Brief Analysis of Float Protocol Based on ETH Non-Collateralized Stablecoins Agreement

I. Introduction

Float Protocol is an ETH Non-Collateralised Stablecoins Agreement. There are two tokens in the project, FLOAT and BANK.

Among them, FLOAT is a stablecoin, but its price is not pegged to the US Dollar, but floating. The initial target price is US $1.618, and the target price will change based on the market situation.

BANK is responsible for the stability of FLOAT value (including reducing FLOAT value in case of inflation and boosting FLOAT value in case of deflation) and governance.

II. Stabilisation Mechanism

When the user stores ETH in the contract, the system will generate FLOAT of equal value. At this time, the total value of ETH in the contract is equal to the total value of FLOAT. The ratio between the two is “Countercyclical Factor / Vault Factor”, and the countercyclical factor will change due to market price fluctuation. 5 per cent of BANK’s total amount is used to reward the users who have deposited into ETH FLOAT.

The system will trigger rebase mechanism every 24 hours to stabilize FLOAT prices.

When inflation occurs, the system changes the supply by producing FLOAT and then affects the price. The specific implementation form is Dutch auction (arbitragers have the opportunity to buy a new FLOAT at a price lower than the market price). BANK received by the system will be destroyed and ETH will enter the vault;

When deflation occurs, the system changes the supply chain and affects the price by purchasing and burning FLOAT. The specific implementation form is reverse-Dutch auction (arbitragers have the opportunity to sell FLOAT at a price higher than the market price), and destroy repurchased FLOAT.

The following table shows the countercyclical factor changes and the corresponding auction rules:

Countercyclical Factor = Total Value of Reserve Assets / (Total Value of FLOAT (at target price))

When both ETH and BANK are used for auction, the proportion of ETH is the same as that of countercyclical factor. Example: countercyclical factor is 0.6, 60% ETH and 40% BANK are required to use in the auction.

Example：

Suppose the current target price of FLOAT is $1.50 and the market price is $2.00. In this case, the new FLOAT will be launched at a decreasing price (starting at $2.00 and gradually dropping to $1.50).

Arbitragers will get FLOAT through auction and then sell it to the market to make the price closer to the target price.

The ETH received by the agreement will be stored in the vault to support the FLOAT price when the demand is insufficient; BANK received by the agreement will be destroyed immediately.

Subsequently, the project plans to reset the auction frequency every two weeks, and increase the auction frequency from 24 hours to 12 hours, then to 6 hours, and finally 3 hours, until every 150 blocks are auctioned. The auction will be held irregularly at the end of this stage, and the auction demand will be initiated by users.

In addition, users who participate in the auction need to pay the price of the Oracle used in the auction.

III. BANK Tokens Distribution

The initial total amount of BANK (the first year) is 168000 tokens, and the distribution is as follows:

IV. Liquidity Mining

Stage I, 7 February-21 March, lasts for six weeks

For whitelist users, that is, users participating in Snapshot governance, each whitelist address can store up to 10000 tokens.

Three liquidity pools: DAI, USDC and USDT. Each pool distributes 500 BANK tokens a day, and a total of 1500 BANK tokens a day.

Stage II, 21 March-03 April, lasts for two weeks

No entry barrier, anyone can participate, and there is no reserve fund limit.

On the basis of four pools (BANK, DAI, USDC and USDT), five additional pools (YFI, YAM, SUSHI, ETH and WBTC) are added for liquidity mining and this will be voted on by governance.

Among them, a total of 7000 BANK tokens were awarded to BANK/ETH pool, 500 tokens each day;

A total of 21000 BANK tokens were awarded to the other eight pools, 125 BANK tokens for each pool per day.

V. Financing Situation

No financing.

VI. Token usage

Speculative tokens: absorb the volatility of FLOAT.

Governance tokens.

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