YFLUSD is a lightweight implementation of the Basis Protocol on Ethereum.
Basis is an algorithmic stablecoin protocol where the money supply is dynamically adjusted to meet changes in money demand.
- When demand is rising, the blockchain will create more Basis. The expanded supply is designed to bring the Basis price back down.
- When demand is falling, the blockchain will buy back Basis. The contracted supply is designed to restore Basis price.
- The Basis protocol is designed to expand and contract supply similarly to the way central banks buy and sell fiscal debt to stabilize purchasing power. For this reason, we refer to Basis as having an algorithmic central bank.
Read the Basis Whitepaper for more details into the protocol.
Basis was shut down in 2018, due to regulatory concerns its Bond and Share tokens have security characteristics. The project team opted for compliance, and shut down operations, returned money to investors and discontinued development of the project.
YFLUSD differs from the original Basis Project in several meaningful ways:
- Rationally simplified - several core mechanisms of the Basis protocol has been simplified, especially around bond issuance and seigniorage distribution. We've thought deeply about the tradeoffs for these changes, and believe they allow significant gains in UX and contract simplicity, while preserving the intended behavior of the original monetary policy design.
- Fairly distributed - community members can earn the initial supply of YFLUSD by helping to contribute to bootstrap liquidity & adoption of YFLUSD.
There exists three types of assets in the YFLUSD system.
- YFL USD ($YFLUSD): a stablecoin, which the protocol aims to keep value-pegged to 1 US Dollar.
- YFL Bonds ($bYFL): IOUs issued by the system to buy back YFL USD when price($YFLUSD) < $1. Bonds are sold at a meaningful discount to price($YFLUSD), and redeemed at $1 when price($YFLUSD) normalizes to $1.
- sYFL ($sYFL): receives surplus seigniorage (seigniorage left remaining after all the bonds have been redeemed and percentage of seigniorage sent to YFL Treasury).
- Contraction: When the price($YFLUSD) < ($1 - epsilon), users can trade in $YFLUSD for $bYFL at the $bYFL-$YFLUSD exchange rate of price($YFLUSD). This allows bonds to be always sold at a discount to cash during a contraction.
- Expansion: When the price($YFLUSD) > ($1 + epsilon), users can trade in 1 $bYFL for 1 $YFLUSD. This allows bonds to be redeemed always at a premium to the purchase price.
- Seigniorage Allocation: If there are no more bonds to be redeemed, (i.e. bond Supply is negligibly small), more $YFLUSD is minted totalSupply($YFLUSD) * (price($YFLUSD) - 1), and a percentage is sent to the YFL Treasury and the remaining is placed in a pool for $sYFL holders to claim pro-rata in a 24 hour period.
Read the official YFLUSD Documentation for more details.
We, the core developers of YFLUSD, were early supporters & observers of Basis when it first launched, and to this day believe that it is one of the best ideas to have ever been put forward in crypto. While Bitcoin first got us interested in blockchain's use cases, it was Basis that first truly inspired us, by painting a picture of a world that runs entirely on decentralized digital dollars the policies for which cannot be corrupted or politicized. Basis is more relevant now today than it ever was in 2017/2018 - with regulators striking back against the decentralized movement by cracking down on Telegram and Libra, while their governments are printing money faster than ever before in human history.
This is not a DeFi project. We are simply leveraging the industry's excitement in the category to bring much deserved attention and engagement to the Basis Protocol, and to use this opportunity to distribute ownership in the protocol fairly.
Our only motivation is to bring the Basis Protocol into the world, and to serve its community in implementing YFLUSD's vision to become the first widely adopted decentralized dollar.
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Contribution guidelines are here
For security concerns, please submit an issue here.
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