Undercollateralized algorithmic stablecoins are the holy grail when it comes to pegging digital assets to the price of a particular good or service. Fundamentally, the stability of these assets is purely driven by the market mechanics coupled with design choices, often in the form of algorithms, that drive the price towards the desired peg.
We propose an experimental fair-launched stablecoin project that is a variation of the Basis model. No coins are sold in advance to early seed investors, insiders, or VCs. The treasury does not have any starting capital which allows for the supply to grow organically based solely on market demand. Read the Basis Whitepaper for more details on the protocol.
We make several improvements over Basis Cash:
- Price feed oracle based on the average of 2 liquidity pool pairs (i.e. BSD/USDC and BSD/DAI) which is more difficult to manipulate.
- The protocol uses TWAP, not EMA, for the price. Time-weighted is more accurate and less subject to attack vectors.
- The epoch duration for minting new supply is reduced to 12 hours.
- The protocol caps the newly minted BSD in the case of expansion to a maximum of 15% of the total supply during each epoch.
- The debt issued is capped at 30% supply (maximum Bond generated for each contraction).
- The Bonds have no expiry date.
- The protocol keeps a minimum of 35% of the expanded supply for seigniorage shares for each expansion, which is an improvement over Basis Cash which keeps all the new supply for Bond redemption if the balance is less than 1000 BAC.
In addition, we propose a longer and fairer distribution schedule, as outlined in the later sections.
How the Basis Dollar mechanism works
Three types of assets will exist:
1) Basis Dollar Bonds (BSDB) which may be purchased at a discounted rate,
2) Basis Dollar Seigniorage (BSDS) which receive the new supply creation of the stablecoin, and
3) Basis Dollars (BSD) which are stable assets with a target price of a US dollar.
In order to receive any newly created supply of BSD, BSDS holders must stake their BSDS in the Seigniorage Stake. Only BSDS that is staked has the Seigniorage rights to receive the newly minted BSD.
To better describe how Basis Dollar Seigniorage (BSDS) and Basis Dollar Bond (BSD) work, we will look at two examples, with the first example taking into assumption that the price of Basis Dollar is above the $1 target peg and below the $1 peg in the second example.
For more details into the protocol, you could read the Basis Whitepaper here.
When Basis Dollar trades below the $1 target peg
When Basis Dollar price trades below $1 target peg, one can purchase Basis Dollar Bonds with a discount to contribute to the price stability of Basis Dollar. The bonds have no expiry date and one can profit in the future upon redeeming the Basis Dollar Bonds for Basis Dollar.
Each Basis Dollar Bond guarantees the holder exactly 1 Basis Dollar upon redemption, but redemption happens only under certain conditions. When a BSDB is redeemed for a BSD, the BSDB is burned, decreasing the supply and a new BSD is minted. Bonds do not have interest payouts, nor do they have expiration dates. Rather, they can be redeemed on a 1:1 ratio with Basis Cash when the price rises above $1.
Since one can only redeem their Basis Dollar Bonds with a 1:1 ratio for Basis Dollar exclusively when the oracle price of Basis Dollar is above the $1 target peg, this prevents bondholders from redeeming their Basis Dollar Bonds at a loss and creating unnecessary increases in the supply.
When Basis Dollar trades above the $1 target peg
When the price of Basis Dollar trades above the $1 target peg, the contract primarily allows the redemption of the Basis Dollar Bonds. If the price of Basis Dollar is traded above the target peg of $1, even after the bonds are redeemed, an increase in the demand of Basis Dollar results in new Basis Dollar tokens being minted and distributed to Basis Dollar Seigniorage holders.
For instance, let’s assume that the price of Basis Dollar continues trading above the $1 target peg after bond redemption. At this point the Treasury contract mints new Basis Dollar into existence. This Dollar is given to the Seigniorage Stake, where users can stake Basis Seigniorage and earn Basis Dollar based on the price of Basis Dollar.
Our aim is to establish a fair launch for two of the tokens (BSD and BSDS) used in the protocol.
Basis Dollar Distribution
The Basis Dollar team has decided to distribute over the course of 4 weeks 500k BSD evenly amongst 5 seed pools: USDT, USDC, DAI, ESD, BUSD.
- First week 200k BSD
- Second week 150k BSD
- Third week 100k BSD
- Fourth week 50k BSD.
The pools will start distributing at:
The seed pools have no risk for the funds.
Basis Dollar Shares Distribution
A total of 1 million BSDS will be generated. 200k BSDS will be allocated to the team and DAO and will be vested linearly over 12 months. 100k will be made available to the DAO and 100k for the team.
Less than a day after the launch of the seed pools, users will be able to provide liquidity to different BSD and BSDS liquidity pools in order to earn Basis Dollar Shares in return. Instead of using Balancer or Uniswap, the team decided to use Value DeFi’s Farm-as-a-Service (FaaS) technology to distribute BSDS. Four Farm-as-a-Service pools will distribute the remaining 800k BSDS over the course of 12 months.
BSD/USDC — 50/50 will receive 300k BSDS linearly over 1 year
BSD/DAI — 50/50 will receive 300k BSDS linearly over 1 year
BSDS/USDC — 20/80 will receive 100k BSDS linearly over 1 year
BSDS/DAI — 80/20 will receive 100k BSDS linearly over 1 year
We choose farms with different ratios for the assets to give farmers options when it comes to their risk tolerance. The BSDS/USDC 20/80 pool has low impermanent loss risk with respect to USDC holders while the BSDS/DAI 80/20 has low impermanent loss risk relative to BSDS holders.
The first two BSD liquidity pools will start at block
The last two BSDS liquidity pools will start at block
How to participate in the seed pools — BSD farming
There you can choose from 5 different seed pools:
How to farm Basis Dollar Shares — BSDS farming
Once you earned some BSD it is time to put them to use and start earning BSDS, which in turn entitles you to a share of the newly generated supply.
In order to do so, navigate to the “Share Bank” tab on the Basis Dollar Page (https://basisdollar.fi/share-banks)
There you will be able to choose to provide liquidity in one of the pools and earn BSDS in return for doing so.
Click on the button will forward you to Value Liquid platform to provide liquidity and directly earn BSDS rewards from the liquidity pools there.
How to stake your Basis Seigniorage Shares — BSDS staking
Basis Dollar Seigniorage Shares can be staked in return for inflationary rewards.
To do so, navigate to the “Seigniorage Stake” tab on the Basis Dollar page and click Stake.
Once staked, your Seigniorage Shares start earning rewards proportional to the whole pool and share all the newly created Basis Dollar supply.
The Seigniorage Stake function will take place exactly one week after launch.
How to purchase and redeem Basis Dollar Bonds — BSDB
The Basis Dollar Bonds are purchased and redeemed on the “Bonds” tab
For the users to be able to buy Basis Dollar Bonds, the price of one Basis Dollar has to be below the target peg price of $1.
When a user buys Basis Dollar Bonds, the Basis Dollar used to buy the Bonds is burned and removed out of circulation, lowering the total supply of Basis Dollar and hence pushing it towards the target peg price of $1.
Once a user has Basis Dollar Bonds, he cannot redeem them for Basis Dollars unless the Basis Dollar is trading above the target peg price of $1.
Once the price of a Basis Dollar is above the target peg price of $1, users may redeem their Basis Dollar Bonds, effectively burning them out of circulation, for an equal amount of Basis Dollars which are newly minted into the circulation and hence again push the price towards the targeted $1 peg.
Audits coming soon