Cryptocurrencies

[DéFi] Focus on the LIEN protocol and its iDOL stablecoin – Cryptocurrencies

Decentralized Finance, two words that are on the lips of the crypto community. Not a day goes by that a revolutionary new project emerges causing the associated token price to soar. In this real jungle that the Défi has become, it is sometimes more and more difficult to differentiate between purely speculative hollow projects and those providing real added value.

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With the LIEN project, it would seem that we are indeed in the presence of a project belonging to the second category. It must be said that the project is multi-faceted. Indeed there are three interconnected projects. In Brief LINK aims to issue a stablecoin named “iDol” a stablecoin based on a new kind of protocol that will be detailed later. LIEN also offers the possibility of issuing “LBT”, derivative products based on the evolution of the price of Ethereum. Finally, the third part of the LIEN project is the establishment of a decentralized exchange called “Fairswap”, this last part will be the subject of a future dedicated article. Now that the stage is set, let’s get to the heart of the LINK subject together to better understand its inner workings!

I. Lien, an anonymous team, which brings us back to the beginnings of cryptocurrency

The project LINK present via his website no less than three white papers. And it must be said that these white papers are quite extensive in terms of the technical explanation detail they present. We thus have a white paper dedicated to the iDOL stablecoin, a white paper dedicated to decentralized exchange Fairswap and finally a white paper dedicated to the settings of the protocol and LINK token.

What is special about these white papers, apart from the fact that they are particularly well detailed, is that the editor (s) have remained anonymous. I apologize in advance for the pun that follows, but the only link that connects us to the members of the project is an email address: [email protected]. This way of proceeding in the crypto sphere is reminiscent of thebitcoin white drunk written under the pseudonym of “Satoshi Nakamoto” a mystery that has been the subject of all fabulations for years now and on which we have had the opportunity to write many articles on Thecointribune. This original example thus shows that anonymity or in any case at least pseudonymity is a recipe that works in the crypto world.

Although the team does not disclose the names of its members on its website or on its social networks, we have been able to learn a little more about their experience. The members of the LIEN team thus present themselves as a group of engineers, traders, researchers and strategists who have worked in several large companies in the crypto sector.

The history of the project LINK is also fairly recent in the sense that the origins of the project go back no further than the beginning of the year. At that time, however, the DeFi sector had not exploded in the way we have seen since this summer. With the LIEN project, the team made up of members with a background in the world of classical finance were therefore keen to bring new added value to the sector by offering a more efficient protocol than what they could observe on the market.. The idea of LINK It then seemed obvious to them and following a battery of Backtesting type tests which enabled them to validate their protocol, the project was thus on track.

II. What ambitions for the LIEN project and its iDOL stablecoin?

The main objective and ambition of the LIEN project is to issue a stablecoin which does not require a significant collateralization ratio to be incurred and which does not require intervention in the governance of the project in order to maintain the stable price of a stablecoin. The named stablecoin “IDOL” proposed by the project LINK thus aims to become the benchmark stablecoin in the nascent decentralized finance market. In the white paper dedicated to the stablecoin project “IDOL” we find in particular a critical comparison with the stablecoins of the existing decentralized finance sector. The main stablecoin targeted by the LIEN teams and the DAI stablecoin which is part of the MAKERDAO project, one of the pioneers in the DeFi sector.

In short, DAI is thus criticized in the sense that its emission requires a very high level of collateralization. Currently this ratio is 150%, i.e. 100 DAI issued on the market must be backed by 150 dollars of value in Ethers. The problem with these collateralisation ratios is that the course of Ether is volatile and that if the price begins to fall and endangers the ratio of 150%, part of the DAI issued are destroyed in order to maintain the correct ratio as well as the stability of the DAI against the US dollar.

On the other hand, the second level of criticism of the MakerDAO Stable Corner DAI Link project focuses on the sensitive issue of governance. In fact, the DAI protocol uses “stability fees” to adjust the price of DAI and thus maintain its stability. The issue raised in the white paper LINK is that these stability charges are adjusted by the members of the project Maker directly. The stabilization of the DAI therefore uses human intervention and is not fully automated in the protocol.

How does the iDOL transmission protocol work through SBT and LBT?

Let us now enter a slightly more technical part in order to understand what is the response of the LIEN project to the problems presented by the stablecoin DAI. Namely, avoiding the need for over-collateralization as well as the need for manual intervention by the project governance to maintain the price of stablecoin.

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The protocol LINK is based on the issuance of two tokens, on one side we find the tokens SBT for “Solid” Bond Token ” and on the other side we find the tokens LBT for “Liquid Bond Token”. These tokens both have a due date fixed in time and a market price. When you hire Ethers in the LIEN protocol, you get a token issue SBT and LBT with a ratio of 1 to 1. On the one hand the token SBT is intended to remain stable over time with respect to the dollar rate. On the other hand, LBT is a derivative product based on the evolution of the price of Ether. In other words, lLBT token holders hedge the risk in the market while SBT token holders take virtually no risk and keep a token whose value is intended to remain stable.

Nothing like an example to better understand how the protocol works LINK.

Imagine that Emma decides to deposit 1 Ether in the LINK protocol, the protocol then sends 1 SBT and 1 LBT. If the course of Ether is $ 200 at the moment, the market price of SBT and LBT will be $ 100 each. If at the expiration date of the SBT and LBT tokens the price of Ethereum is $ 400 then the token holder SBT, which has remained stable with respect to its issue date, receives 100 dollars of value in Ethers, i.e. 0.25 Ethers. And at the same time the holders of tokens LBT receives 300 dollars of values ​​in Ethers or 0.75 Ethers. In the opposite scenario if on the token expiry date the price of Ether has fallen to 100 dollars, then the holder of SBT still receives 100 dollars worth of Ether here 1 Ether and the LBT token holder receives nothing, we can understand from this example how the holder of LBT tokens insures the risk for the holder of the SBT token and thus makes it possible to guarantee the stability over time of the value of SBT tokens in relation to the rate of the US dollar.

The diagrams below are taken from the white paper presented by the LIEN project teams and provide a visual understanding of how the different SBT and LBT tokens are interconnected and how the protocol based on these two types of tokens from a split in the value of an Ether makes it possible to issue a stable coin called “iDOL” that does not require over-collateralisation or intervention at the level of project governance.

Thus, we observe that at the outset anyone withEthers on his wallet can integrate them into the protocol LINK. He thus obtains tokens SBT and LBT. Tokens SBT can be sold to users who want to have stablecoins iDOL in exchange for a deposit of tokens SBT. On the other hand, investors with an objective of speculating on the price of Ether assumes the risk of a fall in the price or will benefit from a possible capital gain linked to the increase in the price of theEther in time. These users exchange tokens LBT.

Diagram showing the split of an Ether between a stable SBT token and a volatile token the LBT
Diagram showing the split of an Ether between a stable SBT token and a volatile token the LBT

Again in the illustration above, we can clearly see how the split between the tokens is carried out SBT and LBT compared to the change in the value of Ether in comparison with that of the US dollar.

The project team LINK remains anonymous but the demonstrations carried out in the white papers as well as the quality of the assemblies necessary for the realization of the protocol LINK do not allow us to doubt that we have to do with a serious project which has the ambition to make a real contribution to the building of the decentralized finance sector.

Conclusion: a project full of promise that does not lack resources!

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The broadcast of iDOL stablecoin is thus an additional step for the sector, it brings concepts based on established and tested financial theories. Of course, the project will have to win over the community, but for the moment it looks good. Indeed even before the launch of the Fairswap exchange which will list the LIN token, the latter ended up on the decentralized exchange Uniswap, which took LIEN members by surprise even if they recognize that this is in line with decentralized projects like theirs with complete freedom of action for stakeholders in the markets.

If this article made it possible to achieve a first approach to help us better integrate the functioning of the iDOL stable coin project of LIEN with the two underlying SBT and LBT tokens, we will come back to discuss the LINK subject again on Thecointribune in order to discuss the subject of the LIEN token itself as well as the decentralized exchange project Fairswap. One thing is certain, the members of the LIEN team did not go out of hand to shake up the world of Challenge a little!

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