Float Protocol
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FLOAT is a stablecoin that tracks a basket of crypto assets instead of trying to exactly match the price of a dollar.
How FLOAT Work
- Unlike most stablecoins, whilst FLOAT is designed to be stable and have significantly lower volatility than most cryptocurrencies, it is not designed to hold its price at $1.00. Instead, it is designed to float and change value over time.
- FLOAT is stabilised through frequent auctions to expand or contract the supply. It is also partly supported by a Basket of cryptocurrencies that are used as part of the auction process.
- FLOAT is also supported by a second token, BANK. This token serves three purposes: first to take the profit created in times of excess demand for FLOAT, second to support the price of FLOAT from time to time and third to govern the Float protocol.
- Float protocol will have a Democratic Launch with an initial BANK issuance that is designed to achieve wide distribution across different crypto communities and to incentivise ownership by users who are active participants in other decentralised protocols.
FLOAT Fundamentals
It aims to have low short term volatility, allowing it to be practically used as a unit of account (for comparison's sake alone, bitcoin's volatility famously made even buying a pizza meme-worthy). However, over the long term FLOAT's value should change according to its own demand and the demand for the underline cryptocurrencies in its “Basket”. As such, FLOAT's value should gradually change as crypto is more or less valuable and, as a result, protect the purchasing power of users in the long-run.
Is FLOAT backed by anything?
- Fundamentally, you cannot exchange FLOAT for any underlying collateral. However, the Protocol has a fund to stabilise the price of FLOAT when it is volatile. This fund is called the ‘Basket' and contains an approved set of cryptocurrencies.
- To grow the Basket is simple. When arbitrageurs buy FLOAT from the protocol during auctions, they have to pay for it with one of the approved cryptocurrencies. Once stored in the Basket, they are used at a later date to support the price of FLOAT if it is ever below its target price.
- Initially in V1 of Float Protocol, the Basket will only contain ETH, with more able to be added by a governance vote.