Unlike first generation algorithmic stablecoins with no collateralized assets, Standard Protocol provides an algorithmic stablecoin and an index of digital assets within its vault. When the price of these assets within the Standard Protocol ecosystem increases, the token price will also appreciate. New tokens are then issued and distributed to the seigniorage pool, in order to maintain the peg of 1 USD. When the price of assets within the Standard Protocol ecosystem decreases, the token price will go down and the bank (vault) will issue bonds to remove tokens from the circulating supply and stabilize the price at 1 USD.
The current algorithmic stablecoin faces three problems:
Current algorithmic stablecoins focus only on automated price stability. Although they provide some interoperability between tokens with initial distribution via yield farming, there is still no sustainable way for them to interoperate in financial activities without the unsustainable level of token issuance distributed to staking pools.
There is no reward system for oracle providers currently, and the current solutions are either controlled by validators or by the companies themselves. One can be dependent on DEXes, but they are prone to flash swaps and generating unwanted arbitrage data when compared to centralized exchanges. In order to provide aggregated and balanced data, oracle providers must be rewarded in a decentralized manner. Standard Protocol proposes a reward mechanism in each era and slashes equivocation with the IQR rule.
Liquidation auctions are hard to track and participate in, and thus only experienced traders can benefit from them. A more decentralized method to liquidate positions must be considered. Auction orders come in high volumes of collateral, which can lead to plutocracy.
Standard tries to solve these problems with these solutions.
Ampleforth (AMPL) uses elastic supply to rebase its total supply of tokens. Standard rebases its stablecoin supply in each era, and utilizes overcollaterization to mint its stablecoin, Meter (MTR).
Standard (STND) automatically rebases the collateralized stablecoin, in the manner of an algorithmic reserve bank with decentralized governance for STND holders. By rebasing the price in each era, the total supply of the stablecoin Meter (MTR) and the amount that can be issued are adjusted to peg Meter (MTR) to the value of USD.
Meter(MTR) supplies are measured in each rebase and adjusted with the medianized price from oracles.
Oracle clients from various sources (e.g. Binance, Coinbase, HydraDX, etc) can provide aggregated price information so that the price cannot be manipulated by a single entity.
Standard Protocol builds an oracle module to share block rewards with oracle providers. Substrate enables developers to split block rewards to other network participants in every era. Block rewards to oracle providers maintain an 8:2 ratio between validators and the providers in an era. Oracles are used for generating synthetic assets from the stablecoin Meter (MTR). Standard Protocol treats oracles like validators for operating across the wide scope of the DeFi ecosystem.
Instead of hosting an auction for liquidating collateral, Standard Protocol deposits liquidated collateral to its AMM pair so that Meter(MTR) holders can purchase other liquidated digital assets. Standard protocol uses a built-in AMM module to provide liquidation in a more market efficient way where liquidated assets are utilized to conduct arbitrage trades.
Standard Protocol rewards stakeholders who find expired loans by giving them a percentage (10% or more) of the collateral. The rest of it goes to Standard Protocol's built-in DEX to provide arbitrage opportunities to stakeholders who use the exchange.
Algorithmically stabilized by rebasing and standard system, Standard protocol provides cash which can act as base of price. For speculating a digital asset x, standard cash can be used to estimate how much worth is the asset with the price pegged to USD.
Standard protocol is a omni-stablecoin protocol across blockchains as a form of smart contracts in each network and one blockchain hub.