Empty Set Dollar Newsletter

1/3/21 - 1/10/21

Jan 11, 2021

Introduction

Hey there Empty Set Dollar community! This is the first of what will be weekly newsletters, released every Sunday. The goal is to have one place where people can catch up on all things ESD: governance changes, integrations, status of the peg, community member supported posts, announcements, and more. Typically, we’ll start right off with the week in review but since this is our first newsletter it’s probably best to start off with some history.

History of ESD

Empty Set Dollar is a decentralized, algorithmic, stable coin, that was started by an anonymous dev team. It began with the goal of becoming the premier stable coin for the DeFi space and has seen a meteoric rise. See the original medium post here. To summarize the medium post: low volatility tokens whose purpose is to represent a stable asset are an essential part of DeFi. Current stables miss the mark either by failing to be censorship resistant, others because of their protocol mechanic, still others because of their lack of composability.

Enter ESD: ESD is censorship resistant because it was developed by an anonymous team. This prevents regulatory bodies, or governmental agencies from really being able to pressure the protocol. With the STABLE Act potentially on the horizon in the USA, having a protocol that is free from government regulation is imperative.

The protocol forces the token back to the peg of $1 based on the time weighted average price (TWAP) over an epoch (measure of time). If ESD TWAP > 1, expansion rewards go to bonded ESD holders. That expansion (inflation) increases supply devaluing the token. If ESD TWAP < 1, contraction occurs and coupons are sold at a premium. The coupon premium value grows with each epoch that passes if the TWAP continues to stay below peg. When the premium is enticing enough token holders may burn ESD in exchange for coupons for future ESD. The risk: coupons expire after X epochs (currently 90 epoch expiry.) The reward: coupons are redeemed when TWAP >1 for enough epochs to clear debt through expansion. ESD has been through multiple debt and expansion cycles. Expansions and debt cycles have lasted weeks, and they’ve also only lasted days or hours. For more detail on the protocol click here.

From epoch 1, all changes have come from the community. Governance changes require a community member with 0.5% threshold amount propose a change, which then is discussed for 9 epochs, and voted on by bonded holders. (X can change by governance vote as well.) History of changes can be found here. A non-comprehensive list of changes: epoch length changed from 24 hours to 8 hours, the expansion rewards changed from a maximum of 10% to 3%, governance changes went from requiring a 1% threshold to a .5% threshold and a quorum from 50% to 33% of all tokens, the premium maximum and rate at which it grows changed multiple times. Critically for the purposes of this newsletter, EIP 10 created the ESD Treasury which funds projects for the advancement of ESD, examples: a communications team (who produced this newsletter), redesign of UI, documentation updates and improvement, Curve AMM Custom Interface, Governance coordination, integration assistance, V2, and more.

ESD has seen something of a meteoric rise and thus it simply wouldn’t be crypto if there weren’t any copy-pasta attempts. Copy pasta (DSD), lasagna (ZAI), pizza (BSD), and other italian delicacies show the elegance of the original design.

Week In Review

Community Call 1/8/21

ESD had its first community call where community members delivered updates on the state of the token. The agenda covered a full range of topics in the ESD ecosystem:

State of peg.
Governance updates.
Treasury Report
Community Projects
Integrations update
Project roadmaps
General community feedback, questions, and suggestions.

It is available to watch here. There are multiple different EIP’s in progress that would change the coupon mechanism which are currently being discussed on the Discord. Future calls will be hosted once every two weeks, on Friday’s, alternating between 10:00 am PST and 9:30pm PST. This should allow people around the globe to access the community calls at least once per month. The next community call is scheduled for January 22nd, at 9:30pm PST.

Update on V2

V2 was inspired by this article written by prominent members of the ESD community. This spurred a successful treasury proposal to create a team to further research and create the code needed to implement V2. The first milestone for that team is fast approaching as their design is to be presented to the community on January 18th. In the community call from 1/8/21, they let us know they are on track. It’s important to remember, whatever their conclusions, and however they hope to change the protocol, that change will have to be presented to the community, and voted on by bonded ESD holders.