PDO has dropped below $1 for the first time
Some of you may be thinking, ‘Pollo Basic Income has been around for less than a month.’ As an algorithmic stablecoin, PDO is expected to dip below $1 at certain times. And the sooner it does, the sooner it will return to the $1 level.
We have written a brief explanation of the mechanics involved, for those of you who have never experienced an algorithmic stablecoin going below $1 and a subsequent recovery.
A brief recap
If the TWAP of PDO remains below $1.00, no PDO will be distributed in the Boardroom even if the epoch count reaches 0. Simultaneously, you will be able to buy bonds.
Once again, let’s go over the essential knowledge about the role of Bonds(bPDO).
- If the PDO price is higher than $1.01…PDO will be distributed in the Boardroom.
- If the PDO price is below $1.01… PDO will not be distributed and the ban on buying bonds will be lifted.
When the PDO is expanded, the maximum supply is always multiplied.
In other words, when the PDO maximum supply is 100,000 and the multiplier is 4.5% (*1.045), 4,500 PDOs will be minted per epoch.
Bonds can only be purchased with PDO; upon purchase of a bond, the PDO is burned and the PDO maximum supply is reduced. This means that the PDO will increase slower in the next expansion.
Tip: The maximum bond issuance is 3% of the maximum PDO Supply (per epoch).
This cycle of expansion and contraction phases is what a healthy algorithmic stablecoin should look like.
If you think algorithmic stablecoins should continue to expand, or theBoardroom should continue to distribute coins without a single epoch of interruption, you are fundamentally mistaken, and I want to emphasize that.
Motivation to buy bonds
If participants do not have an incentive to buy bonds, they will not be able to sell them and the PDO may not be able to return to $1.
bPDO provides a discount of up to 30%. The lower the TWAP price of PDO, the greater the benefit. The following is an example.
If you are trying to buy a bond for $0.9
Discount amount: 1 + (((1 / 0.9) — 1) * 0.3) = 1.03…
In other words, you will receive about 1.03 times the bPDO for the PDO you sent.
If you try to buy bond for $0.4
Discount amount: 1 + (((1 / 0.4) — 1) * 0.3) = 1.45
Since 1.45 is more than the maxRate of 1.3, you will receive 1.3 times the bPDO for the PDO you sent.
However, looking at the situation of DeFi, there is a limit to this benefit alone. With new services popping up every day, it’s no wonder that people are directing their money to places with higher investment efficiency rather than buying bonds.
Some projects have tried to counter this by implementing farming with bonds.
So, what about Pollo?
Pollo is much more than an algorithmic stablecoin. The following initiatives have already been confirmed thus far:
- Pollo Vaults
- Pollo Jackpot
- Pollo Revenue sharing
If you wish that you had launched before PDO fell below $1, I understand how you feel, but you are wrong. Again, if it doesn’t go below $1 from time to time, Pollo Basic Income will go bankrupt.
Of course, Pollo is not going to “never come back” here, PDO will always return to $1.
And once PDO has recovered, the distributions in the Boardroom will resume.
A brief look at the data
Have you ever looked at the Regulation History? If not, please take a closer look.
Pollo Basic Income minted 23,000 PDOs in Epoch 57.
If PDO minting were to resume in Epoch 59, 23,000 PDO would be minted, which is a 3% increase in PDO over 784,153. To be frank, it’s not a huge amount, and Pollo Basic Income is running perfectly fine and healthy.
Reflecting on the current situation, we can conclude that going below $1 did not have significant adverse effects.
We know that some of you are anxiously awaiting Vaults and Jackpots and are eager for more information to be released. We will work hard to provide you with regular updates. Thank you for your trust and patience.