Ink/Jimmy
AMPL, a one-month holding increase of 88 times the income!
I believe that anyone who has experienced the DeFi bull market from July to September 2020 will not be unfamiliar with AMPL.
And if you missed AMPL, you would never think that you will continue to miss BASE, ESD, Basis Cash and a series of algorithmic stablecoin projects that make people continue to get rich.
However, there are still many people who are confused about algorithmic stablecoins. After all, the operating threshold of DeFi is too high.
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1st generation grandfather AMPL
AMPL (Ampleforth) is the first-generation algorithmic stablecoin.
AMPL was issued on the Bitfinex exchange in June 2019 in the form of IEO. Since the end of IEO, the price performance of AMPL has been mediocre until June 2020, when it announced the launch of its liquidity mining plan - Geyser (Geyser). With the increasing popularity of Defi, its market value has reached 2500x increase.
AMPL is designed as an asset anchored to the U.S. dollar, and the supply of tokens is adjusted through the Rebase algorithm to ensure the anchoring of its price. The Rebase mechanism of this "elastic supply" cryptocurrency is as follows:
If Pc < Pt -δ, the money supply contracts and the number of all wallet balances will decrease proportionally.
If Pc > Pt+δ, the money supply expands and the number of all wallet balances will increase proportionally.
If Pc is at [Pt - δ, Pt + δ], no Rebase will occur, and the money supply will not change.
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Rebase price range
Rebase is not dilutive because all account balances are adjusted proportionally, whether positive or negative. Therefore, the proportion of AMPL held by users to the total amount will not change.
Grading adjustment supply mechanism:
When a rebase occurs, the AMPLeforth protocol will calculate the target supply based on the current price, and in order to avoid overcorrection (Overcorrection), the protocol will not adjust the supply to the target value at one time, but adopt a hierarchical adjustment strategy.
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Grading supply adjustment mechanism
The above simple leek explanation is: AMPL will be issued more than 1U, and the price will be brought back to 1U; if the price of AMPL falls below 1U, it will be deflationary, and the price will be pulled back to 1U.
AMPL is not actually an algorithmic stablecoin. The accurate definition of AMPL should be a digital currency with elastic supply. AMPL is also indeed unstable. Due to the problem of human nature, when additional issuance occurs, due to the hysteresis of the market, the price will not be corrected immediately. At this time, the holder's currency increases again, which becomes a double profit situation of the holder's currency increasing in price. , which greatly stimulates holders to continue holding, and attracts the entry of new funds. As long as the consensus is not broken, the growth of the market value will be multiplied by the inflow of funds. But conversely, when the currency price falls below 1, there will be deflation. At this time, for the holders, they will face the double loss of currency price and price drop, which will greatly stimulate holders to sell and curb new entry of funds.
Under the distortion of human nature, the mechanism of AMPL is more like a split disk than a stable currency. This mechanism is very much in need of FOMO emotions. In fact, Moker participated in AMPL’s IEO on Bitfinex in 2019 and understood this mechanism, but the positive spiral of the mechanism failed because there was no Fomo at that time. After AMPL launched on Uniswap in 2020, in fact, due to the constant product formula of AMM DEX, and the amount of AMPL included Uniswap's LP pool when rebase, the price will be corrected immediately at the moment of rebase every day. But the power of human nature has far overcome this correction, and leeks think it is cheap, and continue to buy, which brings more buying. It is not the mechanism that turns stone into gold, but the Fomo emotion induced by the mechanism.
After the explosion of AMPL, there are a large number of imitation disks. On the basis of AMPL, the anchor objects are modified, the cycle is adjusted, or other micro-innovations are carried out. A large number of imitation disks such as RMPL, XMPL, TMPL, REBASE, xBTC, and sBTC spewed out.
BASE, which exploded in December, mainly made two changes:
1. Changing the grading adjustment of Rebase to immediate adjustment, it becomes an accelerated version of AMPL, which brings great stimulation.
2. Anchoring the market value of the encryption market brings greater volatility, and the volatility makes Rebase more frequent and intense, which intensifies the game.
The change of Base can’t help but remind people of the dividends of decentralized spinach in 2018. It is also from week to day to hour, and the frequency of stimulation continues to accelerate. Rebase is not a currency, but an electric shock button for the brain, long live the dopamine pleasure!
Rebase has been so successful that projects like YAM, which do not target algorithmic stablecoins, have also borrowed the mechanism of Rebase.
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Generation 1.5: ESD
ESD is currently the currency with the second market value among the algorithmic stablecoins. Its form is between the first-generation AMPL and the second-generation Basis Cash, so we define it as the 1.5th generation.
ESD has made the following improvements on the basis of AMPL:
1. After rebase, if additional tokens are issued, the additional tokens will not be directly and evenly distributed to AMPL holders like AMPL. ESD holders need to pledge to obtain newly issued ESD. There are two pledge modes. Pledge single currency ESD into DAO, and DAO will get 77.5% of the newly allocated ESD, which requires 15 epochs to unlock; or pledge ESD-USDC-LP into the LP Reward Pool, and the pool will get newly allocated ESD 20%, it takes 5 epochs to unlock. (1epoch=8hours)
This ingenious design requires ESD holders to obtain rewards by providing liquidity or reducing their own liquidity, instead of "getting something for nothing", which reduces the selling pressure and improves the stability of ESD. And the ESD amount in Uniswap's ESD-USDC pool will not be affected by Rebase, and it is easier to drive a positive cycle. Moke thinks this is a better design than AMPL.
2. After rebase, if there is a need for deflation, deflation will not be carried out, and excess liquidity in the market will be absorbed through bonds. These excess liquidity will be bought into Coupon, and the value of Coupon to buyers lies in when ESD is issued again. , will be given priority to Coupon holders.
It is worth noting that Coupon has a one-month time limit, and it will become invalid if no additional issuance is made after the time limit expires. Although the community sees this as a mechanism to discourage users from entering. But for the system, this is another level of correction.
Bonds are a model that essentially fills in the current shortfall with future earnings. Bond buyers save the system from shortfalls by sacrificing their own liquidity and earn future rewards.
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Generation 2: Basis Cash
Basis Cash is a second-generation algorithmic stablecoin. It's actually not a new thing.
Basis is an algorithmic stablecoin project that raised more than US$100 million in 2018. It was originally named Basecoin, but was later withdrawn due to US SEC regulatory issues.
Basis Cash draws on the design of Basis and adopts YFI's fair distribution model based on it.
The Basis Cash protocol consists of three tokens (Basic Cash (BAC), Basis Share (BAS), Basis Bond), Basis Share and Basis Bond are designed to move Basis Cash towards a price of $1. It uses three tokens to achieve inflation and deflation: BAC is against real-life U.S. dollars, BAS is against stocks with the Fed’s voting rights and dividend rights, and BAB is against U.S. dollar bonds. Bond dividends. Its mechanism is as follows:
When the trading price of Basis Cash is below $1, users will be able to purchase Basis Bonds at the price of BAC*BAC, thereby ensuring the stability of the BAC price. The bonds purchased are redeemable at a 1:1 ratio when the price of the BAC is above $1.
When the trading price of Basis Cash is higher than $1, the contract will first redeem the Basis Bonds to adjust the price of BAC. If the price of BAC is still higher than $1 at this time, the contract will mint new BAC and give priority to redemption BAB is then allocated to users who pledge BAS in the Boardroom.
In the distribution model of YFI, we call the pool that deposits stablecoin output YFI as pool 1, and the pool that deposits YFI-DAI-LP as pool 2.
And the model of Basis Cash is 1 pool composed of 5 stable coins, which lasts for 5 days, then 2 pools produce BAS for BAC-DAI-LP, and 3 pools produce BAS for BAS-DAI-LP. The output cycle of 2 pools and 3 pools is 1 year.
Pledging BAS can get additional BAC rewards. We will find two links:
Holding BAC market-making output BAS;
Hold BAS pledge dividend BAC.
Isn't this just "Tiyun Zong", left foot on the right foot, right foot on the left foot, To the moon elevator, Russian matryoshka in the inner loop, Möbius strip, and the endless loop of getting rich.
On the other hand, because BAB=BAC*BAC, when the price of BAC is oversold, there will be a huge arbitrage space. This arbitrage space will curb the decline of BAC. Above we call it "Tiyun Zong 2.0". The self-feedback enhanced design of Basis Cash has attracted a lot of speculators.
Of course, there will be a hidden risk in this. The larger the arbitrage space of BAB, the larger the deficit generated by the system, and the more funds need to be entered in the future. When the system arbitrage deficit is too large, the system may be the same as ESD Cannot repair itself.
The Davis double-click (kill) effect of all algorithmic stablecoins is particularly powerful, and all of them need a strong consensus to support a positive cycle, or some big players can reverse their emotions through strong capital behavior. In Basis, we saw a Ming Zhuang, Huang Licheng (founder of SWAG/CREAM/MITH). We witnessed with our own eyes that when BAC crashed to 60DAI for the first time, Huang Licheng’s address frantically bought. At that time, almost everyone in the community thought it was about to collapse, but when the price of BAC stabilized, BAC and BAS returned to the positive feedback link.
We are not encouraging readers to get into ESD or BAC and BAS now, these projects are full of huge game and risk (benefit). Therefore, we do not intend to share the arbitrage strategy of algorithmic stablecoins in this article. Years of experience in the cryptocurrency circle tells us that the crypto world rewards those who pioneer. YFI once collapsed, but later 1YFI>1BTC; LEND was once uninterested, but after the rebirth of Nirvana, it created 100x glory. At the beginning of 2018, no one at AMPL thought that it could make a comeback. Although there are so many imitation discs after AMPL, all of them have become the nourishment of AMPL. Innovation is value, and delivering innovation is also a kind of value.
In the DeFi era of the blockchain, funds are more actively rewarding these projects that bring real value. We are swimming on the cusp of blockchain innovation, and what we can convey is very pale. Talking about too many blockchains is not as profound as buying the first BTC. The taste of love can never be conveyed in words. Don't trust, Verify.
Ironically, these so-called algorithmic stablecoins have never been stable. It's okay, no one cares. After all, under the name of the so-called algorithmic stable currency, it is your and my restless hearts that are surging. The designers of these algorithmic stablecoins probably did not expect that their designs would eventually become our hype tools.
Money never sleeps.
