Read on Twitter
1/ New update for @fraxfinance will have the protocol yield farm with reserves
This is a pretty major positive change that increases the resiliency of the system and can see other reserve-based algo stablecoins adopting this mechanism as well
This is a pretty major positive change that increases the resiliency of the system and can see other reserve-based algo stablecoins adopting this mechanism as well
2/ The issue with all algo stablecoins is that the supply of the stablecoins are too interconnected with the price of the share token
The reflexivity works in both directions - both up and down
Higher price
More Supply
Lower price Less Supply
The reflexivity works in both directions - both up and down
Higher price
More SupplyLower price
Less Supply
3/ This reflexivity exists for as long as share tokens are used to reward those that hold the stablecoin (usually for LPs)
But using yield farming to *safely* yield farm can help to prevent death spirals as the yield can be used to build reserves, making users less likely to run
But using yield farming to *safely* yield farm can help to prevent death spirals as the yield can be used to build reserves, making users less likely to run
4/ If reserves are high enough, the yield can also be used to directly benefit share token ($FXS) holders by using proceeds to buy & burn
This also indirectly spurs supply growth/reverse as $FXS price rises
This also indirectly spurs supply growth/reverse as $FXS price rises
5/ To some, this might seem too dangerous
but this is no different from how banks/USDC/USDT make $ - by monetizing customer deposits
The difference is in DeFi, it is all done transparently on-chain for anyone to audit
but this is no different from how banks/USDC/USDT make $ - by monetizing customer deposits
The difference is in DeFi, it is all done transparently on-chain for anyone to audit
