1. Day 8/30 of @THORChain threads
Subject : 3rd gen stables - Algorithmic stablecoins
This is pre-requisit knowledge for understanding the THORfi breakdown ๐งต โฌ๏ธ
Subject : 3rd gen stables - Algorithmic stablecoins
This is pre-requisit knowledge for understanding the THORfi breakdown ๐งต โฌ๏ธ
2.
Contest :
I will give away TWO Brookr NFTs among everyone who retweets the first part of the thread.
@BrokkrFinance is having it's token launch event soon. Holders will get a $bro token airdrop.
Contest :
I will give away TWO Brookr NFTs among everyone who retweets the first part of the thread.
@BrokkrFinance is having it's token launch event soon. Holders will get a $bro token airdrop.
3.
Defi summer of 2020 saw the explosive beginning of a parallel financial system. Complexity of smart contracts began to be explored with the interest of copying traditional finance functions and some novel ones.
Defi summer of 2020 saw the explosive beginning of a parallel financial system. Complexity of smart contracts began to be explored with the interest of copying traditional finance functions and some novel ones.
4.
Lending, borrowing, market making, and trading all proliferated quickly. Equity and debt like tokens were made and copied in endless forms as there was no rules or limits set on the system.
Lending, borrowing, market making, and trading all proliferated quickly. Equity and debt like tokens were made and copied in endless forms as there was no rules or limits set on the system.
5.
The line between terms like debt and equity started to blur and within time you could only describe each token as that token.
The line between terms like debt and equity started to blur and within time you could only describe each token as that token.
6.
Back to Makerdao in its development phase. MKR saw an eth price in the 10-100B range. It used the already highly valued ETH token as collateral and created a new equity type token MKR that sought to charge an interest rate to borrowers, and accrue value to MKR from this.
Back to Makerdao in its development phase. MKR saw an eth price in the 10-100B range. It used the already highly valued ETH token as collateral and created a new equity type token MKR that sought to charge an interest rate to borrowers, and accrue value to MKR from this.
7.
In other words, MKR bootstrapped an already valued token to issue debt. And kept its own token separate. The faith in the value of dai was more separated from the new MKR token, and more related to the already successful ETH token.
In other words, MKR bootstrapped an already valued token to issue debt. And kept its own token separate. The faith in the value of dai was more separated from the new MKR token, and more related to the already successful ETH token.
8.
Near the end of defi summer ampleforth began attracting capital. Ampleforth would allow the price of AMPL to do whatever it wanted for a day, at the end of that day if the price was up 40% it would issue 40% more tokens thus in theory tokens still worth 1$ (stablecoin).
Near the end of defi summer ampleforth began attracting capital. Ampleforth would allow the price of AMPL to do whatever it wanted for a day, at the end of that day if the price was up 40% it would issue 40% more tokens thus in theory tokens still worth 1$ (stablecoin).
9.
Ampleforth was trying to separate out the volatility of price and distribute it all into the quantity of the tokens rather than the price. A $600m bubble inflated and deflated. The Algorithmic stable coin had been born. It failed, crashed and burn.
Ampleforth was trying to separate out the volatility of price and distribute it all into the quantity of the tokens rather than the price. A $600m bubble inflated and deflated. The Algorithmic stable coin had been born. It failed, crashed and burn.
10.
Anything attracting that much capital for any reason would inevitably be copied and the last months of 2020 saw an endless set of attempts at algorithmic stable coins that issued rebasing tokens that tracked the price of USD, BTC, and even the price of gold.
Anything attracting that much capital for any reason would inevitably be copied and the last months of 2020 saw an endless set of attempts at algorithmic stable coins that issued rebasing tokens that tracked the price of USD, BTC, and even the price of gold.
11.
One after the other new games of magical chairs were created until finally @DegenSpartan broke it down. Algorithmic stable coins were all approaching their destined price of not 1$ but 0$.
One after the other new games of magical chairs were created until finally @DegenSpartan broke it down. Algorithmic stable coins were all approaching their destined price of not 1$ but 0$.
https://twitter.com/DegenSpartan/status/1342724316354383872?s=20&t=YQB_RxEy4valah9vvIOe_w
12.
Speculators had enough. It was impossible to create an undercollateralized copy of the USD without anything behind it. Only the federal reserve could accomplish this feat and even they could only keep the Ponzi going for a limited duration.
Speculators had enough. It was impossible to create an undercollateralized copy of the USD without anything behind it. Only the federal reserve could accomplish this feat and even they could only keep the Ponzi going for a limited duration.
13.
The builders remained and one of the most ambitious projects was born. The issue with algostables, do kwon believed, was that the token backing the algorithmic stable had to accrue genuine value.
The builders remained and one of the most ambitious projects was born. The issue with algostables, do kwon believed, was that the token backing the algorithmic stable had to accrue genuine value.
14.
The logical end to this argument was to build not just a momentarily in demand ponzi, or a valued application, but an entire layer 1 that would issue its own form of debt in line with and as a compliment to the growth of the L1.
The logical end to this argument was to build not just a momentarily in demand ponzi, or a valued application, but an entire layer 1 that would issue its own form of debt in line with and as a compliment to the growth of the L1.
15.
$luna didnโt want to store the sanctity of the collateral in a separate already valued token like MKR did with ETH. $luna wanted to build it all at once from the start, with ALL of the value of the applications as well as the debt accrued to the token. The rest is history.
$luna didnโt want to store the sanctity of the collateral in a separate already valued token like MKR did with ETH. $luna wanted to build it all at once from the start, with ALL of the value of the applications as well as the debt accrued to the token. The rest is history.
16.
$luna is the #7 ranked coin. It approaches a 100b valuation on a fully diluted basis. $luna has more than its fair share of detractors, regardless of what happens to $luna itself.
$luna is the #7 ranked coin. It approaches a 100b valuation on a fully diluted basis. $luna has more than its fair share of detractors, regardless of what happens to $luna itself.
17.
$luna is now being iterated upon in other coins as the model has been proven at a minimum to be the best bootstrapping mechanism ever seen in the history of the financial world.
$luna is now being iterated upon in other coins as the model has been proven at a minimum to be the best bootstrapping mechanism ever seen in the history of the financial world.
18.
The mechanism is simple : You can always destroy $luna at it's current value to create $ust, or destroy $ust to create $luna.
If $ust is lower, you mint $luna and sell it on the market at current price.
If it's higher, you sell it for $luna and burn it for $1 $ust.
The mechanism is simple : You can always destroy $luna at it's current value to create $ust, or destroy $ust to create $luna.
If $ust is lower, you mint $luna and sell it on the market at current price.
If it's higher, you sell it for $luna and burn it for $1 $ust.
19.
The @terra_money has created artificial incentives for the promotion and adoption of $ust.
An analogy : They built the perfect plane and sent it in the air, refuelling while airborn. They are now building the runway where it will land.
The @terra_money has created artificial incentives for the promotion and adoption of $ust.
An analogy : They built the perfect plane and sent it in the air, refuelling while airborn. They are now building the runway where it will land.
20.
Algorithmic stablecoins most important feature is high liquidity at the peg during moments of volatility, leverage liquidations and bank run.
Protocols like @TeamKujira and @WhiteWhaleTerra enable a lot of community capital to flow into this.
Algorithmic stablecoins most important feature is high liquidity at the peg during moments of volatility, leverage liquidations and bank run.
Protocols like @TeamKujira and @WhiteWhaleTerra enable a lot of community capital to flow into this.
21.
With CEX orderbook style, only a small part of the market cap continuously bids at the peg. If $luna is worth $30B, there might only be $5B of demand in a single day. That leads to heavy volatility during downturns and depeg.
With CEX orderbook style, only a small part of the market cap continuously bids at the peg. If $luna is worth $30B, there might only be $5B of demand in a single day. That leads to heavy volatility during downturns and depeg.
22.
Automatic incentivized liquidity pools however continuously bid to buy and sell any assets. That creates liquidity that is way deeper.
The @terra_money foundation is now acquiring a lot of $btc to be pooled, continuously buying and selling $ust.
Automatic incentivized liquidity pools however continuously bid to buy and sell any assets. That creates liquidity that is way deeper.
The @terra_money foundation is now acquiring a lot of $btc to be pooled, continuously buying and selling $ust.
23.
That $10B in $btc buy will likely more than double the liquidity at the peg. Since the market cap is much higher, the volatility from selling the asset will be lower than $luna's. It will cement $ust as the king of stablecoins and shield it against attacks.
That $10B in $btc buy will likely more than double the liquidity at the peg. Since the market cap is much higher, the volatility from selling the asset will be lower than $luna's. It will cement $ust as the king of stablecoins and shield it against attacks.
24.
My ThorFI thread will cover the 4th iteration of stablecoins, the DEFI 3.0 vertically integrated system where a hybrid between collateralized stable, algo stables and continious liquidity pool bidding at the peg will meet.
My ThorFI thread will cover the 4th iteration of stablecoins, the DEFI 3.0 vertically integrated system where a hybrid between collateralized stable, algo stables and continious liquidity pool bidding at the peg will meet.
25.
IMO @THORChain is offering the most compelling evolution. Rather than issuing debt backed by a growing L1. @THORChain will issue debt backed by the most resilient cross chain dex and all it's liquidity.
IMO @THORChain is offering the most compelling evolution. Rather than issuing debt backed by a growing L1. @THORChain will issue debt backed by the most resilient cross chain dex and all it's liquidity.
@THORChain 26.
The implications of this are massive. Thorchain can back this debt with rune, lp tokens, but also can tap into massive markets including native $BTC and $ETH.
Tomorrow I will cover the lending and borrowing protocols history, as this will be an important part of ThorFI.
The implications of this are massive. Thorchain can back this debt with rune, lp tokens, but also can tap into massive markets including native $BTC and $ETH.
Tomorrow I will cover the lending and borrowing protocols history, as this will be an important part of ThorFI.
@THORChain 27.
For more threads about @Thorchain and $rune, click here : linktr.ee/thormaximalist
If you are a $rune whale (100k+ $rune) would like to bond to a node while keeping custody, send me in PM.
If you like my content, please delegate to my 0 fees $luna node :)
For more threads about @Thorchain and $rune, click here : linktr.ee/thormaximalist
If you are a $rune whale (100k+ $rune) would like to bond to a node while keeping custody, send me in PM.
If you like my content, please delegate to my 0 fees $luna node :)
28.
One more comment on orderbooks VS AMMs liquidity pools :
I think that having deep multichain liquidity pools will remove a LOT of volatility from the market.
If you have a $20B $btc liquidity pools where CEXes can liquidate into, liquidations will create less volatility.
One more comment on orderbooks VS AMMs liquidity pools :
I think that having deep multichain liquidity pools will remove a LOT of volatility from the market.
If you have a $20B $btc liquidity pools where CEXes can liquidate into, liquidations will create less volatility.
29.
One last thing, the $mim / SIFU panick generated a very heavy $ust sale cycle when the $TIME scandal was revealed. Billions of $ust traded hands in a single day. The peg held perfectly, without having the benefit of access of @CurveFinance style liquidity pools.
One last thing, the $mim / SIFU panick generated a very heavy $ust sale cycle when the $TIME scandal was revealed. Billions of $ust traded hands in a single day. The peg held perfectly, without having the benefit of access of @CurveFinance style liquidity pools.
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