The beginning of “Foundation Money” brings non-functioning steady cash into the DeFi period
A team of anonymous developers creates a fork of a project that never started.
Readers of this post will likely see a strong chance of winning here, but please be careful.
Basis Cash is based on the Stablecoin Basis (originally known as Basecoin), which before the intervention of the US securities regulators had a financing of 133 million US dollars and the team behind it returned everything at the end of 2018.
For those who want to take part in this new DeFi (Decentral Finance) project, the smart contracts were opened early Monday.
Continue reading: Basis Stablecoin confirms the shutdown and blames “regulatory restrictions”
That being said, it's not the first base-inspired stablecoin to hit the market. Empty Set was released in late August and now has a market cap of more than $ 100 million.
"In the long term, we look forward to the widespread use of Basis Cash as a base layer primer, so there is organic demand for the asset in many de-fi and commercial environments," said one of the two anonymous project leaders, "Rick Sanchez", said of CoinDesk Telegram.
The two Anons are named "Rick" and "Morty" from the popular adult cartoon by Dan Harmon and Justin Roiland.
Basic cash basics
Like most stable coins, Basis Cash (BAC) is pegged to the US dollar, so one BAC should be the crypto equivalent of one USD. The price of Basis Cash is managed by two other crypto assets: Basis Bonds and Basis Shares (more on this in the next section).
Starting at the end of November, 50,000 BAC will be distributed over a five day period (10,000 per day) to people who deposit one of these five stable coins into their smart contract: DAI, yCRV, USDT, SUSD, and USDC. Depositors cannot discard more than 20,000 stable coins from an account. The daily reward is distributed proportionally and users can remove their coins at any time.
Continue reading: What is crop farming? DeFi's rocket fuel, explained
Unlike most of the other DeFi projects that are doing this type of cash flow, this four stablecoin pool won't do anything. Depositors will be liquidity providers in still waters. "It is admittedly a useless capital exercise," wrote Sanchez. “Think of it as a kind of Coinbase earn quiz. Minimum threshold to receive free assets. "
After this initial BAC distribution, two Uniswap v2 pools are started up. The pairs are BAC-DAI and BAC-Basis-Aktien (BAS). One million BAS – all existing BAS – will be distributed to these two pools (750,000 to the former pool and 250,000 to the latter).
By far the most generous distribution will be the first 30 days of the BAC-DAI pool. More about it here.
Some very clever attackers may have worked out a great trick on the original base, and that attack has been shelved since then. So be careful (again).
However, Basis Cash requires fewer users to deposit collateral than most other DeFi applications. After these first five days, the two Uniswap pools are mainly located where the funds would be at risk.
"Seigniorage-stock style stablecoins … are far more prone to black swan failure than Makers or Tether – and I'm not ruling out the possibility of base cash being significantly untied in the early days of protocol (in fact, I think that this is the case) very likely) ", wrote Sanchez, adding:
"We strongly believe that 1) the protocol can fix most of these errors, and 2) such errors become much less common and more serious over time as new participants enter."
How it works
The most important aspect of Basis Cash is: It is completely unrelated to anything that has “real” value.
The US dollar, for example, was once backed by gold, but long ago it could not be redeemed for precious metals. Dollars are actually still supported, but they are mostly supported by US Treasuries.
Circle's USDC is backed by real dollars in a bank account. While the Dai is minted out of nowhere by MakerDAO, it is backed by ETH or other crypto-assets locked into a smart contract.
Continue reading: The US government uses USDC for the "Global Foreign Policy Objective" in Venezuela: Circle CEO
Basis Cash has nothing hidden to guarantee its value. The only guarantee is a purely algorithmic system that can help determine the actual demand for BAC in the market so the price tends to be around $ 1.
Should the BAC fall below a dollar, the system issues basic bonds. These underlying bonds can be bought for a BAC. They can also be redeemed for a new BAC if the price is over a dollar.
For example, if the BAC fell to $ 0.97, a user could buy a range of BACs at that reduced price and redeem them for the bonds (which burn the BAC up). That reduces the supply and should bring it back in line with the pen.
If the BAC is above $ 1.00, a new BAC is issued. The system allows bondholders to repay them first (so if someone bought bonds at a price of $ 0.97 they should make a profit of at least 3%), and the rest of the new BAC goes to holders of basic cash Shares.
In order to receive the new BAC (Seignorage), BAS owners have to use their shares in the boardroom, another intelligent contract.
The obvious part of this system that could be exploited could be how his oracle system works. The team has not yet responded to questions from CoinDesk about how prices should get into the system. However, from the documents published so far, it appears that it is based on Uniswap pricing data.
Isn't 50,000 BAC tiny?
The stablecoin supply was $ 20 billion at the end of September, making 50,000 BAC seem very low.
The initial supply of BAC could be intentionally low. In any case, the basic cash system should adapt if this is not enough.
Continue reading: Origin debuts OUSD, a stable coin that works like a savings account
If the market turns out to be asking for much more BAC once it is operational, the price should quickly break its dollar peg. In this case, the smart contracts should print more BAC quickly. In theory, this could mean that in the early days of Basis Cash, the returns on its stocks could be exceptionally high to begin with.
"Given the fact that Basis Cash must provide liquidity in exchange for Dai in order to receive Basis Share-Token, liquidity providers who wish to manage Basis Share-Token will buy Basis Cash at short notice – the demand for agriculture is fueling the initial demand and the associated demand Seigniorage, ”wrote Sanchez.
If the world really wants that new stablecoin, the base system should find the right supply in no time. But as Sanchez mentioned above, it's likely extremely volatile early on.
CoinDesk asked the head of the team that started the original base, Nader Al-Naji, what he thought of the stablecoin resurrection. In an email to CoinDesk, he said he hadn't looked into it.
"A lot of people have turned to me about Basis Cash," wrote Al-Naji. "It seems to be gaining in importance with the people who supported me with Basis, considering how many people have asked me about it, but I don't know anyone who has definitely decided to support the project."