bDollar is the latest algorithmic stable coin to launch on the BSC, innovating on the ETH-based algorithmic stable coin, Basis Cash.
What Is Bearn.Fi?
Bearn.Fi is a cross-chain decentralized finance (De-Fi) ecosystem that aims to bring users yield opportunities, casino/gaming aggregation, cross-chain bridge, treasury, and governance. Bearn.Fi brought their multi-chain protocol to Ethereum as well as the Binance Smart Chain (BSC).
Bearn is focusing on a series of core products comprising the Bearn.Fi ecosystem. In the future, we can expect the De-Fi ecosystem to offer all of the previously listed services. Users who hold the BFIE(ETH)/BFI(BSC) will proceed in the protocol’s management and governance. Currently, Bearn is most focused on their debut product, BDollar, an algorithmic stable coin.
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.
Rebase tokens are a fundamental mechanism used in Algorithmic stable coins, BDollar, a Basis Cash 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 algorithmic tokens create positive seigniorage, which makes an economic profit, allowing for users to profit.
The existing system revolves around three tokens, the stable coin, a bond, and a share. The bond and the share tokens are used to adjust the supply to reach the asset’s peg price.
bDollar is the first algorithmic stablecoin to launch on the BSC, innovating the ETH-based algorithmic stable coin, Basis Cash. As mentioned above, bDollar consists of three tokens: bdollar, bDollar Shares, and bDollar Bonds.
BDO is the algorithmic stable coin that is pushed towards its peg by the other two tokens:
sBDO – Allowing holders to claim BDO inflation rewards when BDO is above the $1 price peg
bBDO – Redeemable for BDO 1:1 when BDO is below the $1 price peg, bBDO can then be redeemed 1:1 for a premium once the network returns to its inflationary state, above the $1 peg
The following excerpt from the bDollar medium explains the algorithmic mechanism:
BDO trades below the $1 target price
When the BDO price is below the target price of $1, token holders can purchase bDollar Bonds (bBDO) by burning bDollar to reduce the circulating supply with a 1:1 ratio, and Bonds will be burnt when users redeem bDollar with a premium bonus.
In case of redemption, an amount of BDO will be minted according to the TWAP at the beginning of the epoch (for example, if the BDO price is $1.1 then one Bond burnt will get back 1.1 BDO). Important to note is that Bonds have no expiry after purchase.
BDO trades above the $1 target price
When BDO price is above the 1$ peg, the token supply will have to expand to push it back down to 1$ and the contract will allow the redemption of the bDollar Bonds.
When the price of bDollar continues trading above the $1 target price after bond redemption, the contract mints an appropriate amount of new BDO. This will be distributed to the Boardroom Stakers.
This three token system creates incentives through seigniorage, always pushing BDO towards its peg. sBDO is used to redistribute the seigniorage from inflating the asset, while bBDO is used to establish a price floor while BDO is in its deflationary state. Overall, this system allows the Bearn.Fi team to leverage seigniorage to create a stable coin that requires no collateralization.
The boardroom page is where users can stake their sBDO to receive the seigniorage incentives. It is important to note that each epoch(reward distribution) is 6 hours, and users must lock their sBDO for three periods. Whenever the price of BDO is over its $1 peg excess BDO will be minted in order to push the price back towards its peg. These are the rewards generated from seigniorage, which are then distrubuted to sBDO holders.
The bank consists of multiple PancakeSwap liquidity pools (LP), which allow users to earn BDO emissions. Currently, there are seven liquidity pools, which are displayed above. These rewards where allocated from the initial BDO supply in order to generate liquidity.
Here users can mint bonds from existing BDO at a discount. This creates a price floor for BDO as people speculate on the price returning to its peg. If and when the price returns to its peg, users will be able to redeem their bBDO 1:1 for BDO.
Source : bsc.news