Dollar-pegged stablecoins have become an essential part of crypto due to their lack of volatility as compared to tokens such as Bitcoin and Ether. Users are comfortable with transacting using stablecoins knowing that they hold the same amount of purchasing power today vs. tomorrow. But this is a fallacy. The dollar is controlled by the US government and the Federal Reserve. This means a depreciation of dollar also means a depreciation of these stablecoins. Sierra aims to solve this by creating a non-pegged stablecoin called SRA. By focusing on supply growth rather than price appreciation, Sierra hopes that SRA can function as a currency that is able to hold its purchasing power regardless of market volatility.
No, SRA is not a stablecoin. Rather, SRA aspires to become an algorithmic reserve currency backed by other decentralized assets. Similar to the idea of the gold standard, SRA provides free-floating value its users can always fall back on, simply because of the fractional treasury reserves SRA draws its intrinsic value from.
Each SRA is backed by 1 MIM, not pegged to it. Because the treasury backs every SRA with at least 1 MIM, the protocol would buy back and burn SRA when it trades below 1 MIM. This has the effect of pushing SRA's price back up to 1 MIM. SRA could always trade above 1 MIM because there is no upper limit imposed by the protocol. Think pegged == 1, while backed >= 1. You might say that the SRA floor price or intrinsic value is 1 MIM. We believe that the actual price will always be 1 MIM + premium, but in the end that is up to the market to decide.
At a high level, Sierra consists of its protocol managed treasury, protocol owned liquidity, bond mechanism (minting), and high staking rewards that are designed to control supply expansion.Bonding in the "Mint" page generates profit for the protocol, and the treasury uses the profit to mint SRA and distributes them to stakers. With LP bond, the protocol is able to accumulate liquidity to ensure the system stability.
- Minting (Bonding)
Staking and minting are considered beneficiary to the protocol, while selling is considered detrimental. Staking and selling will also cause a price move, while bonding (minting) does not (we consider buying SRA from the market as a prerequisite of staking, thus causing a price move). If both actions are beneficiary, the actor who moves price also gets half of the benefit (+🚠). If both actions are contradictory, the bad actor who moves price gets half of the benefit (+🚠), while the good actor who moves price gets half of the downside (Ⅹ). If both actions are detrimental, which implies both actors are selling, they both get the worst possible outcome (❌)!
- If we both stake (🏔, 🏔), it is the best thing for both of us and the protocol
- If one of us stakes and the other one bonds, it is also great because staking takes SRA off the market and puts it into the protocol, while bonding provides liquidity and MIM for the treasury!
- When one of us sells, it diminishes the effort of the other one who stakes or bonds.
- When we both sell, it creates the worst outcome for both of us and the protocol (❌, ❌)
As the protocol controls the funds in its treasury, SRA can only be minted or burned by the protocol. This also guarantees that the protocol can always back 1 SRA with 1 MIM. You can easily define the risk of your investment because you can be confident that the protocol will indefinitely buy SRA below 1 MIM with the treasury assets until no one is left to sell. You can't trust the FED but you can trust the code. As the protocol accumulates more PCV, more runway is guaranteed for the stakers. This means the stakers can be confident that the current staking APY can be sustained for a longer-term because more funds are available in the treasury.
It is extremely important to understand how early in development the Sierra protocol is. A large amount of discussion has centered around the current price and expected a stable value moving forward. The reality is that these characteristics are not yet determined. The network is currently tuned for expansion of SRA supply, which when paired with the staking, minting, and yield mechanics of Sierra, result in a fair amount of volatility.SRA could trade at a very high price because the market is ready to pay a hefty premium to capture a percentage of the current market capitalization. However, the price of SRA could also drop to a large degree if the market sentiment turns bearish. We would expect significant price volatility during our growth phase so please do your own research whether this project suits your goals.
When you buy and stake SRA, you capture a percentage of the supply (market cap) which will remain close to a constant. This is because your staked SRA balance also increases along with the circulating supply. The implication is that if you buy SRA when the market cap is low, you would be capturing a larger percentage of the market cap.
Rebase is a mechanism by which your staked SRA balance increases automatically. When new SRA are minted by the protocol, a large portion of it goes to the stakers. Because stakers only see staked SRA balance instead of SRA the protocol utilizes the rebase mechanism to increase the staked SRA balance so that 1 staked SRA (PEAK) is always redeemable for 1 SRA.
Reward yield is the percentage by which your staked SRA balance increases on the next epoch. It is also known as rebase rate. You can find this number on the Sierra staking page.
APY stands for annual percentage yield. It measures the real rate of return on your principal by taking into account the effect of compounding interest. In the case of Sierra, your staked SRA represents your principal, and the compound interest is added periodically on every epoch (8 hours) thanks to the rebase mechanism.One interesting fact about APY is that your balance will grow not linearly but exponentially over time! Assuming a daily compound interest of 2%, if you start with a balance of 1 SRA on day 1, after a year, your balance will grow to about 1377.
As illustrated above, your SRA balance will grow exponentially over time thanks to the power of compounding. Let's say you buy one SRA for $400 now and the market decides that in 1 year's time, the intrinsic value of SRA will be $2. Assuming a daily compound interest rate of 2%, your balance would grow to about 1377 SRA by the end of the year, which is worth around $2754. That is a cool $2354 profit! By now, you should understand that you are paying a premium for SRA now in exchange for a long-term benefit. Thus, you should have a long time horizon to allow your SRA balance to grow exponentially and make this a worthwhile investment.
There is no clear answer for this, but the intrinsic value can be determined by treasury performance. For example, if the treasury could guarantee to back every SRA with 100 MIM, the intrinsic value will be 100 MIM. It can also be decided by the future DAO. For example, if the DAO decides to raise the price floor of SRA, its intrinsic value will rise accordingly.
Let’s say the protocol targets an APY of 100,000%. This would translate to a rebase rate of about 0.6328%, or a daily growth of about 2%. Please refer to the equation above to learn how APY is calculated from the rebase rate.If there are 100,000 SRA tokens staked right now, the protocol would need to mint an additional 2000 SRA to achieve this daily growth. This is achievable if the protocol can bring in at least 2000 MIM daily from bond sales. If the protocol fails to achieve this, the APY of 100,000% cannot be guaranteed.
No. Once you have staked SRA with Sierra, your staked SRA (PEAK) balance will auto-compound on every epoch. That increase in balance represents your rebase rewards.
You can track your rebase rewards by calculating the increase in your staked SRA balance.1. Record down the Current Index value on the staking page when you first stake your SRA. Let's call this the Start Index.2. After staking for some time, if you want to determine by how much your balance has increased, check the Current Index value again. Let's call this the End Index.3. By dividing the End Index by Start Index, you would get the ratio by which your staked SRA balance has increased.ratio = endIndex / startIndexratio=endIndex/startIndex
Sierra is currently unaudited! It is a hybrid fork of Olympus DAO/Wonderland on the avalanche Network, audits will occur at a later stage. Stay cautious!
Here at Sierra we believe that minting better describes the action that users are taking, when purchasing SRA with different assets. If you go to the "Mint" page of the website, you will be able to mint SRA tokens, effectively selling your assets for discounted SRA tokens. Depsite the name difference, the process is exactly the same as a Bond Purchase on Olympus DAO!