Binance Agile Set Dollar Project Review: An Algorithmic Stablecoin Built on The BSC.

Binance Agile Set Dollar, a DSD/ESD fork, leverages inflation incentives and a coupon system in attempts to peg the price of BASD to $1. This system allows BASD users to earn incentives through enforcing the peg.

By
Goon Trades
on
January 19, 2021
Category:
Project Insight

Algorithmic Stable Coins?

Algorithmic stable coins are unlike the two other types of stable coins, Fiat-Collateralized and Crypto Collateralized. Algorithmic stable coins rely on an algorithm to recognize specific parameters, where it will then adjust the supply to reach its peg price accordingly. For example, rebase tokens will increase supply when the token price is above its peg, but it will reduce supply when its price is below its peg. This is completely different from traditional stable-coins such as Tether and Maker Dao, which are backed using tangible collateral.

Rebase tokens are a fundamental mechanism used in Algorithmic stable coins; Binance Agile Set Dollar, a DSD fork, leverages a different agent referred to as seigniorage. Seigniorage is defined as the difference between the real value versus the cost of producing it, typically for currencies. These ultimately create positive seigniorage scenario, which produces an economic profit, allowing for users to profit from inflation used to peg the price.

The existing system revolves around a bonding and coupon mechanism. Coupons are used to reduce the supply of BASD, allowing users to redeem them for BASD when above the peg price of $1. To receive these coupons, users can purchase them at a discount for BASD, which will burn BASD upon purchase. The other mechanism leverages seigniorage, allowing users to receive the economic profits from the inflation used to curb the buy-side pressure, pushing BASD towards its $1 peg. Users can recieve inflation incentives through providing BASD liquidity or participating in the DAO.


How Does BASD Work?

When BASD is over a dollar, bonded dollar users will receive the inflation rewards that help push the coin towards the one dollar peg. When BASD is under a dollar, users will be able to purchase BASD coupons at a discount. This coupon is received through burning BASD, and is redeemable 1:1 for BASD when the price is over a dollar. The catch here is the vouchers expire worthless after 15 days below the peg price.

This system attempts to push BASD back towards $1 through leveraging seigniorage and a burning/coupon method to increase the price of BASD. Currently, BASD is highly volatile as expansion and debt cycles initially set in. 

The team explains this system in the following excerpt from the BASD Medium:

During the expansion phase, which is determined by BASD fluctuating over $1, it is normal to see the price increase well over it’s intended $1 long-term peg.

This results from new buyers entering the market after being attracted by the high APY reward system when funds are bonded to the DAO and LP pool.

Eventually, these rewards create enough selling pressure to push the price below $1. This signals the beginning of a new phase; debt.

During the debt cycle, rewards stop being distributed to the DAO and LPs, and users will be incentivized to burn their BASD for coupons at a discounted price (based on the debt ratio).

Once enough BASD has been burnt for coupons (effectively reducing the supply), the buying pressure will outweigh the selling pressure. This pushes the price of BASD back over $1 and into the expansion phase once again.

In the proceeding expansion cycle, users who burnt their BASD supply for coupons at a discounted price will redeem these coupons for BASD.

Coupons expire after 360 epoch = 15 days.

In summary, this system implements two different cycles, one used in attempts to steer the BASD price towards $1 through burning BASD to receive 1:1 BASD coupons at a discounted rate. These coupons are valid for 15 days or 360 epochs and allow the users to redeem their coupons 1:1, when BASD is over the $1 peg. To reduce the price back towards $1 BASD leverages seigniorage and distributes the inflation rewards to users who are bonded and participate in the DAO.

At the core, this system utilizes mechanics from ESD (Empty Set Dollar) and DSD (Dynamic Set Dollar), but BASD integrates further. The team has created a BASD Decentralized Autonomous Organization (DAO), allowing forward-thinking users to become involved in the product's future. Currently, the DAO has been awarded 8.3% of BASD pre-sale funds to further developments, partnerships, and marketing. Overall, the DAO helps contribute to the project’s longevity and allows the dedicated community members to be the project’s driving force.


Algorithmic Stable on BSC

BASD has specifically landed on the Binance Smart Chain (BSC) for a few reasons. The first is the low transaction fees, making BASD very user-friendly, as high transaction costs keep new users from ETH-based projects. The low transaction fees allow for a smaller reward to be allocated to the user who calls the rewards, providing more rewards to the users as a whole. The main idea behind building on the BSC is that it gives BASD a powerful and robust network to build on, benefitting both the users and the project’s overall longevity.



Tokenomics

Due to this being an algorithmic stablecoin, there is no max supply, as inflation is used to enforce the peg price. A key thing to note is that a small token pre-sale was used to generate a small number of funds for the DAO, and the majority was used to create initial liquidity pools for BASD on PancakeSwap. The following pre-sale was executed:

The BASD team will be held a small pre-sale capped at 1320 BNB (~$60,000 USD) with a max cap per wallet of 11 BNB (~$500). 91.7% of these funds will be provided into the PancakeSwap liquidity pool at launch. 

The yields which BASD offers its users when compounding is where the Binance Agile Set Dollar shows its true strengths. Due to the initial awards used to bootstrap liquidity and the standard inflation rewards, yields are exceptionally high, especially when compounded. Compounding is executed automatically for DAO users, but it is a great way to maximize returns for LP providers.

Check out the following BASD tutorial on how to maximize your yield through compounding:

BASD: How to compound LP rewards


Concluding Thoughts

Overall, BASD innovates on both the traditional stable coin model and the algorithmic coin model. This coupon and bonding system adopted from Ethereum native algorithmic stable coins ESD and DSD provides for a unique stablecoin;but it is important to note that these stable-coins are highly speculative as they maintain no collateral to enforce a true peg. The system solely relies on the economic incentives in place.

In short, the BASD team has brought the innovation of some of the largest algorithmic stablecoins to the BSC  benefiting individual users and the project as a whole.

Overall it is vital to proceed with caution when purchasing tokens that have just been listed. For those who have not already read our articles on safety in the BSC, it is crucial to reference the following items, HERE and HERE.

None of our articles are advice at the end of the day, and all financial decisions should be made on your behalf or from a professional financial advisor.

For more information, or if you wish to stay up to date on the project, check out their media and social media pages:

 

Website

Telegram

Twitter

Medium 

 

Disclaimer: A BASD investor has arranged to fund the costs of this article in agreement with the Binance Agile Set Dollar team.


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Goon Trades

Greg (GoonTrades) is BSC News' Chief Editor and is also a writer for the team. Currently enrolled as an economics major, he finds himself as a cryptocurrency researcher, writer, and technical trader.