Parallel routes to a collateralized AFT
Parallel-processing multiple proofs of concept is the only realistic way for LUNC holders to rally around a new (or not so new) 'Algorithmic Fungible Token' / algorithmic unit of stable account
Starting with a simple reality,
Defining and scoping a complex product — the equivalent of crowdsourcing iPhone 1 design to AAPL shareholders before anyone has seen an iPhone or has any idea what it could do differently from a Nokia / Blackberry / Palm Pre — is not something L1 governance can or should do, unless extremely strong consensus exists down to small details.
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… there are several possible approaches LUNC community who believe in algotoken PMF can take, keeping in mind LUNC’s main asset (a hyper-engaged core community) as well as its main liabilities (6+ months of tech debt, very weak on-chain liquidity, and no community consensus on an AFT despite 6 months of scorched-earth debate).
The choices, as best as I can see them, are:
Easiest way to reach LUNC users
Already has significant cex listings, which will be significantly more challenging for other AFTs
As a provocative turnaround narrative, will gain significant free publicity and industry interest not available to brand-new tokens
Has easiest access to community collateralization to bootstrap usage
Has the easiest line of sight to achieving a level of scalability (>$50m of float) that makes it an actually useful product
Most credible solution to the burn issue
Avoids nationalization risk since it’s already a community-governed asset through LUNC mechanisms
Inherits USTC’s extremely uncertain/problematic legal status as a debt token, in other words, it inherits a portion of a $9bn bad debt liability, LUNC prior legal attestations as a stablecoin, etc
If 96%+ of USTC is burnt (my original suggestion), USTC holders would cry foul at being forced to restructure against their will; some might sue
Would see-saw with the winds of a fractured community, as seen in the past 6 months; the team would likely be whipsawed by the community randomly taking certain features and ditching others according to influencer grandstanding, when different features will have major co-dependencies unappreciated by community influencers
Puts LUNC users at risk of another death spiral if it doesn’t work
TFL related parties own 50% of all USTC in existence. TFL’s intentions are clearly good, but TFL may be forced to dump it in response to legal verdicts or other issues beyond their control. This becomes more likely as the market value of USTC goes up, which it will if the rebuilding team makes progress on its roadmap.
With a new token (USTN) vs USTC: tradeoffs would be similar, but USTN would avoid the contingencies of TFL being forced to dump USTC, USTC holders seeing most of their USTC burnt, and any legal contingencies that might arise from that.
As a dapp optimized for the LUNC L1, like MKR with the DAI CDP on the Ethereum blockchain
2nd easiest way to reach LUNC users
Sidesteps LUNC governance on individual product features, presents a solution as a take-it-or-leave-it product
Has a very high probability of gaining significant community backing; has the best risk/reward ratio of getting community backing relative to retaining control over the end product
Inherits all of LUNC’s tech debt
Has no control over existentially important governance decisions that stablecoins are hyper-sensitive to, like tax rates
Has no control over L1 decisions affecting cross-chain interoperability
Inherits LUNC’s very damaged on-chain liquidity; on-chain liquidity is needed for any variant to work
Potentially competes with the community’s roadmap at some point in the future, opening the door to “nationalization” / the L1 embedding competitive preferences in their own product (eg, whitelisting its preferred product from taxation while taxing the dapp)
As a dapp optimized for another Cosmos L1
Ditches LUNC’s tech debt while retaining access to LUNC users, via Interchain Station or similar
Can decisively optimize around major UST technical problems, like UST’s intra-crisis cex/dex speed gap which crippled UST
Can start with that L1’s functioning ecosystem to create baseline demand & adoption
Can benefit from that L1’s on-chain liquidity
Can be ported to its own blockchain at a later date after initial adoption has taken off (if necessary)
Has to be built in the Rust language, which is far more difficult than Go (the Cosmos L1 core language)
Has more difficulty reaching LUNC users: will be fudded by low-IQ politics (“leaving and airdropping is basically than what Do Kwon did”) if any USTC/N team is attempting a simultaneous on-LUNC solution, rgdless of quality
As its own L1 on its own new Cosmos blockchain.
Ditches LUNC’s tech debt while retaining access to LUNC users, via Interchain Station
As an L1, has much greater self-sovereignty than it would as a dapp living on top of an L1
Can decisively deal with major UST technical problems, like UST’s sintra-crisis cex/dex speed gap, which crippled UST
Can be built in Go, which is much easier to write in vs. Rust
If its on-chain economy grew (a huge if), it would have its own domestic economy of AFT usage, as Terra did
Insources layers of work (infrastructure, security, ecosystem development) that have already been arguably done elsewhere
Has the most difficulty reaching LUNC users: will be fudded by low-IQ politics (“leaving and airdropping is exactly what Do Kwon did”) if a USTC/N team is attempting a simultaneous on-LUNC solution, rgdless of quality
Will start with very little on-chain liquidity, which is needed to manage an on-chain reserve
Dapp devs won’t appreciate being hostage to an unproven financial concept on top of usual L1 risks, which will deter builder adoption (if the AFT fails the way UST did, their work would be vaporized).
As a hermit blockchain focused only on 1 cross-chain product, it would have a uniquely severe dependency on bridges to other chains, which would also deter consumer adoption
As a non-Cosmos-SDK L1 or dapp
This is a non-starter, because it offers no synergy or possible distribution with the LUNC community.
(If any devs disagree on any of the above points, please fire away in the comments!)
Any algorithmic stablecoin or AFT project coming out of the community, regardless of whether it’s on-LUNC or calls another Cosmos chain home, would be well-served to airdrop it en masse to LUNC users (now possible with TFL’s Interchain Station). Airdrops are a game of giving free tokens to those crypto users you think are likeliest to stick around as the initial cohort of early-adopter users of your product. On-chain LUNC investors (excluding the large majority of LUNC users who participate exclusively on CEX’s) have voted with their feet, self-selecting as the world’s most interested participants in the most ambitious stablecoin & AFT experiments.
However, the LUNC community has struggled for consensus around the right implementation of this idea for 6 months. The solution lies in multiple teams pursuing their different approaches in parallel until a consensus forms.
The stated preferences of individual L1TF participants, and the L1TF’s laudable transparency around its 6-month roadmap, mean a) non-USTC efforts have a low likelihood of being sanctioned by the L1TF, and b) the L1TF can’t seriously push forward on this for months at the least.
So it makes the most sense for a team w/ different ideas, such as ours, to let the L1TF sanction a community-driven USTC recovery effort, while being mutually constructive towards any such efforts, and simultaneously building our own proof of concept elsewhere — while airdropping most of the on-chain LUNC community as an avenue to bootstrap early usage.
By prioritizing a widely anticipated airdrop for on-chain LUNC holders, and getting on-CEX LUNC holders to join the LUNC on-chain economy, we’d hopefully provide another essential service to the LUNC community, and especially to USTC or other LUNC-native AFT efforts: we’d incentivize people to bring their assets off CEXs and onto the chain, and help revive on-chain liquidity.
Any other LUNC project using airdrops for distribution should align airdrops towards on-chain users, and away from on-CEX LUNC holders who hold 60%+ of all LUNC. These users represent severely under-utilized value, who are not currently adding any value to LUNC’s on-chain economy aside from pushing up the price of the token.The LUNC chain needs to incentivize these users to bring their assets on-chain and join the LUNC economy to finance dapp development.
An inert cex holding of LUNC that doesn’t move is equivalent to burned LUNC: the LUNC is taken out of circulation, but doesn’t pay on-chain taxes, doesn’t participate in governance, doesn’t use dapps on the chain, doesn’t bootstrap the TVL of any new dapps, show up as a unique independent user of the chain, etc. A blockchain’s intrinsic value is driven by all these things.
Additionally, CEXs are notorious for “mishandling” airdrops — keeping the airdropped tokens for their own account and not redistributing them to users — and also dumping airdropped tokens. These ‘complications’ have formed a clear track record at this point, and the only practical way for an airdropping team to deal with this issue is by excluding CEX wallets.
Sounds like you're angling for a fork. I do wonder why you'd need the L1 JTF's blessings for that? It's not like Ed and company have any say whether the community decides to back this initiative or not. They're paid to do L1 work, not act as kingmakers for the chain.
Is there a part 3/3 of the article coming out, or was this it?