A follow-up on the smart contract
In today’s post, we’ll be covering:
-DONs in Stablecoin (algo-stable)
-The role of DONs in the algorithmic stablecoin
- How DONs achieve the Oracle function for stablecoin
* DONs in Algorithmic stablecoin
As we said in our previous post that Decentralized oracle nodes aim to offer oracle resources with strong confidentiality, integrity, and accountability
With the DONs application, developers can create efficient off-chain data for their smart contract
Decentralized oracle nodes aid the functionality of how algorithmic stablecoin operates, it's one of the backbones that set the path straight for algo-stable.
These DONs serve as a main source of trusted feeds to the algo-stable smart contract
* The role of DONs in algo-stable
Before looking at how DONs help in scaling the functionality of some stablecoin
Let's look at the meaning of algorithmic stablecoin and how they work;
Algorithmic stablecoin comes in handy when looking at the classification of the stablecoin. They operate in a non-collaterized form i.e not backed by anything.
They appear to show forth a completely new variant of cryptocurrency tailored for offering improved price stability.
One outstanding factor about them is that they help in balancing the supply & demand of the asset in circulation and at the same time considerably come with an improved capital efficiency in comparison to collateralized stablecoins.
The algorithm/protocol backing up this stablecoin work as a 'central bank'- it helps in increasing the supply in event of a deflationary tendency of the token or reducing the supply in event of a decline in purchasing power of the stablecoin.
The rules for such actions by the algorithm are available in the smart contracts- which also set the rule for balancing the supply and demand of the token.
To enable the smart contract source for data off-chain- which triggers the value of the rebase contract at a gap of every 24 hours, whose main function is to determine the ideal choice before contracting or expanding the supply; a trusted oracle like DONs will be needed to be able to carry out the highlighted function effectively
* How DONs achieve the Oracle function for algo-stables
Algorithmic stablecoins like #Frax, #DefiDollar_DAO, and Sahara_DAO use chainlink DONs to fetch in some data feed to achieve the following functions for the secured minting of algo-stable by:
i. Liquidating a position
ii. Adjusting bonding curves
iii. Re-calibrating the incentives mechanism
DONs can achieve each of the above-highlighted functions through the below simple process
- First Data is pulled from centralized and decentralized exchanges like @Binance, @coinbase, @Uniswap, @shushiswap
- Which is then received by the chainlink network nodes and aggregated, then it's delivered as on-chain price feeds
- Afterwards, it's taken by the bonding curve before it is actualized by the algorithm itself
So with decentralized oracle nodes, an algorithmic stablecoin is achieve peg stability and also increases the usability of the stablecoin.
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