Why is SATO, as a 4th-gen stablecoin, a better choice?
Historically, the world has reached a consensus on the worth of gold and silver, but these metals became inconvenient in a real payment scenario, so later governments issued metal coins that were not necessarily made of precious metals.
The new “wealth consensus” is derived from “cryptocurrency” that was envisioned by Satoshi Nakamoto, and its essence is a decentralized encrypted token based on cryptography. However, although digital currencies issued by commercial institutions or central banks nowadays also use blockchain technology, they have strong centralization attributes; as Bitcoin continues to rise high, stablecoins, on the other hand, are cryptocurrencies that are more in line with Satoshi Nakamoto’s vision.
As of now, the market value of DeFi cryptocurrency is $98.55B, and it continues to increase. A reliable stablecoin can make people no longer need to worry about the daily fluctuations of cryptocurrency. In the short-term, stablecoins allow people to trade in a practical way, and in the long-term, stablecoins can provide other important financial functions, such as debit and credit.
The representative of the first generation of stablecoins is USDT, which tokenizes fiat currency and is fully centralized. Its agency issues stablecoins through reserves of U.S. dollars and make those stablecoins equivalents to U.S. dollars. .The reality is, however, that Tether’s US dollar reserves have always been questioned by the public. Everyone is afraid that the USDT system might collapse, and USDT’s unsolvable problem has become the “Sword of Damocles” hanging over the entire industry.
The second generation is making an attempt to build decentralized stablecoins. Although it is also 1:1 anchored to the U.S. dollar, its assets are mainly encrypted assets. It maintains anchor pricing through an automatic pricing mechanism built into smart contracts, rather than through the issuer.
One of the representatives is MakerDAO’s DAI. In its early days, MakerDAO used ETH as collateral, but based on market risk considerations, they introduced centralized assets as collateral too, such as USDC, wBTC, etc. However, after the introduction of centralized assets, although DAI gained stronger stability, it also sacrificed some of its decentralized features.
Compared with the first and second generations of stablecoins, the third and fourth generations of stablecoins abandoned the original anchoring model, and instead established a “currency” system through market supply and demand.
The third generation of stablecoins attempts to build native tokens in the cryptocurrency industry. These stablecoins do not require the users to use collateral and are mainly regulated by algorithms and automated mechanisms. For example, Amplforth, based on the Ethereum smart contract, its most important feature is the “Rebase” mechanism, that is, it automatically adjusts the number of AMPL tokens in all user wallets based on market prices. This adjustment will not cause the tokens to be diluted but will increase or decrease the number of tokens at the same percentage. The adjustment is mainly based on changes in the market supply and demand relationship, which prompts AMPL to locate a price balance point. AMPL is very innovative. It is worthy of recognition to try to find the native currency of the encrypted world through market supply and demand, but this kind of attempt lacks experience and is highly speculative, and is not suitable as the “currency” envisioned by Satoshi Nakamoto.
The fourth-generation stablecoins are also algorithmic stablecoins. They refer to the previous design and combines the experience of liquidity mining and elastic stablecoins to form a relatively complete currency market adjustment mechanism.
Let’s take the Super Algorithmic Token (SATO) as an example. As a fourth-generation algorithmic stablecoin, its rebase mechanism works with this equation: Inflation or deflation = (market price — target price) / 10.
For example, assume that when the market price is $1, the user spends $100 to buy 100 SATO. On the second day, the market price of SATO has risen to $1.5, exceeding the threshold of $1.05. According to the equation, the balance in all addresses will increase (1.5–1)/10=5%, The number of SATO in the user’s wallet or mining pool will change from 100 to 105.
At this point, if the market price of SATO has not fallen back and remains at $1.5, then the SATO in the wallet is worth $157.5. Compared with the original $100 worth of SATO, although the currency price has only increased by 50%, the user has made a profit of 57.5%. From this example, we can see that SATO actually comes with its own leverage.
At the same time, SATO has adopted an off-chain solution to allow users to experience SwapAll, a fast platform without GAS fees, reducing time risk and transaction costs to none, facilitating more users to participate in the wave of algorithmic stablecoins. Simply using the mobile application (such as SwapAll), or on the website, users can trade, exchange and stake through very easy steps, so that every investor can participate in it fairly.
In addition, SATO can be applied to DeFi credit in the future. The most common application scenario is that users may deposit SATO as collateral and withdraw a certain type of cryptocurrency. SATO may also be used as a deposit in decentralized derivative products. Users may also stake SATO to earn Bitcoin, Ethereum, and other cryptocurrencies.
SATO is now available on several exchanges (such as SwapAll, BurgerSwap, LAVAswap, etc.) on April 14, 2021.
With the expansion of algorithmic stablecoins, the algorithm stability will be more widely adopted, a more accurate anchor point will thus appear. At that time, the volatility of algorithmic stablecoins will also be greatly reduced, so that the market will be generally accepted to a complete set of “currency “system will also mature. The combination of algorithmic stablecoins, DeFi, Bitcoin, and other encrypted assets will form a complete encrypted economy.