A Deep Dive into FATfi Algorithmic Stablecoins
Algorithmic stablecoins are a world unto themselves, but before diving in, it’s worth taking a step back and surveying the broader stablecoin landscape. (Readers who are already well-acquainted with stablecoins might skim or skip this section.)
Overshadowed by Bitcoin’s snowballing institutional adoption, DeFi’s sweltering summer, and Ethereum’s impending network upgrade, stablecoins have been on a tear of late, with a total market cap that has eclipsed $25 billion. This parabolic growth has caught the eye of powerful individuals outside of the cryptoverse, including, most recently, a cadre of U.S. legislators.
Why we need an Algorithm Stable
The main logic behind Algorithm Stable Coin is the logic of the demand and supply, which demonstrates how the governance bank manipulates the money supply. With the development of DEFI, there is already a lot of good DEFI financial products out there. We aim to create an Integration Application for Fatfi product into other financial services out there in DEFIverse.
While several different designs of algorithm stable coins have launched, we believe that the 4 tokens design is the best design out there. It’s proven to be resilient while also having the widest distribution of users. Fatfi Cash is an Algorithm Stable Coin protocol, but in a better version having Governance Token — FAT. Of course, one of the natural questions that many may have is: “Why would someone want to participate in Fatfi, instead of others?”.
With Others Algorithm Stablecoin, Users only earn the profit within the Expansion and Contraction of the protocol, which can easily come to a point that there is no more profit for users because the main goal of a Stable Coin is to stay Stable. Once the Protocol already come to that stage, without any further development of the project, the game is done.
With Fatfi, one can also participate in the Algorithm Stable Coin and earn rewards in the form of FAT tokens. However, unlike others, those FAT tokens will also entitle you to continue to earn a portion of the protocol’s fee, accumulated in FAT, even if you decide to no longer participate in the Algorithm provision.
What is Fatfi Algorithmic Stablecoin?
Fatfi is a decentralized open innovation platform that will foster a collaborative ecosystem, with the goal of dramatically accelerating the development and adoption of the world’s most advanced technologies & strategies into the most attractive segment in DEFIverse: Liquidity Rewards.
In short, Fatfi is a DeFi hub, intergated with its own Algorithm Stabecoin.
What is the 4 tokens mechanism?
There are four tokens in the Fatfi protocol:
FAT: FatFi Gorvenance token
The FAT token is intended to perform several functions, all of which come down to one primary value proposition: protocol ownership.
l FAT holders can receive incentives the protocol fee in term of FAT.
l FAT holders can use their tokens to vote on governance proposals regarding changes and upgrades to the protocol.
FAC: Fatfi Cash — Fatfi Algorithm Stablecoin.
Fatfi Cash tokens are designed to be used as a medium of exchange. The built-in stability mechanism expands and contracts their supply, maintaining the price of 1$.
FAB — Fatfi Bonds
Fatfi Bonds are minted and redeemed to incentivize changes in the Fatfi Cash supply. Bonds are always on sale to Fatfi Cash holders, although purchases are expected to be made at a price below 1 Fatfi Cash. At any given time, holders are able to exchange their bonds to Fatfi Cash tokens in the Fatfi Cash Treasury. Upon redemption, they are able to convert 1 Fatfi Bond to 1 Fatfi Cash, earning them a premium on their previous bond purchases.
Bonds in Fatfi Cash do not have expiration dates. All holders are able to convert their bonds to Fatfi Cash tokens, as long as the Treasury has a positive FAC balance.
FAS — Fatfi Shares
Fatfi Shares loosely represent the value of the Fatfi Cash network. Increased demand for Fatfi Cash results in new Fatfi Cash tokens to be minted and distributed to Fatfi Shareholders, provided that the Treasury is sufficiently full.
Holders of Fatfi Share tokens can claim a pro-rata share of Fatfi Cash tokens accumulated to the Boardroom contract.
How can FAC stay stable?
When Fatfi Cash is below $1
When Fatfi Cash is traded below $1, users will be able to purchase Fatfi Bonds at a certain discount to establish the price stability of Fatfi Cash, with the expectation of future profits upon redemption.
Each bond promises the holder exactly 1 Fatfi at some point in the future under certain conditions. Whenever a user purchases Fatfi Cash, it is burned, causing a decrease in the circulating cash supply. Bonds do not have interest payouts, nor do they have maturity or expiration dates. Rather, they can be redeemed on a 1:1 ratio with Fatfi Cash when the price rises above $1.
Purchased bonds can be redeemed on a 1:1 ratio with cash only when the oracle price of cash is above $1. This prevents bondholders from cutting their losses on redemptions and creating unnecessary increases in supply.
When Fatfi Cash exceeds $1
When the price of Fatfi Cash exceeds $1, the contract primarily allows bond redemptions to bond redeemers. Even after the bonds are redeemed, if the price of Fatfi Cash is traded above the price of $1, an increase in the demand of Fatfi Cash results in new Fatfi Cash tokens being minted and distributed to Fatfi Share holders.
For instance, let’s assume that the price of Fatfi Cash exceeds $1 even after bond redemption. In this case, the Treasury contract mints new Fatfi Cash seigniorage into existence. This seigniorage is given to the Boardroom, where users can stake Fatfi Shares and earn daily seigniorage based on the price of Fatfi Cash