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Although it feels like a long time, but in fact, Basis has only been online for more than a month, and it is still a new project. Basis is the successor of the original basecoin model. After this period of practice, how does the founder of basis view the Basis project? This is critical to our understanding of the future direction of Basis. The following is summarized based on the community statement of Morty, one of the founders of Basis.
Basis's three priorities
- Dynamic coin threshold
According to Basis's community proposal BIP-5, Basis will implement a dynamic minting threshold, and the expected initial minting price will drop from the current 1.05 to 1.037, which means that the future BAC TWAP price will exceed 1.037 (instead of the current 1.05) After that, BAC will be generated to motivate holders of BAB and BAS.
- Integrated DeFi protocol
For algorithmic stablecoins, it does not have any collateral. At present, it is basically a speculative game. This is unsustainable. If you want to survive, you must find more application scenarios. The more protocols that integrate them, the more effective the algorithm is. The more demand for stablecoins, the more secure.
At present, Basis is planning to integrate with some protocols, and some have been integrated, including pickle, harvest, cream, sushi, Curve, Secret, etc.
However, these agreements are far from enough. More agreements should be integrated. Of course, it has only been born a month, and it will take some time. To this end, the Basis team even plans to hire a person in charge of protocol integration.
- Set the upper limit of BAB circulation
The price of BAC is determined based on one-hour TWAP. If it is less than $1, BAB can be generated, and the discount depends on the one-hour TWAP price. However, there is a problem here. If the TWAP price is 0.9DAI, BAB can be mined by destroying 0.9BAC. At the same time, users can use 0.8DAI to purchase BAC (because of the price fluctuation of 1TWAP) to participate in the destruction, which is actually 1BAB=0.8DAI .
The issuance of BAB debt without a ceiling may lead to excessive BAB issuance. The spam of BAB will be detrimental to the development of the system. First of all, it will be detrimental to BAS holders because the BAC generated by minting in the future will first be used to repay debts. A large amount of debt means that BAS holders need to wait a long time to get the reward. Secondly, a large number of sudden additions of BAB will also affect the demand for buying new debt, because it also means longer waiting time for BAB redemption. Finally, the spam of BAB will also lead to excessive deflation of BAC, which is also not conducive to the stability of BAC itself and deviates from the goal of BAC as an algorithmic stable currency.
For this problem, the team's solution is to set the maximum BAB issuance limit: ($1-1hTWAP)*(Circ $BAC), 1hTWAP is the BAC price of 1 hour TWAP, and Circ $BAC is the circulating supply of BAC. For example, as of the writing of Blue Fox Notes, its 1hTWAP BAC is $0.75, and the circulating supply is 61,419,303, so the current upper limit of the BAB that can be generated is 15,354825.75. This upper limit lasts for 1 hour, and the upper limit is recalculated after one hour.
Won't take a hybrid road
In the current algorithmic stability model, there are hybrid algorithmic stablecoins, such as the partially mortgaged FRAX model, and the Basis team clearly stated that it will not consider a hybrid model. The Basis team believes that a purely algorithmic model can also achieve its goals.
It is not advisable to reward BAB holders through part of the funds in the reserve treasury
Some people propose to use part of the treasury's funds to purchase BTC or ETH as reserve funds when BAC issuance, and subsequently use it to incentivize BAB holders (if BAC is lower than the anchor price for a long time).
But Morty, the founder of Basis, does not support this approach. Morty believes that this approach may encourage bond buyers to manipulate BAC prices for profit. In this matter, the Basis team has its own clear idea.
It is not supported to distribute 20% of the additional BAC bonus to BAB holders
Someone proposed to give 20% of the additional BAC bonus to BAB holders to incentivize people to hold BAB and restore price anchoring as soon as possible. The Basis team believes that BAB and BAS holders have different risk/return preferences. What BAB more satisfies is the demand of fixed rate of return, and obtains premium through redemption. Holding BAS means holding a long position in the entire basis agreement. Therefore, the two need to be clearly distinguished.
Anchored with a basket of currencies
Currently BAC anchors DAI, but in the future, for the resilience of the system, it will consider anchoring a basket of currencies.
Don't worry about the impact of mining on the agreement
Some people are worried that if pickle is integrated, the price of bas will drop. The founder Morty is not worried about selling pressure from mining. Because ultimately, if mining is widely adopted, the price of BAC will rise, and the price of BAS will form an equilibrium. At the same time, this will also attract more users to participate in the Basis ecosystem, especially ordinary mining users. From the current point of view, mining does not bring big risks to the agreement itself, but will bring greater liquidity and enhance the resilience of the system. At the same time, there are also some long-term believers who are willing to take greater risks, accumulate more BAS, and try to get benefits from the long-term development of the Basis agreement.
Plans to launch Basis Swap
The Basis team has plans to add more liquidity pools. The team believes that only relying on BAC/DAI on Uniswap cannot achieve the desired results, and its price curve cannot be as effective as expected. At present, it is trying to pass the governance vote of Curve. If it is reached, the BAC/3Pool liquidity pool will be provided on Curve.
In addition, there are plans to increase the liquidity pools of BAC/wBTC and BAC/ETH, and this part will be implemented in the mid-term. In Basis's mid-term plan, it proposed to build its own Basis Swap, which is its own AMM liquidity pool, to build more practical application scenarios for BAC, thereby increasing the resilience of the system.
Rewards based on BAS lock time
In the future, it will be planned to adopt the veBAS model of reward locking, similar to the veCRV model, but this will have to wait until the launch of Basis Swap. The launch of this plan is conducive to locking in more BAS, and it can also give more reasonable returns to holders who have been locked in for a longer time.
Working with economists to improve Basis's token economic mechanism
According to Morty, one of the founders of Basis, the team is currently discussing with some economists to continuously improve its token economic mechanism. This also shows that the algorithmic stablecoin is just a newborn and a brand-new thing in human history. Its growth still requires a lot of effort, and it is not something that can be accomplished overnight. It requires continuous iterative growth in practice. At present, Basis has not experienced a complete cycle, and it needs more time to increase people's confidence in it and the resilience of its system.
Will consider other public chains
In addition to Ethereum, Basis will also consider issuing and launching on other networks. For example, by integrating with Secret Network, BAC will be circulated on the Cosmos-SDK chain. The advantage is that the transaction cost is low and the speed is fast.
New UI
A new UI style will be released in the near future. In addition to supporting the Metamask wallet, it will also support some other wallets. It shouldn't take too long to see the real face. The new version is said to be available in Chinese and other languages.
