Overview
Last updated
Last updated
TAU is the first algorithmic fractional stablecoin protocol to adopt the 'Protocol Owned Liquidity' game theory in its price balance economics. The ecosystem maintains the peg through the bonding dynamics and adds more value to the token holders through yield benefits and arbitrage opportunities.
TAU is driven by two interdependent transmutable ASA token standards named ELEM and TAU.
TAU: A Capital Efficient Stablecoin whose supply is backed by at least 110-125 % of crypto collateral, such as
A) Protocol owned Collateral Reserve
B) Bonding Reserve
C) Ecosystem Reserve
D) Algorithmic Burn Reserve
E) DeFi 2.0 Electron Protocol & Farming Reserve
ELEM: An elastic Protocol-Owned-Liquidity (POL) currency whose supply is backed by a basket of assets (e.g., DAI, USDC), giving it an intrinsic value that it cannot fall below via game-theoretic logic through staking and bonding.
The efficiency of a stablecoin protocol is defined by the treasury reserve it must have to support its circulating supply. Most existing protocols have up to 100% of the treasury backing, but TAU is modeled to have at least 10 to 25% more than the amount needed to support the supply at any given time. The following principles will help the treasury gain additional collateral to back up the circulating supply
1) User mint deposits that make 100% backing initially.
2) LP Bonding curve by selling vested governance tokens
3) Algorand Foundation's liquidity backing to bootstrap DeFi platforms
4) DeFi 2.0 Electron Protocol's Fee backing through liquidation free lending and USDC staking across other DeFi protocols will further increase the revenue backing significantly
For example, if we have $100 million TAU stablecoins in circulation, we will have between 110-125$ million dollars' worth of treasury reserve (approx. 25% additional reserve)
TAU aims to provide a solution for capital efficiency and price stability through its novel Autonomous Demand Supply Balancer Algorithm called ADSB, which controls the following six functions.
MINT enables the mint operation by accepting ELEM and collateral deposits into the protocol controlled by the Target balancer Ratio (TBR).
ENCASH enables the redemption of TAU stablecoin from the protocol controlled by the Effective Balancer Ratio (EBR).
When the reserve exceeds its equilibrium threshold, the BUYBACK process will incentivize users to sell their ELEM tokens for a profit. As a result, the ELEM Supply gets reduced, increasing its market price.
When the reserve falls below the equilibrium threshold, the RE-COLLATERALIZATION process will incentivize users to mint more ELEM tokens at a discount to increase the backing reserve.
REBASE BONDING allows users to buy ELEM tokens from the protocol at a discount by trading with liquidity (LP tokens) pool tokens or other assets. ELEM tokens purchased via bonding are vested linearly to avoid price volatility. Bonding includes three essential functions
D-Bonding is an active short-term strategy that allows the protocol to acquire liquidity by selling ELEM tokens at a discount for collateral. D-Bonds are further classified into two types.
Liquidity Bonds
Reserve Bonds
Liquidity bonds help the protocol accumulate and lock liquidity, while reserve bonds grow their treasury faster.
I-Bonding is an inverse short-term strategy that allows the protocol to acquire liquidity by selling ELEM tokens at a discount for collateral.
Staking is a passive, long-term strategy that helps stakers earn rebase rewards. Even if the market price of ELEM drops below the initial purchase price, given its long staking period, the increase in the staked balance should eventually outpace the fall in price.
6. The reserve funding received through bonding will get deposited into four independent Vaults to generate passive income, each meant for a specific function, and converted into a smart contract called Canisters.
