Ducata - Solving the Stablecoin Trilemma?: What You Need to Know
New Take on Programmatic Money, DCM Presale, & More
The issue of stablecoin implementation has been pronounced and long-lasting, spanning the course of a decade with the debut of $USDT. In this time, the stablecoin space has seen ups and down, from depegs to concerns around full asset backing, and everything in between…
After a lot of trial and error, stablecoins have become one of the biggest use cases in crypto, even recently grabbing the attention of former US Speaker of the House Paul Ryan, who believes the digital asset class could even help to solve the US debt crisis. Stablecoins have even ushered in new demand and utilization’s for US treasuries, with some protocols keen to bring this yield onchain given the high rates relative to years prior. Of course, new models of stablecoins have also emerged, including Ethena, which explicitly uses CEXs for trading, with the funding rate being funneled to stablecoin users as a yield. We even recently covered Liquity’s new v2 design just the other day. Even MakerDAO recently announced the prospect of a ‘pure’ version of DAI, which could take up to several years to come to market.
Ultimately, a lot of these approaches take a stab at the classic issues presented with stablecoins in one way or another. DUCATA's Reflexivity Protocol, DUCA, produces a next-generation stablecoin: Programmatic Money. Programmatic Money, in this case $DUCA, is designed to maintain purchasing power and protect holders from inflation. While known stablecoins are inherently connected to the current financial system due to dollar-pegs and exogenous collateralization, the DUCA protocol is designed to be entirely autonomous, on-chain and provides a true alternative financial system with a stable value asset. The protocol's main token, $DUCA, strikes a balance between decentralization, stability, and capital efficiency, the three prongs of the stablecoin trilemma. This is seen as the holy grail by many in the stablecoin space, and quite an ambitious endeavor. In today’s edition, we’ll be briefing you on how Ducata and the DUCA protocol works, details around their upcoming presale, and more.
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Background on Ducata
Like many stablecoin protocols of past and present, Ducata aims to create a more fair financial future for individuals, seeing as fiat is more or less thrust upon every person of every nation, condemning them to the inherent issues of inflation, centralization, etc. Of course, those interested in crypto will likely know all about this.
Note that Ducata is not an algo-stable: it uses an “algorithmic approach to create a stable reference value onchain.” DUCATA's DUCA Protocol represents a paradigm shift from stablecoins to Programmatic Money, going beyond what is currently know as stablecoins, creating a crypto-native reference value fully on-chain via its reflexivity protocol. This means that the DUCA protocol stands entirely on its own, providing an alternative financial system, not connected to the current system. The protocol consists of 3 tokens: DUCA, DCM, and LPD, all operating with the intent of ‘solving’ the stablecoin trilemma as best as possible.
DUCA operates free of manual intervention; this is done with predefined rules that are applied as well as algorithmic float based on top major currencies, not simply USD. This removes some risk around having to maintain a specific peg, as instead the float is used to generate an ‘ideal’ price for DUCA. The adjustment process also remains entirely onchain, to reduce external influences, such as CEX risk, real-world asset risk, and more, which are present with some other stablecoin protocols.
In the past another interesting deployment that also looks to maintain value without relying on one form of fiat (predominantly USD) is Frax’s FPI, which aims to keep up with the Consumer Price Index (CPI). As mentioned above, Ducata uses a 3 token model and takes a very different approach from any major undertakings in the past. All holders of DUCA receive a yield, without having to stake. This yield is based on protocol performance and is ultimately derived from the other two supporting tokens in the ecosystem, DCM, and LPD which seek to balance each other out in an intentionally volatile manner. This is done through an AMO (Autonomous Market Operator), distinct from the AMOs used by Frax which are algorithmic.
DUCA gets its value from its supply and market dynamics, and isn’t bound to external assets, i.e. collateral. Its supply is maintained and adjusted by a standard mint and burn mechanism. However, the DUCA protocol does use endogenous collateral to address the risk presented in the form of the DCM token. DCM acts as a lender of last resort, though decentralized compared to the equivalent lender of last resort in traditional markets, i.e., the Federal Reserve or other central banks.
Supporting the Stable Protocol: DCM & LPD
DCM is the utility token of Ducata and the DUCA protocol. DCM serves as the primary basis of backing behind DUCA, with DUCA minted 1:1 with the DCM supply. The token is a rebasable ERC20, which is never burned. DCM and LPD are closely connected and via several known mechanisms the protocol can autonomously decide when it needs to rebase DCM, protecting the collateralization levels while at the same time creating demand from within the protocol itself via an extensive incentive structure. LPD and DCM basically work as a mini stock market, making it favourable to either swap to LPD or swap to DCM based on market dynamics. This mini stock market also adds to the DCM collected for DUCA Yield.
There are measures in place to ensure adequate over-collateralization of DUCA via DCM, as well as to guard a bottom value of DCM. The additional layers of support that exist beyond DCM also differentiate this utility token from others like FXS, MKR, etc.
Considering the DCM presale is currently live and in the interest of time, we'll focus more on DCM for now. DCM is the fuel of the protocol and is used for the minting of DUCA and generating LPD, it also forms the layers of endogenous collateral. The DCM that is held in the Stability Pool is provided by LPD holders and forms the second layer of endogenous collateral for DUCA, with the reserve forming the first.
In addition to DCM and LPD which are both capable of absorbing DUCA’s given market cap, a 3rd and final layer of 100% endogenous collateral backing exists, putting the total collateral value of the DUCA protocol at 300%. This final layer is the Decentralized Market Maker (DMM). The DMM is operated by the AMO to balance the protocol liquitiy pools.
Ducata Presale
Ducata has actually been in the works for some 6 years as of now and is currently in their presale stage. Note that Ducata’s presale is a more polished and professional venture; users will indeed have to register with name, email, etc., as opposed to a strictly onchain operation.
Those who engage with the presale earlier are rewarded as this process is broken down into 14 different stages, with each subsequent phase associated with a higher token price than the last. The protocol has notably completed 7 stages, now sitting beyond the halfway mark after debuting in late April. Stage 8 will see 150,000 DCM tokens sold for $135,135 ($0.90 per DCM), with the next stage bumping up to $0.95. Interested investors have 70% of the allocation in this stage to go before their entry price would be raised. The maximum supply of DCM is 3.75 billion, with issuance starting at 0 with a price-based distribution system post-launch starting at $7.25. Note that the total presale amount is 7M DCM ($4.1M in funding), with ~5.4M DCM being sold thus far.
Postlaunch plans include some interesting plans such as opening a DUCATA bank to link old and new money systems. When it comes to future expansion, the DUCA protocol will begin on Ethereum mainnet before expanding to other networks and reducing transaction costs.
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