The hybrid algorithmic stablecoin — SPERAX
Let,s Start Yield-bearing. Complete guide A stablecoin is a digital asset token where the price is designed to be pegged to a fiat currency. Where 1 USD coin equals 1 USD dollar. The peg is maintained by market arbitrageurs, and confidence that the digital coin can always be redeemed for the fiat dollar. If the coin trades below 1 dollar, arbitrageurs can purchase it and then redeem for fiat dollars, profiting from the difference. This function maintains the peg by placing buying pressure in the market, and demonstrates redeeming confidence, which contributes to the price stability.
We just experienced this with USDT Yield-bearing. Tether stablecoin. The total market capitalization in May 2022, was 83 Billion dollars. Questions arose about the collateral risk exposures and liquidity. Their balance sheet is still private and continues to concern people especially after the UST crash. Over the last 2 months, 18 Billion dollars has been redeemed from Tether, and about 10 billion was picked up by USDC — Circle. Circle’s balance sheet is transparent and publishes audit financial statements. This demonstrates the flow of capital to the hardest form of money Yield-bearing.
Algorithmic stablecoins Yield-bearing:
rely on market arbitrageurs, and uses an onchain mint/redeem mechanism to maintain the peg. This technology can facilitate a fully decentralized, transparent, and unsenserable digital currency. However, the nascent technology does present risks, as we have painfully seen materialize multiple times Yield-bearing.
After Terra’s “stablecoin” UST went up in smoke, many are understandably turned off by the concept of an algorithmic stable coin. While in theory it may have sounded stable, the reality was, it was not. We experienced a massive death spiral, caused by intense pressure to redeem UST. The price of Luna tumbled which was the collateral for the stablecoin, which further catapulted the depegging. There are many factors that contributed to Luna/ UST demise, but I think the most significant ones are the artificial yield that Anchor was providing, and that UST was entirely collateralized by Luna.
Sperax issues a hybrid algo stablecoin called USDs which offers depositors auto-yield by simply holding the stablecoin.
Sperax can be described effectively as an on chain stablecoin fund. The Sperax stablecoin USDs is collateralized by established fiat stablecoins, such as USDC (circle) and USDT (Tether). Sperax deploys the collateralized stablecoins (USDC & USDT) into stablecoin swap pools to earn yield. Stablecoin swap pools on curve finance, provide a very low risk yield opportunity for stablecoin holders. This yield is distributed to Sperax stablecoin holders through a repurchase program, which auto adjusts holders balances in their wallet. A holder of USDs does not need to claim earned yield, it is automatically adjusted via a rebasing mechanism. As of writing the most recent yield was 8.14%.
There is an algorithmic component.
that serves as a peg stabilizing mechanism. To mint $1 of USDs, you would need 1$ of USDC/USDT and SPA tokens — the Sperax governance token. Currently .12% of the total mint value needs to be SPA tokens. The SPA mint ratio is subject to change by governance vote and is expected to increase by 1% a year. The SPA token is burnt and USDs is minted at a 1:1 ratio. The reverse process is to redeem USDs for the same value of USDC/ USDT with the small percentage of SPA. This mint/redeem mechanism ensures that peg remains at $1. For example, If USDs trades above $1, arbitrageurs can mint USDs for $1 of eligible collateral and SPA, then sell to profit on the peg difference (this inflates USDs supply, pushing price towards the peg). If USDs trades below $1, arbitrageurs can burn USDs for $1 of SPA or eligible collateral, then sell to profit the peg difference (this deflates USDs supply, pushing the price towards peg).
Has Sperax found Yield-bearing:
a solution for a sustainable algo yield bearing stablecoin? it’s very possible. I am very excited about this project, since it provides depositors with a sustainable yield. This was something our traditional banks provided in the past, before they got too greedy. In an inflationary economy, this kind of project is especially attractive. Please do your own research before apeing in and understand this area of defi, is still in experimental stage, and risks may be highYield-bearing .
Sperax operates on the Arbitrum network as the largest hybrid-algo stablecoin. Arbitrum is an Ethereum layer two scaling network using technology known as optimistic rollup. Gas fees are paid in ETH and will go down as usage increases. To use the Sperax protocol, one needs a web wallet and ETH on the Arbitrum network. Check out Sperax.io to learn more.
