currency without collateral;

4. From the perspective of participants, from institutions to project parties to the general public participate in the issuance of stable coins.

There is a saying that those who win dicks win the world. Although I don't like this saying, I can't refute this truth.

The algorithmic stable currency AMPL is a stable currency that allows all holders to participate. From this perspective, I prefer AMPL to succeed.

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Three, four kinds of stable currency, development history

1. Centralized stable currency

At present, the stablecoins issued by institutions are led by USDT, but the market has always doubted whether USDT has enough dollars.

With the rapid development of the cryptocurrency market, many institutions are eyeing the cake of stablecoins. The issuance of stablecoins is equivalent to a money printing machine. Coupled with the uncertainty of USDT, more and more stablecoins have appeared.

Currently issued by institutions, there are several stablecoins with large circulation, including USDT (Tether), USDC (Coinbase), HUSD (Huobi & STCOINS), and BUSD (Binance & PAX). It can be seen that big exchanges are vying for the stablecoin market.

2. Over-collateralized stablecoins

After the birth of DeFi, compared with the stable currency issued by institutions, a very verifiable stable currency was produced, that is, over-collateralized stable currency. The more representative one is the DAI issued by MakerDAO.

Why is it called an over-collateralized stablecoin? A mortgage with a mortgage rate of more than 100% is called overcollateralization. To produce DAI in MakerDAO, users need to over-mortgage their assets into the agreement, and the lowest mortgage rate will be given according to the stability of different currencies.

Therefore, each DAI is backed by assets worth more than $1, and does not require any audit report from a centralized company. All mortgage data is open, transparent and verifiable on the chain.

3. Synthesize a basket of stable coins

This is a synthetic asset that integrates multiple stablecoins to form a more reliable stablecoin portfolio. When there is a problem with the value of one of the stablecoins, other stablecoins are used as fillings, representing products USD++, mUSD.

This method is a choice to reduce risks, but it is not completely avoiding risks. It has better market compatibility and will not destroy the existing stablecoin market structure. This is a more "soft" way, while Not in a "revolutionary" way.

4. Rebase Elastic Stablecoin"The Rebase Elastic Stablecoin can be described as an innovative stablecoin in the DeFi world. The principle is simple: adjust the currency supply through an algorithm to regulate price stability. Just like kneading noodles, if there is too much noodles, add water, and if there is too much water, add noodles, and you can always mix well.

However, the Rebase stablecoin is not mortgaged and does not have any value support. It is to maintain the currency price to fluctuate around a certain value by elastically adjusting the supply of tokens.

The originator of ReBase currency is AMPL. AMPL anchors the price of 1 US dollar in 2019. If it is higher than 1.05, it means inflation, and if it is lower than 0.96, it means deflation. Simple and straightforward, the amount of coins in the hands of all users changes in the same proportion.

AMPL has been baptized by the market, experienced the happy time of great inflation, and also experienced the so-called "death spiral"

, that is, AMPL has been below $1 for a long time, the number of AMPL is decreasing, and the price is still falling.

AMPL's coming out of the death spiral means a phased victory, which verifies that the Rebase mechanism will not die in the event of deflation.

Many algorithmic stablecoins were born after AMPL. Most of them imitate AMPL's rebase mechanism and optimize what they think AMPL lacks.

For example, ESD, in order to make the price of ESD more stable, retains the inflation mechanism on the basis of AMPL, but adjusts the deflation mechanism to a bond mechanism to reduce the psychological pressure of ESD on users during the death spiral. For the mechanism of ESD, you can read this article "Algorithm Stablecoin, What is Stirred is Instability, ESD Rebase Mechanism Designed for Large Accounts".

At present, the entire Rebase elastic stable currency is still in the experimental stage. Because it can easily arouse Fomo sentiment, it has become a speculative tool. The Rebase elastic stable currency can be divided into the following four categories:

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1) The originator of the AMPL rebase mechanism;

2) YAM introduces the treasury concept into the rebase mechanism;

3) ESD, Basis, etc. introduced the concept of bonds;