DYNAMIC SET DOLLAR
DESCRIPTION OF EVENTS
"We are excited to introduce Dynamic Set Dollar: a next-generation elastic supply stable token that, by improving upon its predecessors through the integration of several novel features, is destined to become the first fully DeFi compliant stablecoin." "DSD is a decentralized self-stabilizing and censorship-resistant stablecoin without any collateral backing. Oracle-driven pricing for voluntary supply elasticity is used without having to trust third-parties."
"DSD uses the mechanics from several other projects and is mainly inspired by ESD, Empty Set Dollar. ESD set a strong foundation for being the first viable non-collateral backed stablecoin design. Yet, governance proposals and protocol changes negatively influenced its growth and did not meet the expectations of its early participants. Therefore, we are launching DSD, which aims to serve as a rolled-back version of ESD incorporating slightly adjusted parameters to be even more agile and respond even quicker to market demand."
"The ideal DeFi stablecoin would be fully decentralized, capital efficient and censorship-resistant. We, an anonymous team and strong supporters of non-collateralized stablecoin designs created DSD to do all of these things, and more."
"To encourage users to buy coupons, the Empty Set Dollar system sets an enticing exchange rate between ESD stablecoins and coupons, say 1 ESD stablecoin to 1.1 coupons. So if you own 10 ESD stablecoins, and their price falls below the $1 peg, the system will let you convert your 10 ESD stablecoins into 11 coupons. When (or if) the price of ESD stablecoins rises back above $1, you’ll be able to reconvert your coupons into 11 ESD stablecoins. Voila, your 10 ESD stablecoins have become 11, for a 10% profit."
"Got that? A coupon, in short, can be thought of as a promise to pay even more ESD stablecoins in the future, conditional on locking up one’s ESD stablecoins now, but only if and when the $1 peg has been restored."
"The further that the price of ESD stablecoins falls below $1, the more enticing the system-set conversion rate into coupons gets. Put differently, the more that it fails, the more the algorithmic stablecoin system tries to harness forces to repair itself."
"This all sounds good in theory, but what about in practice? Luckily for us, algorithmic stablecoins aren’t just ideas jotted down on paper. ESD debuted last September and is providing real data on how these things function. A second algorithmic stablecoin has joined it. Dynamic Set Dollar (DSD), a clone of ESD, hit the pavement running in late November."
"Both algorithmic stablecoins have proven to be popular. At their peaks in late December 2020, ESD and DSD had respectively issued $550 million and $300 million worth of stablecoins into circulation."
"How close did their prices hew to $1? For the first few months, the pegging mechanisms seemed to work. When ESD or DSD rose above $1, new coins were created, driving their prices back down. And periods of sub-$1 prices were successfully fixed, too, with the aforementioned coupon freezing mechanism pushing them back up to $1."
"Dynamic Set Dollar, an 'algorithmic stablecoin' that plunged to 28¢ a few days back, has swung back up to its $1 reference point. Good for it, but I'm not sure that "stable" is the appropriate adjective."
"However, since late December the price of ESD has gradually fallen to 23 cents. DSD stablecoins have fallen to 24 cents. There is little indication that either will ever return to $1. The value of ESD is presented in Figure 1. The value and volume of DSD is presented in Figure 2."
"Dynamic Set Dollar hits 26¢. So is it game over for the algorithmic stablecoin experiment? Or just back to the drawing board?"
"Coupons have been proven ineffective to recover the 1$ peg. This is mostly caused by the pricing of the coupon being too static due to the fact that the duration they are held is completely neglected. This incentivizes buying coupons once the price re-approaches peg and not when it deviates away, which is when contraction is most needed."
"The DSD treasury proposal just successfully passed. This opens up a new chapter for the Dynamic Set Dollar protocol, and provides important resources to scale the team and project even further."
"After one of the most successful launches in DeFi history, it is time for the DSD economic experiment to advance into the next epoch. Improving on the existing mechanics and setting the cornerstones for a stable, reliable, and scalable store of value for the decentralized economy."
"Therefore, with DIP-10 we are going to revamp the entire incentive design of DSD. The new contraction cycle mechanics introduced by DIP-10 are a significant step towards becoming the first non-collateralized algorithmic stablecoin that can sustainably maintain its peg."
The Dynamic Set Dollar was a stablecoin based on Empty Set Dollar with modifications. It was launched on November 30th, 2020. The value ended up not remaining stable, fluctuated wildly in December, and eventually collapsed and failed to recover in January 2021.
HOW COULD THIS HAVE BEEN PREVENTED?
Algorithmic stablecoins face a fundamental issue with the requirement of faith in their value. Preparing a stablecoin requires scrutiny and expert opinions. Some funds should be available to assist victims in the event of collapse.
Algorithmic Stablecoins | AIER (Jun 19)
Announcing Dynamic Set Dollar (Jul 12)
https://web.archive.org/web/20201129004638/https://dsd.finance/ (Jul 13)
Dynamic Set Dollar Price in USD: DSD Live Price Chart & News | CoinGecko (Jul 13)
https://coinmarketcap.com/currencies/dynamic-set-dollar/ (Jul 13)
https://dynamicsetdollar.medium.com/dsd-v2-final-specs-voting-d17db9c8b5a (Jul 13)
@defiyield_app Twitter (Jul 13)
@jp_koning Twitter (Jul 13)
@jp_koning Twitter (Jul 13)
@dsdproject Twitter (Jul 13)
@el33th4xor Twitter (Jul 13)
Dynamic Set Dollar faces ‘massive test’ as stablecoin falls as low as $0.27 - bitcoinnotifactions (Jul 13)
Empty Set Dollar - Market Analysis Tools - YouTube (Jul 13)
@TraderDefi Twitter (Jul 13)