Dafi’s synthetic DFY uses elasticity to create new, stable forms of Blockchains & Liquidity. Could this be the answer to the biggest hyperinflation issues in Decentralized Economies?
What is an elastic token?
Simply, it is a token which changes it’s quantity routinely, after it has measured that it’s demand has increased or decreased.
What is it used for?
Previously, it was used as a form of money or a stable coin, this can be seen in Ampleforth and Yam.
However, this is not the best applied use-case of an Elastic Supply. The key trait that it offers, is the ability to algorithmically peg & adapt to a certain ‘demand’.
Typically, in rebase projects, they all attempt to peg to fiat. This has several flaws. Firstly, it exposes risk to those less familiar with the rebases. The changes in market-cap also mean that it doesn’t act as a stable form of payment, meaning it has limited real utility besides speculation.
(Remember these issues for later!)
What is the real potential?
It can adapt. It changes it’s availability, relative to demand, by increasing quantity in greater demand, and decreasing in lower demand.
Elasticity creates adaptive economies, which can respond to demand-changes, through rebases.
DAFI believes this has a greater potential in actually being used to peg directly to other tokens, instead of fiat. This elastic unit, would therefore not have any value, it would not be tradeable, and it would simply create an adaptive nature, in the unstable universe of Blockchain & DeFi.
It acts as an intermediary-unit, which can exist in different versions (flavours). Each Blockchain, DeFi application or DApp could have their own version of this elastic-unit.
What would it be used for?
It would be used to introduce an adaptive mechanism, into all Inflation models throughout Blockchain protocol’s, liquidity in DeFi, and other Decentralized Economies.
It solves one of the biggest questions, how do we incentivize early-users over a long time period, without a high inflation rate? The answer, by introducing an elastic-intermediary into the equation.
Without DAFI: Economy → Inflation → Reward
- Cannot incentivize early-users without creating excess supply
- Less able to maintain liquidity & staking in periods of lower demand
With DAFI: Economy → Inflation → (Demand = DFY) → Reward
- Not hyperinflationary
- Rewards early-users as the demand in the economy grows
- Maintains liquidity & staking in low-demand phases, through the growth of the demand-pegged curve
Once you truly understand the above, it’s a beautiful evolution to the very nature of Decentralized economies.
Bitcoin was originally created to be a gradual-deflationary economy. The Dafi Protocol is partially inspired by this, as a contrast to the hyper inflationary economies being created in Blockchain & DeFi today.
DAFI is designed to incentivize liquidity & users without unsustainable reward rates, through a demand-bonded curve, which all Blockchain’s, Tokens and DeFi platforms can adopt. Creating stable Chains & DeFi.