Algorithmic asset experiments continue to entice traders & developers

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As the team behind Morph.Finance can attest, developing an algorithmic stablecoin project can be just as frustrating and exciting as investing in one.

While algorithmic assets have retreated from market cap highs in mid-December, the space has nonetheless continued to attract intrepid investors and developers looking to position themselves at the forefront of a new financial industry – although it remains an open question whether such projects will ever achieve stability .

The algorithmic assets were largely developed in the form of the defunct 2018 project and are designed to automatically adjust the entire circulating supply of a token to pre-set conditions such as time or price. While they are supposedly meant to cling to a hook like the U.S. dollar, it has proven notoriously difficult to contain and mitigate volatility.

So far, those assets have been somewhat on the verge of decentralized finance (DeFi), with the three largest projects – Empty Set Dollar, Frax, and Dynamic Set Dollar – accounting for just half a billion market cap per coinecko. Still, dealers keep lining up to play spins at the Rebase casino, and new products are constantly being developed like BadgerDAO’s upcoming DIGG – a synthetic asset designed to track the price of Bitcoin. It remains new, exciting, and largely unexplored territory.

A more stable stablecoin

In an interview with Cointelegraph, the anonymous developers of Morph.Finance – formerly Dynamic.Supply – told their story of trying to build a sustainable project in space, a story with as many ups and downs as an algo-stablecoin chart.

“Dynamic.Supply was a simple basic fork with modified variables that was introduced in early January,” the team said. “We tried to limit the accumulation of whales / bots by limiting the maximum number of tokens per TX in the first hour of launch, but this was unsuccessful.”

The team explained that “whale” traders tucked into their pockets shortly after launch sucked in the tokens and the rebase parameters played in their favor.

“Initially, there was no lock in the boardroom, which gave us the ability to snip, where users buy and deposit large amounts of DSTR just before the end of an era, collect the rewards, and then bring it all to market before a few hours were repeated later. ”

The manipulation discouraged early community members and even some of the developers. Others, however, remained intrepid.

New features, new problems

As is so often the case in startup stories, the obstacles led to ingenuity. In Morph’s case, the ingenuity came in the form of a zapper contract that allowed algorithmic liquidity providers for stable coins to quickly switch between other project pools to theirs.

In the short term, it has bolstered liquidity, but in the long term it could also enable Morph to “roll out a market-wide LP zapper system that benefits all farms” – an innovation that could take flight across the space.

But even the new ramps were not enough to stabilize the hook.

“Liquidity has improved a lot, but our tokenomics have been working against us,” the team said. “The DST and DSTR issuance was way too fast that we didn’t have enough time to introduce new arbitrage mechanics.”

To combat their over-aggressive token emissions, the team implemented new contracts, renamed them, and urged the community to transfer their tokens – a process that has resulted in a significant impact on gas charges on social channels, as well as a no small amount of concern about it That led the team may be planning a sophisticated rugpull.

Twitter retailer @ CryptoSpider1 was among those who had its part in migrating to the new contracts, telling Cointelegraph in a statement that “rugpull” risks are part of what is happening on the emerging frontier of space.

“High risk = high reward, and the developer has shown that he / she is not interested in rugpulling but is doing something interesting that challenges the current model,” he said.

Next Steps

Starting today at 8 p.m. EST, just a few weeks after its start as “Dynamic.Supply”, the project has reopened the liquidity pools and completed the “metamorphosis” of Morph. DST and DSTR tokens were converted into Morph Coin (MORC) and Morph Tracker (MORT). along with the new name, the new website and the new emission rate.

The zapper feature – the first that Morph hopes will be a series of contributions to the space – has also been carried over from the old brand.

A series of shuffles, tweaks, and innovations, all from a handful of developers, designed to drive the algorithmic asset space forward.

It is an open question whether Morph’s changes will improve its asset stability, as is similar concerns with most, if not all, algorithmic asset projects. When asked about the future of Morph and similar projects, however, the Morph team already had other innovations in mind.

“Usefulness! Without it, Morph and all similar projects will eventually get out of hand. We don’t want that, we want to build a sustainable ecosystem that we hope will offer our users real added value.”