Introducing Big Empty Apple
BEA(Big Empty Apple) was inspired by exsiting stablecoin projects, particularly ESD. ESD built its coupon system to minimize stablecoin holders’ psychological resistance to reduce their stablecoin numbers when ESD’s price was below 1$, which is a great progress on the basis of AMPL. However, ESD is stuck in its reflexive trap and hysteresis trap at present. In order to build a new system to solve these two problems, BEA introduced the WETH parity factor.
Apple is an algorithmic driven stablecoin with an epoch every 8 hours, that is, the price is re-anchored every 8 hours .
When Apple’s oracle price is higher than 1.0, BEA will issue additional Apple. When Apple’s oracle price is lower than 1.0, BEA will issue some apple Coupon. Investors can use Apple to purchase apple Coupons to invest for the future of Apple. At this time, the number of Apples is decreasing, and there will be some investors need Apple to buy Apple Coupons. Apple’s scarcity and demand are both rising, so that Apple’s price will rise back.
Apple is anchored to both USD and ETH. Therefore, Apple does not anchor one-to-one with USD, but introduces the price of WETH in the WETH-USDC trading pair in Uniswap as the parity factor. We believe this can better reflect the true value of Apple as a stable currency. Apple’s oracle price is 0.9*(APPLE-USDC Price) + 0.1*WETH parity factor.
Specifically, APPLE-USDC Price indicates the real transaction price of Apple, and Apple’s oracle price is the price floating with the ETH market. The issuance of apple is determined by Apple’s oracle price
This design is mainly based on the following two considerations:
(1) Reflexive trap. Decentralized stable currency is a rigid demand of the crypto-world. The current minting speed of DAI, SUSD, USDC is obviously not enough to meet the thirst for stable currency after the rapid growth of market size. As the Ethereum market rises, the demand for encrypted stablecoins will also rise simultaneously. If the 1:1 anchoring rule with USD is strictly followed, the algorithmic driven stablecoins will fall into a reflexive trap. At present, mainstream algorithmic driven stablecoins such as AMPL, ESD, Basis, etc. will fall into this reflexive trap after the initial explosive expansion. Because they are completely endogenous and too closure, then the project’s market value will stop at a certain scale because Reflexivity strongly hinders its further expansion. In an attempt to solve this problem, we introduced the price change of Ethereum, which is highly correlated with the market value of cryptocurrencies, as a rationalized disturbance item for the stablecoin.
(2) Hysteresis trap. Algorithmic driven stablecoin which fully peg on the full collateral stablecoin are also prone to fall into the lag trap. For example, suppose that the Ethereum market is experiencing a 24-hour rise and fall cycle at this time, and the algorithmic stablecoin complies with the 1:1 anchor of USD, when the first cycle of the algorithmic stablecoin is 0:00–8:00. At this time Ethereum is rising, and investors is buying Ethereum. The second cycle of algorithmic stablecoins is from 8:00 to 16:00. At this time, Ethereum is stable near the extreme value. Investors begin to look for DeFi projects to invest. Some investors seek the undervalue of algorithmic driven stablecoins, and the demand for algorithmic driven stablecoins increases , The price of algorithmic stablecoin rose above 1.0. In the third stage, the third cycle of algorithmic driven stablecoins is 16:00–24:00. At this time, the price of Ethereum begins to fall. Apple’s price was higher than 1.0 in the previous cycle, and Apple began to issue more. Although the 24-hour example is a bit extreme, both the long-term market behavior and the short-term market behavior roughly conform to the above laws, which means that the 1:1 anchor with USD will bring anti-market expansion behavior to the algorithmic driven stablecoin, and this part of the additional issuance will greatly undermine the stability of the algorithmic driven stablecoin in the fourth cycle, resulting in a sharp drop in price. The sharp drop in prices will undermine investor confidence, further trigger panic, and lead to the collapse of the consensus of this stablecoin.
Therefore, the introduction of the WETH price allows the BEA system to directly receive the influence of the Ethereum market, so that BEA can issue Apple when the ETH price is maintained at a high value, in other words, when the demand for algorithmic stablecoins rises, additional issuance.In addition to being directly affected by the rise of the Ethereum market, Apple’s price will also fall down with the decline of the Ethereum market.
When the crypto market is down for a long period of time, demand for crypto stable coins will drop, and the price of the coins will fall. This is determined by market rules. The core of algorithmic driven stable coins should not violate this rule. Contrary to the market trend of expanding the number of stablecoins or forcibly locking the price of the stablecoin will lead to underselling, triggering panic, splitting and distrust, and finally leading to the collapse of consensus. With the impact of the parity factor, the bloodletting therapy following the market decline can maintain the basic consensus of the crypto stable currency, and it will quickly pick up when the next market recovery cycle is discussed.
When faced with a short-term and medium-term economic downturn, the parity factor will amplify the falling effect of currency prices and stimulate BEA to produce more Apple Coupons. When the next round of Ethereum’s rising market comes, the BEA system has both the oracle price that is directly affected by the parity factor and the Apple Coupon that is stimulated by the parity factor, so that BEA can start a large number of Apple’s issuance in line with market conditions. When all other stablecoins of the same type are still in a lagging state, BEA ejects at a very high initial speed and acceleration to start and initiate recovery, and can enjoy the first divident of each economic cycle.
We believe, what algorithmic stablecoins should do is not to avoid currency price changes, but to embrace price changes.
The specific parity principle is:
1.Taking each epoch (8 hours) as a time point, record the change of the WETH-USDC TWAP exchange rate (Time Weighted Average Price) in Uniswap at each time point. Assume that the exchange rate at four time points has been recorded here, denoted as price0, price1, price2, and price3.
So the parity factor is:
2.Whereas BEA oracle price is:
The design of the parity factor introduces three epoch time windows and square root operations, which can sharpen the upward trend when the Ethereum market rises slowly, and inactivate the upward trend when the Ethereum market soars. for example:
Suppose price0 =price1=price2=1:1 and price3=1.1:1. At this time, the parity factor = 1.181, which is greater than 1.1 of price3.
Suppose price0 =price1=price2=1:1 and price3=2.0:1. At this time, the parity factor = 1.577, which is less than 2 of price3.
The same pattern follows when Ethereum price falls down.
In summary, BEA innovates a new oracle mechanism, this mechanism introduces ETH price as part of oracle to overcome amount increasing limitation and price hysteresis affection.
