Project Yuan -
First-ever Elastic Token that Tracks Chinese Yuan’s Exchange Rate against USD
DISCLAIMERS (Mostly bullshits but still…):
This is not investment advice…
Yuan has ZERO intrinsic value.
DON’T PUT YOUR LIFE $AVING INTO IT AND YOU COULD LOSE IT ALL.
Yuan is a 100% community-driven project, no pre-mine, no founder and team shares, no VC shares, no tricks, equal for everyone to participate.
Though Yuan has been audited (by PeckShield, audit report here), there is absolutely no guarantee of bug-free. On the contrary, shit happens in DeFi more often than a bird shits on the window of your car during a beautiful sunny Monday morning.
What is Yuan and Why We Are Here
Why we are here, honestly, don’t know, COVID is not going anywhere, don’t care who wins the election, life is boring, Yuan probably is the cure.
Can’t believe we spoiled the whole summer for all kind of silly yield farming useless food and vegies, but actually, not all useless dump degens, quite a few inspirations emerged from the season of this grant agriculture revolution, particularly, AMPL and its variants, YAM, BASED, YFI and UNI etc. We draw inspirations from these projects, for their monetary design, community launch, governance structure.
Yuan is a 100% community-driven project, no pre-mine, no VC, all governances are fully on-chain.
Yuan is an elastic token tracking the exchange rate of Chinese Yuan against USD. Unlike other elastic tokens, which relies on money expansion/contraction driven by deterministic algorithm, Yuan plans to develop or co-develop other protocols (i.e AMM, lending etc), so to inject more demand side variables into the equation.
So far, all elastic tokens are pegged to USD, it actually is quite boring, yes, AMPL with an inflation target, but still the world is already flooded with USD alternatives, marginal addition to this collection doesn’t excite us.
So, Yuan is trying to peg to Chinese Yuan/USD exchange rate.
There is no such token that could let people gain exposure on CNY exchange rate, let alone with a decentralization and perpetual flavors. Dollar is collapsing and beaten by COVID and Yuan is the hot darling.
In addition, all elastic tokens so far are algorithm-determined expansion and contraction, there is no inherent demand for the elastic token aside from arbitraging the rebase mechanism. Given the abundance of USD stablecoin offering in the market, the incentive is weak, as a result, the market demand waxes and wanes and liquidity dries up and ultimately all those designs encounter the risk of death spiral.
Our Goals
The Yuan experiment is set to achieve the following goals:
- Create the first elastic token tracking Chinese Yuan/USD exchange rate
- Making Yuan/USDx both: a) the Oracle for and b) the most liquid proxy for gaining Chinese Yuan/USD exposure
- Building the rebase Yuan token into the incentive layer of its associated protocols.
- Associated protocols will likely include a AMM and lending protocols, which detailed proposals are to be determined by the future governance.
- On-going incentives and shared liquidity pool, many so-call fair-launch projects, turning off their incentives too early too soon, we believe this is fatal to the sustainability of the network. For Yuan, any protocol proposes to integrate Yuan and provide incentive, the community can determine to extend Yuan’s liquidity rewards to such integrated platforms. Yuan has a 4-year on-going distribution initiative in place to bankroll community engagement.
- Other monetary primitives to be built are subject to Yuan governance.
So, this is not just a simple rebase elastic token, where its supply is controlled by pre-determined peg rate and rebase rules, but we embed other financial activities into the equation, trading and lending, replicating the basic traditional financial infrastructure.
The trading and lending protocols will provide external demand liquidity into the elastic monetary supply, i.e., trading fee to purchase Yuan for distributing to LPs and equity reserve in lending protocol to be used to purchase Yuan for distributing to lenders/borrowers.
There are so much more dynamic and unpredictable financial incentives and demand/supply given many of the circular factors involve, we can’t foresee how all these interacting with each other and what is the end game for the experiment.
At the end of the day, everything is changeable through on-chain governance, you can even change it to peg to the price of a kilogram of dumplings.
Mechanism of Elastic Yuan
If you have very limited knowledge about elastic token, you better Google before diving into the following. In short, it basically is a token design that expand or contract the token supply to anchor the token to a target price, the process is called Rebase. Holder of the elastic token won’t be diluted due to rebase, because their token ownership will be changed on a pro-rata basis (assuming no extra tax introduced on the rebase).
Yuan is an elastic token tracking the Chinese Yuan’s USD exchange rate, unlike other USD elastic tokens, there is no on-chain Chinese Yuan exchange rate to anchor, hence we propose the following design:
1. To introduce Chinese Yuan exchange rate oracle, facilitated by oracle feeds from anonymous sources; there is certain centralization risk at the stage, but the oracle is totally upgradeable subject to on-chain governance, the community can always decide when and how to upgrade it.
2. Establish and incentivize the USDx/Yuan rebase pair liquidity pool on Uniswap V2
3. Rebase every 12 hours, if the exchange rate of (Yuan/USDx-CNY/USD)/CNY/USD) rate deviate more than ±5%, a rebase will kick in, anyone can trigger the rebase functionality
i.e. We use Yuan/USDx pairs on Uniswap V2 as the rebase pair, the rebase will happen if Yuan/USDx rate is ±5% deviate from CNY/USD price, and two scenarios, if
(a) If the deviation between Yuan/USDx and CNY/USD <5%, the total Yuan outstanding shall contract by an amount equal to the difference
(b) If the deviation between Yuan/USDx and CNY/USD >5%, the total Yuan outstanding shall expand by an amount equal to the difference.
4. Rebase will expand or contract Yuan’s monetary supply by the amount of difference between the above exchange rate, after the rebase, every account will be adjusted on a pro rata basis with the new rebase outstanding.
5. For each supply expansion, 10% of the expansion will be used to purchase USDx and deposit into Treasury account, the purchase will be carried out in several batches to minimize price impact. The Treasury usage will be subject to on-chain governance. (i.e. to fund future development, audit, marketing, ecosystem or incentive for associated protocols etc)
6. 10% of Yuan will be reserved for ecosystem bootstrapping.
7. 1,000,000 Yuan will be reserved for on-going liquidity incentives.
Why We Choose to pair against USDx
First, we need a USD stablecoin that can really hard peg to USD dollar (minimal peg divergence to minimize the rebase impact), so this basically rules out all over-collateralized stablecoins, like DAI, sUSD etc; at the same time, we avoid USD regulated stablecoins due to their vulnerability to regulatory capture (like USDT, USDC etc), USDx cuts in the middle and looks like a reasonable trade-off and if there are other better candidates, the governance can always make changes.
Yuan Distribution
The total supply of Yuan is 3,600,000 (this figure is subject to changes driven by rebase), of which are distributed as according to the following allocations:
• Initial Distribution: 2,240,000 Yuan
Typical liquidity pool distribution to bootstrap initial Yuan liquidity and achieve its broad distribution
• On-going Distribution: 1,000,000 Yuan (yet to be minted)
The distribution will be carried out over four years, to incentivize Yuan’s liquidity and exchange rate pegging and adoption, initial incentivized pools include USDx/Yuan, Yuan/ETH
New liquidity pools can be added subject to governance, preferable for projects willing to provide their own token for liquidity rewards (aka dual mining)
• Ecosystem Pool: 360,000 Yuan (yet to be minted)
This pool is for incentivizing collaboration with different protocols, including developing/co-developing associated protocol. Its distribution is subject to future governance.
The rebase will kick start once we reach 95% initial distribution.
Initial Distribution Pools
• The Ancestors - 2,000,000 Yuan
Distribution will follow a halving schedule on daily basis:
o XIA
USDx/USDC - 600,000 Yuan
o SHANG
USDx-Yuan - 1,200,000 Yuan
o ZHOU
ETH-Yuan - 200,000 Yuan
The following distribution will follow a 12-day linear schedule:
• QIN (Great Unification) - 80,000 Yuan
USDC/ETH - 20,000 Yuan
USDT/ETH – 20,000 Yuan
DAI/ETH – 20,000 Yuan
USDx/ETH – 20,000 Yuan
• HAN (The Civilization) - 40,000 Yuan
YAM/ETH 20,000 Yuan
AMPL/ETH 20,000 Yuan
- TANG (The Opening) - 120,000 Yuan
UNI/ETH 20,000 Yuan
YFI/ETH 20,000 Yuan
DF/ETH 20,000 Yuan
YFII/ETH 20,000 Yuan
LINK/ETH 20,000 Yuan
BAND/ETH 20,000 Yuan
The Great Expectations (Ongoing Distribution) - 1,000,000 Yuan
Please be noted that all the number in the distribution are the original un-rebased number, actual number of distributions will be subject to scaling factor.
The first-year distribution with the following schedule:
The first-year distribution will start on the 9th day after the initial distribution, with a total of 400,000 Yuan distributed to the following pool over the first year:
• 70%: Yuan/USDx pool for 280,000 Yuan
• 30% Yuan/ETH pool for 120,000 Yuan
On-going distribution beyond the first year, addition/adjustment of current/future pools and their respective weighting are subject to governance.
Tokeneconomics for associated protocols
There will be unlimited addition of associated protocols in the future, of which the two most imminent ones are AMM and lending protocols. We don’t intend to build all protocols ourselves, but seek to collaborate with other communities for co-developing/co-governing associated protocols.
The basic principle is that, if the associated protocol, such as a Uniswap type AMM which requires minimal governance, we intend to build ourselves, but for protocol such as lending protocol, which is more complex to manage and govern, we prefer co-developing with tokeneoconics designed that split between the collaborated platforms.
The incentive pools for associated protocols are subject to governance.
Governance Structure
• Yuan Primitive Governance
Yuan, all parameter with regarding to design, distribution, tokeneoconimcs are subject to Yuan governance, this will be carried out on one-Yuan-one-vote manner, so whatever changes in the future will be subject to yuan governance itself.
• Associated Protocol Governance
For minimal governance protocol, such as Uniswap type of AMM, the governance will be subject to Yuan’s governance.
For more complex protocol, as such lending, which requires heavy off-chain inputs (risk parameter setting, collateral evaluation etc) and collaboration, we prefer a co-governance structure, where the collaborated parties co-govern the protocols with aligned interests.
Other Details
• Website: https://1yuan.finance
• Token Address: 0x4A3e164684812DfB684AC36457E7fA805087c68E
• GitHub: https://github.com/yuan-finance/yuan
• Twitter: https://twitter.com/1YuanFinance
• Medium: https://medium.com/@yuanfinance
• Telegram：https://t.me/YuanFinance
• Telegram (Chinese)：https://t.me/YuanFinanceCN
Initial Protocol Parameters：
- Initial Distribution start time: UTC 03:00am, 5 November, 2020
- Total Supply: 3,600,000 Yuan (Note: this and all other Yuan figures are subject to change via rebase)
- Rebase Period: Every 12 hours (2am UTC, 2pm UTC) - initial rebase to occur roughly 9 days (around 14 November, 2020) after the start of the initial distribution
- Portion of Rebase Used for Reserve: 10%
- Asset Contributed to Reserve on Rebase: USDx
- Yuan Threshold to Submit Governance Proposal: ≥1% of Total Outstanding Supply
- Yuan Threshold for a Valid Proposal: ≥4% of Total Outstanding Supply in Support
- Yuan Threshold for an Executable Vote: >50% of Participated Yuan in Favor of the Proposal
- Proposal Voting Period: 48 hours
- Queue after Successful Proposal: 12 hours
