The Evolution of Algorithmic Stablecoins

  • Seigniorage Shares
  • Basis
  • Basis Cash
  • Empty Set Dollar
  • Fei
  • Frax
  • Protocols that fully own their assets can become stagnant but can never die
  • It reduces reliance on speculators to manage the stablecoin, and consequently reduces the need to pay third-party actors
  • The protocol can incrementally increase its reserves by utilizing idle collateral assets in activities such as liquidity provision and yield farming
  • Withdraw all of its liquidity from the FEI/ETH pool
  • If the pool still has liquidity, purchase enough FEI to bring its price back to $1
  • Deposit all ETH and the corresponding amount of FEI back into the pool
  • Burn the remaining FEI
  • Deposit ETH into the smart contract
  • Receive 1 FEI per $1.01 of ETH deposited and a proportional amount of 10% of the total TRIBE supply
  • Post-launch, sell TRIBE for FEI and sell all FEI for ETH
  • If the price of FRAX rises above the band, the CR decreases to enable additional FRAX to be minted with less collateral
  • If the price of FRAX falls below the band, the CR increases to supplement collateral reserves and restore confidence in the system
  • If the price of FRAX is within the band, the CR is adjusted based on the market cap of FRAX and the liquidity of FXS (since a larger FRAX market cap and less FXS liquidity imply greater fragility)
  • Collateral Investor — Invests idle collateral in DeFi protocols
  • Curve — Operate a stableswap pool with liquidity controlled and owned predominantly by Frax to provide FRAX/USDC liquidity and earn fees and CRV rewards
  • Lending — Directly lend minted FRAX and earn interest from borrowers through existing money markets
  • Collateral Hedge — Perfectly hedge collateral with a short position to create a basis trade of net 0 volatility
  • Tornado Cash — Mint FRAX directly into Tornado anonymity sets to expand privacy features
  • Bonds — Issue tokens on an x*y=k curve and pay its holders an interest rate so they can redeem their bonds at higher prices. Alternatively, bake this functionality into staked FXS

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