Bean

<p>There simply aren’t enough stablecoins in DeFi to meet demand, which is reflected in high borrowing costs for stablecoins across lending platforms like Aave and Compound. Most stablecoins today are either issued by centralized entities (USDC, USDT, etc), have collateral requirements that limit the growth of their supply (DAI, MIM, FRAX, UST, etc), or both.</p><p>Enter <a href="https://bean.money/" rel="noopener noreferrer nofollow">Beanstalk</a>—a decentralized, Ethereum-native, credit-based stablecoin protocol that solves both of those problems and is working.</p><p></p><h3 id="strong-beanstalk-model-decentralized-governance-strong"><strong>Beanstalk Model: Decentralized Governance</strong></h3><p>Unlike USDC, USDT, etc., Beanstalk is uncensorable. Its price oracle, governance token, issuance schedule and DAO are all censorship-resistant by design. There was no pre-mine, pre-launch, or team allocation during the August 2021 deployment. In order to censor Beanstalk, Circle, for example, would have to blacklist the Uniswap liquidity pool for USDC:ETH, effectively destroying its value proposition—and Beanstalk could simply move to a different stablecoin liquidity pool as an oracle the following day.</p><p>Being permissionless means that anyone with an internet connection can participate. This should be a core feature of any stablecoin.</p><h3 id="strong-beanstalk-model-credit-based-and-capital-efficient-strong"><strong>Beanstalk Model: Credit-based and Capital Efficient</strong></h3><p>Beanstalk is able to maintain its dollar peg without collateral requirement via its decentralized credit facility known as the Field. Because Beanstalk doesn&#39;t have to back Beans with collateral, it can flexibly and reliably expand supply to meet an arbitrary amount of demand. We’ll talk about how this works in the next section.</p><h3 id="strong-beanstalk-model-price-stablility-strong"><strong>Beanstalk Model: Price Stablility</strong></h3><p>Many participants in DeFi have been burned in the past by failed attempts at algorithmic, uncollateralized stablecoins like Empty Set Dollar, Dynamic Set Dollar, and Basis Cash. The price of each of these stablecoins plummeted below their dollar pegs within a couple months of launch. Beanstalk was conceived with these previous attempts in mind and improves substantially upon them in the very areas where they were weakest. As of writing, the price of Bean has returned to its $1 peg over 4,200 times in its ~8 months of existence and has repaid $24M of debt.</p><p><img src="https://academy-public.coinmarketcap.com/optimized-uploads/1a76c92208de4d33ac648f509fb47f9f.png" /></p><h3 id=""></h3><h3 id="strong-how-it-works-strong"><strong>How it Works</strong></h3><p>The most important metric for Beanstalk is that 1 Bean stablecoin continues to be worth $1—after all, stable is in the name. Beanstalk maintains its peg by increasing and decreasing the supply of Beans in response to changes in demand. At a high level, when the price of Bean is below $1, Beanstalk incentivizes users to buy Beans off the market and lend them to the protocol, which it will then remove from the supply. When the price of Bean is above $1, Beanstalk will mint new Beans to bring the price back down to $1 and distribute those Beans to participants in the ecosystem.</p><p>There are two core components that are responsible for maintaining price stability outside of the price oracle: the Field and the Silo.</p><p></p><h3 id="strong-the-field-a-decentralized-credit-facility-strong"><strong>The Field: a decentralized credit facility</strong></h3><p>Beanstalk relies on a decentralized community of lenders to maintain Bean price stability. The faster Beanstalk can attract creditors, the more stable the price of Bean will be. Bean lending takes place in the Field.</p><ul><li>Anytime Beanstalk is willing to issue debt, Soil becomes available in the Field.</li><li>Soil represents the number of Beans that can be lent to Beanstalk.</li><li>Any Beans outside of the Silo can be lent to Beanstalk in exchange for Pods.</li></ul><p>Pods are the Beanstalk-native debt asset. They function as bonds with a fixed interest rate and an unknown maturity date.</p><ul><li>The number of Pods that grow from 1 Sown Bean is determined by the Weather — the Beanstalk-native interest rate — at the time of Sowing.</li><li>Pods become Harvestable (redeemable) for 1 Bean on a First In, First Out (FIFO) basis during Bean supply increases.</li></ul><p></p><h3 id="strong-the-silo-a-decentralized-governance-mechanism-strong"><strong>The Silo: a decentralized governance mechanism</strong></h3><p>Beanstalk uses the Silo, the Beanstalk DAO, to create a robust decentralized governance mechanism. Any owner of Beans can earn yield from passive participation in Beanstalk governance by Depositing assets in the Silo and receiving Stalk and Seeds.</p><p>Stalk is the Beanstalk-native governance token. Stalk holders collect a portion of Bean supply increases as interest and can submit and vote on Beanstalk Improvement Proposals.</p><p>The more Deposits and diversity of Stalk holders, the more decentralized the governance mechanism. To encourage long-term stickiness of Deposits and increase decentralization of Stalk ownership over time:</p><ul><li>Depositors receive new Stalk and Seeds at the time of Deposit.</li><li>Seeds yield new Stalk every Season.</li><li>The associated amount of Stalk and Seeds from a particular Deposit must be forfeited when the Deposit is Withdrawn from the Silo.</li></ul><p>Deep and consistent liquidity in the liquidity pools improves stability.</p><p></p><h3 id="strong-beanstalk-today-and-in-the-future-strong"><strong>Beanstalk Today and in the Future</strong></h3><p>Beanstalk’s credit mechanism has the potential to make it the dominant stablecoin issuer in DeFi because it’s scalable enough to meet arbitrary amounts of demand — collateralized stablecoins cannot. There is even research that suggests a decentralized stablecoin with mass adoption is <a href="https://www.biancoresearch.com/what-ends-cryptos-correlation-to-legacy-markets/" rel="noopener noreferrer nofollow">what would end crypto’s correlation to legacy markets</a>.</p><p>Stablecoin utility is a function of 1) censorship resistance, 2) liquidity, and 3) stability. Beanstalk has all 3 and each will strengthen over time. Beanstalk—</p><ol><li>is designed from first principles to be as censorship resistant as possible and strengthen  over time.</li><li>has $26M-worth of liquidity that is heavily incentivized to remain Deposited in the protocol-native Silo. When Stalk becomes liquid and tradable, the Silo will become even more of a black hole for liquidity because users will need Stalk to withdraw.</li><li>has crossed the price of Bean over its dollar peg more than 4,200 times since deployment on ETH mainnet in August 2021. Each time the price crosses the peg, the value proposition of arbitraging price deviations becomes higher, resulting in tighter oscillations.</li></ol><p>One of the most exciting things about Beanstalk today is that it’s actually working. After attempts like ESD and Basis Cash, many people in the crypto industry thought an ETH-native, fully uncollateralized stablecoin just wasn’t possible. But Beanstalk is proving that with the right incentives, it is. And the implications are significant.</p><p>The shortage of stablecoins is DeFi’s biggest obstacle to mass adoption. DeFi needs a solution that can scale, and deserves one that’s available to everyone. Beanstalk is both.</p><p>The vision behind Beanstalk is to create the world’s internet money, and it’s on the right track.</p><p>To learn more about Beanstalk:</p><ul><li><a href="bean.money" rel="noopener noreferrer nofollow">Beanstalk&#39;s Website</a></li><li><a href="https://discord.gg/beanstalk" rel="noopener noreferrer nofollow">Join the Discord</a></li><li><a href="https://beanmerchant.substack.com/p/beanstalk-vs-every-other-stablcoin?s&#61;r" rel="noopener noreferrer nofollow">Beanstalk vs. Every Other Stablecoin</a></li><li><a href="https://medium.com/beanstalkfarms/beanstalks-6-month-roadmap-e0ff77f3cea8" rel="noopener noreferrer nofollow">Beanstalk&#39;s 6 Month Roadmap</a></li><li><a href="https://mirror.xyz/astn.eth/w5336TYVkb-9eIlKxrCPKLoUNvYRgJmd6nB4Br5-Vs8" rel="noopener noreferrer nofollow">Zero to Beanstalk: A Comprehensive Guide</a></li><li><a href="https://twitter.com/JackNiewold/status/1504546656271929344" rel="noopener noreferrer nofollow">Tweet thread on Beanstalk</a></li></ul>

Meet Beanstalk, the decentralized stablecoin built to scale DeFi to TradFi proportions

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Beanstalk Farms

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