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Idea: An elegant solution for algorithm stablecoin with Multi-Asset Reserve (Feedback for innovation)


Qijun_TiTiProtocol
Posts: 3
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(@qijun_titiprotocol)
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I think algorithmic stablecoins are an excellent alternative to USDT. Because it is completely transparent, and all mechanisms are open and cannot be tampered with. it can be drawn that whether the algorithmic stablecoin is sufficiently stable depends on the degree of trust of its stakeholders. The core goal of any algorithmic stablecoin project is to design a mechanism that make the system recover from known or unknown risks and confidence can be quickly and effectively restored, thus establishing a strong trust foundation among a wide range of users. Therefore, a well-rounded algorithmic stable currency product should have the following four characteristics:

1) Strong price stability:  Stablecoins cannot exhibit violent fluctuations in price performance. The stronger the mean regression characteristics of the price relative to a specific number, the more conducive to the establishment of trust;

2) Strong value stability:  The value of stablecoins cannot change significantly. Any overall inflation and deflation will not have a huge impact on the value of stablecoins in circulation;

3) Ease to use:  Stablecoins Users should be insensitive to the complexity of the system's underlying mechanism. The stablecoin stabilization process does not require frequent intervention by users;

4) Low cognitive cost: The Protocol should be extremely easy to understand. The risk perception of the protocol itself should be clear to avoid unnecessary panic among ordinary users;

5) Robust to resist systematic and non-systematic risks: There should be diversified and effective solutions to the systemic or non-systematic risks of the entire cryptocurrency world.

The above analysis indicates that the algorithmic stablecoins secured by reserve assets features great use-value. A general consideration is that this type of stablecoin performs better than the over-collateralized algorithmic stablecoin model in terms of fund utilization. The next argument is that compared with the non-asset reserve algorithm stablecoin, system reserves can buck up users’ confidence when facing hefty sell-off pressure. A compressive asset reserve will be the last resort to turn to when risk occurs. Some new algorithmic stablecoins are booming, such as FRAX Finance, FEI Money, TiTi Protocol, Olympus DAO, etc. I think these projects are excellent alternatives to USDT.
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