Charge DeFi: How Algorithms Create Decentralized Stability

Footprint Analytics, a bitcoin industry research firm, estimates that the cryptocurrency market is currently worth USD 2.8 trillion, a 600% increase year-to-date. These developments and investments have led to an increasing need for stable assets to stabilise increasingly volatile asset pairs. As a result, the number and value of stablecoins have increased on the bitcoin market. According to the most recent data, there are currently 74 stablecoins with a total worth of approximately USD 165 billion.

With Tether, the world’s most well-known stablecoin, you can trade USDT with EURT and GBPT with a stablecoin of your choice. Stablecoins alone are valued USD 78.2 billion, or 47.3% of the overall stablecoin market cap. However, tethered stablecoins have inherent centralization and consequently existential risk, as proved by the several audits of Tether’s actual fiat holdings.

Charge DeFi is an algorithmic crypto coin that uses a “rebase” technique to ensure long-term viability. When the price of $STATIC falls below a peg, the system uses price-elastic tokens to raise the circulating supply. We’ll study Charge DeFi’s algorithmic stability solution, see how it works, and see how it stacks up against the alternatives in the stablecoin market. It will next examine the effects of algorithmic stability on the algorithmic space and the wider bitcoin market.

What is Charge DeFi?

The algorithmic crypto token and rebase techniques combine to form Charge DeFi. Cryptocurrency that is linked to the value of 1 USD is known as “stablecoin.” Stablecoins are usually backed 1:1 by “tethering,” in which a firm buys an identical quantity of, say, USD. This process, however, necessitates a high level of faith in the guarantor, which necessitates regular and frequently expensive monitoring.

The stability of an algorithmic crypto coin is enhanced. Rather than using a fixed peg, a smart contract can be programmed to automatically alter the price of a token based on predetermined parameters. With no third-party input required, the algorithm is able to operate on its own and respond to changes in the market.

It eliminates the need to rely on the word of a guarantor and allows for complete, affordable independent monitoring.

How Does Charge DeFi Ensure Stability?

The $CHARGE and $STATIC tokens are the two key components of this rebasing technique. In the Charge DeFi ecosystem, $CHARGE serves as a share/seigniorage token and $STATIC as an elastic supply coin.

The contract rebase concept is one of the most important aspects of this new ecosystem. Price-sensitive tokens are implemented through rebase mechanics, which modify the circulating supply in order to influence the token’s price. Charge DeFi, unlike other tokens, only implements a rebase mechanism that rebases below a specified peg (target price), unlike other tokens.

The rebase mechanism works as follows:

  • When the TWAP of $STATIC is below its USD 1.0 peg for 6 epochs (1 epoch is 8 hours), or when the TWAP of $STATIC drops below USD 0.8 the protocol rebases. An easier explanation for this would be that the protocol “compresses it’s tokens until the value is back at its USD 1.0 peg
  • During such a “compression” all tokens in circulation are compressed, including those in a user’s wallet and inside liquidity pools. Only unclaimed tokens in the project’s boardroom are exempt.

But perhaps an example would make this clearer:

  1. You have 1k $STATIC tokens ($STATIC = $1.0) in your wallet, worth $1000
  2. The price drops 1 $STATIC = USD 0.98 for more than 6 epochs
  3. Your wallet value is USD 980.0
  4. The rebase starts and $STATIC tokens are compressed
  5. You now have 980 $STATIC tokens worth USD 1.0 in your wallet, worth USD 980

It is because of the “Death-spiral” that every AlgoStable enters when a token dips below a USD 0.6-0.7 level that Charge DeFi decided to incorporate these mechanisms.

Using a seigniorage system, algorithmic cryptocurrency pays its holders when the ecosystem grows. A portion of the expansion is given to token investors who put their money into a boardroom.

Whenever the value of a token falls too low, all of the incentives for its price to rise vanish. These so-called “Death-spirals” saw token values fall to 90 percent of its initial price or lower.

Because of these drops, there were no longer any incentives to hang onto a token, and regaining a token’s value was now ten times more expensive. STATIC’s peg price is restored thanks to the implemented supply and demand adjustments, which rebalance supply and demand in such a way as to allow expansions and holders to reap rewards again.

A rebase prevents an Algorithmic cryptocurrency from ‘dying’ in a straightforward way. Instead, the ecosystem is reset to a lower level so that investors can ‘attempt again’.

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A price range of USD 1.20 to USD 1.70 is appropriate for the $STATIC cryptocurrency. This will lead to a stable reward system for all. More profits come with increased risk, as arbitrage hunters may seek to profit in the short term.

The rebasing method for $STATIC can be maintained by allowing users to invest in the liquidity pools. Every epoch (about every eight hours), an organisation called the Boardroom distributes a reward to investors. To facilitate trade between $STATIC and $CHARGE, Charge DeFi operates a decentralised exchange (DEX) called Smart Swap.

Making Progress in Algorithmic Cryptocurrency

When it comes to a 1:1 peg between fiat currency and a stablecoin, there is no need for a central guarantor to be trusted. In light of the Tether and USDCoin controversies, this is a significant move in the direction of decentralisation.

Tether, for example, was fined USD 41 million for misleading authorities and investors about the number of resources it held to honour its guarantee. The Tether team (which is owned by the same holding company that runs centralised exchange, Bitfinex) had been reassuring investors for years that the 1:1 guarantee between USDT and USD was fully funded.

MakerDAO’s algorithmic stablecoin, DAI, was one of the first attempts to address this challenge. Stability is achieved by deploying an algorithm to maintain a peg by collateralizing a basket of crypto assets. When it comes to receiving data on the assets in the basket, this approach is completely decentralised. In November of 2020, a faulty oracle transmission caused DAI’s price to spike by 30% for a brief period. As a result, DAI-based pairings on the DeFi protocol compound registered liquidations totaling USD 88 million.

The answer to this problem is algorithmic rebasing, which is provided by Charge DeFi. Without human or oracle interference it is completely decentralised and transparent, eliminating the need for confidence, but also minimising the chance for error.

“Money Legos” are only one of a slew of additional features that can be found in the Charge DeFi ecosystem. Using Charge DeFi’s Money Legos, you can automate your own home-based staking strategy. Users can automate stake rules and conditions in their first iteration of the $CHARGE ecosystem. The Boardroom ($CHARGE, $STATIC-$BUSD) or any of the $BUSD farms accessible in the ecosystem can be programmed to collect profit or compound profit. Other Binance Smart Chain initiatives will be included in future iterations of these Money Legos. Providing the ability to establish customised investment plans for numerous projects at once. Money Legos, on the other hand, aims to reduce the complexities of DeFi by combining automated trading tactics with staking, which is already widely utilised. The first version of Money Legos is expected to become live in March 2022, according to the project team.

There is a second team developing an addition to the Charge DeFi ecosystem that will make it easier for the average user to send and receive crypto payments and stake in DeFi projects. This wallet will have DeFi interfaces. The team has welcomed an experienced UX designer who has worked on a number of large-scale banking apps to its ranks. The second team’s goal is to release an MVP by the conclusion of the first quarter of 2022. A later version of the previously announced Money Legos is also on the way.

Is There Hope for Stablecoins in the Future?

To combat the rising volatility of the cryptocurrency market, Charge DeFi has developed a brand-new technique of stability maintenance. In addition to its rebasing method outperforming competing algorithmic cryptocurrency, its removal of the fundamental weaknesses of tethered stablecoins restores confidence in a market that is demanding more of its arbiters of stability.

As part of their 2022 plan, stablecoins are being given a makeover with new innovations. In the first quarter of 2022, the Charge DeFi team plans to launch two user beta platforms and make numerous enhancements and additions to the present platform. The boardroom complex, a voting system, and guided reinvestment are all examples of this.

With the help of resource-sharing agreements, the team hopes to spread the word about their unique new cryptocurrency strategy to a broader audience. It’s possible that Charge DeFi is on the verge of ushering in a new era in algorithmic cryptocurrency, providing a new method to stability, and so driving the space into a decentralised, transparent, and algorithmic future.

 

Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.

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