Novel stablecoin design: bonded stablecoins

End-user benefits:

  • crypto-backed
  • no overcollateralization: you send $1 worth of crypto to get $1 worth of stablecoins
  • no margin calls, no liquidations, even in case of abrupt price movements
  • no front-running, no miner bribing, because the dapp runs on a DAG and there are no miners and blocks
  • they can optionally earn interest (stable+ coins)

One can easily create new stablecoins that target any benchmark: USD, BTC, stocks, commodities, indexes, etc, or a benchmark + interest. We use a broad definition of “stable” in “stablecoin”, meaning stable relative to a target, the target being anything that can be tracked by an oracle.

Under the hood, stablecoins are issued on a two-dimensional bonding curve. The curve issues two tokens T1 and T2 against the deposited reserve according to a formula (Bancor is the closest analogy and it works on a one-dimensional bonding curve). Having two tokens gives more flexibility and allows the price of T2 token to stay near the target while the supplies of both tokens change.

The price of T2 follows the target, it is a stable or stable+ coin (stable+ if the target includes interest). The price of T1 depends on the amount of T2 issued. It is a governance token, its holders can vote to change various parameters.

Details (with a good deal of math): https://medium.com/obyte/using-multi-dimensional-bonding-curves-to-create-stablecoins-81e857b4355c

There are no owners, no admin keys, no developer backdoors.

It’s live, try it out: https://ostable.org

I’m the founder and will be happy to answer your questions.

P.S.: there is also incentive to provide liquidity to liquidity pools where the new stablecoins are traded, it started only a day ago and the expected APY is still a bit insane (around 167,000%) but should get more reasonable soon https://medium.com/obyte/liquidity-mining-8cce2bf3722e.

Everything is open source of course.
Github: https://github.com/byteball/bonded-stablecoin

I think the idea is somewhat similar to Lien, Reflexer

Thanks for reminding about these two projects.

I had a design similar to Lien long time ago, but abandoned it. Although no-overcollateralization and no-governance are great properties, it works as a stablecoin only within a finite range of prices, and these coins expire. This might be okay for a financial instrument like a futures contract but as a stablecoin I didn’t like that.

There is some similarity between Reflexer and how the capacitors work in bonded coins but other than that I see little in common.