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Empty Set Dollar: A Game Theoretical Approach to Elastic Stablecoins

Nov 9, 2020 · 9 min read

By Ashwath Balakrishnan

Crypto trading volumes have seen a momentous shift towards stablecoins. The rise of DeFi further augmented this phenomenon, with over $245 billion of blockchain transactions settling via stablecoins in H1 2020.

While designs vary amongst different coins, one notable project, Ampleforth, attempted to change what it means to be a “stablecoin” all together. Its token, AMPL, is an algorithmic cryptocurrency that introduced the concept of rebasing. Simply put, a rebase is a mechanism where tokens are printed and issued by the protocol when the price of the token is above a certain threshold (i.e. if X-price > $1 then increase X-supply). For all intents and purposes, AMPL is not a true stablecoin despite having an explicit price target.

Before AMPL, however, the pioneer of the elastic token concept was Basis. In late 2018, Basis was shut down by the SEC for having too many security-like instruments. Basis had 3 tokens: a stablecoin whose supp

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