As the team behind Morph.Finance can attest, developing an algorithmic stablecoin project can be just as frustrating and exciting as investing in a project.
While algorithmic assets have pulled back from high market caps in mid-December, the space has nevertheless continued to attract intrepid investors and developers looking to position themselves at the forefront of a new financial vertical – though it remains an open question whether such projects will ever achieve stability.
Formed largely in the shape of Defunct 2018 project Basis, algorithmic resources are designed to handle automatically adjusts the total circulating supply of a token based on pre-set conditions, such as time or price. While ostensibly intended to hack into a peg like the US dollar, controlling and reducing volatility has proven to be a notoriously difficult problem to solve.
So far, these assets have remained somewhat on the brink of decentralized financing (DeFi), with the three main projects – Empty Set Dollar, Frax and Dynamic Set Dollar – accounting for just half a billion in market cap between them, per Coingecko. Still, traders keep lining up to win spins at the rebase casino, and there is an ongoing development towards new products like BadgerDAO’s upcoming DIGG – a synthetic asset intended to track the price of Bitcoin. It remains new, exciting and largely unexplored territory.
A more stable stablecoin
In an interview with Cointelegraph, the anonymous developers of Morph.Finance – formerly Dynamic.Supply – told their story when they tried to build a sustainable project in space, a story with as many ups and downs as an algo stablecoin chart.
“Dynamic.Supply was a simple Basic fork with custom variables launched in early January,” the team said. “We have tried to limit whale / bone accumulation by limiting the maximum number of tokens per TX during the first hour of launch, but it was unsuccessful.”
The team explained that deep-seated ‘whale’ traders vacuumed the tokens shortly after launch and continued with the rebase parameters in their favor.
“There was no boardroom lock-up initially, which opened us up to sniping, where users would buy and deposit large amounts of DSTR just before the end of an era, cash in the rewards, and then dump everything on the market before a few hours. repeated later. “
The manipulation discouraged early community members and even some developers. Others, however, remained undaunted.
New features, new problems
As is often the case with startup stories, the obstacles led to ingenuity. In Morph’s case, the ingenuity came in the form of a Zapper contract that allowed algorithmic stablecoin liquidity providers to quickly switch between other project pools to theirs.
In the short term it boosted liquidity, but in the long term it could also enable Morph to “introduce a market-wide LP zapper system that benefits all farms” – an innovation that could support the whole space.
But even the new ramps weren’t enough to stabilize the pen.
“Liquidity improved significantly, but our tokenomics worked against us,” the team said. “DST and DSTR emissions were both far too fast, leaving us with insufficient time to roll out new arbitration mechanisms.”
To counter their overly aggressive token emissions, the team implemented new contracts, renamed and prompted the community to hand over their tokens – a process that led to significant criticism of gas fees in social channels, as well as no small amount of fear That the team may be planning an elaborate back pull.
Twitter Trader @ CryptoSpider1 was among those who kept his share of the migration to the new contracts, saying in a statement to Cointelegraph that “back pull” risks are part of being on the emerging frontier of space.
“High risk = high reward, and the developer has shown that he / she has no interest in back pull, but creates something interesting that challenges the current model,” he said.
Today at 8:00 pm EST, just a few weeks after launch as “Dynamic.Supply”, the project has reopened liquidity pools, completing Morph’s “metamorphosis” – converting DST and DSTR tokens to Morph Coin (MORC) and Morph Tracker (MORT), along with the new name, website and emission speed.
The Zapper feature – the first that Morph hopes will be a series of contributions to the space – has also been carried over from the old brand.
A series of shuffles, tweaks, and innovations, all from a handful of developers, and intended to advance the algorithmic asset space.
It’s an open question whether Morph’s changes will bring stability to their assets, just as similar concerns swirl around most if not all algorithmic asset projects. But when asked about the future of Morph and similar projects, the Morph team already had further innovations in mind.
“Usefulness! Without this, Morph and all similar projects will eventually disappear. That’s not what we want, we strive to build a sustainable ecosystem that we hope will deliver real value to our users.”