Beanstalk AMA Summary (10/29)
Quick Overview of the 10/21 community AMA
Publius, the anonymous team behind Beanstalk Protocol hosted their second community AMA this Friday. Below is a quick overview of the highlights for those who missed it live. If you want to listen to the full audio, link is here.
What is the the vision for Beanstalk?
$Bean is a decentralized stablecoin that is not backed by any collateral.
Instead, it's backed by credit on the Beanstalk Protocol which issues the $Bean token. This decentralized credit model is radical departure from the collateralized model in a protocol like MakerDAO.
Because of this, the ability for the Beanstalk protocol to attract credit is the main driver of stability and of utility.
Where is Beanstalk now?
Beanstalk's ability to attract loans over the last couple of weeks has been a testament to Beanstalk's resilience.
In September, Beanstalk went viral on crypto twitter and went from trading at a $1 to having 6-8M ETH come and pump the price to $4.
This capital then quickly left Beanstalk. Once the apes who pumped it realize they couldn't exploit Beanstalk for their personal gain, they immediately left.
This was a blessing in disguise. Beanstalk is resistant to the inorganic demand that broke ESD, DSD, or Basis Cash because they all couldn’t handle the fast growth on the upswing.
How does Beanstalk compare to OHM or MIM?
As per DeFi as usual, the space is moving at a lightning quick pace.
With regards to where Beanstalk fits into the overall ecosystem there's two separate angles.
First, in the long run, there's hopefully going to be non-USD currencies that are used throughout DeFi, throughout the whole blockchain world. Something like OHM is an attempt at that. Something like BTC or ETH could also fulfill that spot in the ecosystem. But the transition for the space to start to use an asset like that is a long one.
In the meantime, there is a major demand for USD on the blockchain. MIM is an example of an addition on top of the traditional MakerDAO model. The fact that MIM has started to be widely adopted is evidence for the huge demand for USD on the blockchain that is not being met. MIM is another source of supply for USD that can meet that demand. So looking at that, there's clearly excess demand for USD. And this is the fundamental problem that Beanstalk solves. Remember, Beanstalk is a totally decentralized DeFi Stablecoin that can print millions or billions of $BEAN’s without locking up any collateral.
Sidenote: A simple example of why the current shortage of dollars on the blockchain is causing a major decrease in what is currently efficient to use DeFi.
For example, in something like Augur or Polymarket, part of the problem in being a market maker is that there is a major shortage of USD on the Blockchain.
But because there's such a shortage of USD on the blockchain there are very high borrowing and lending rates. So If you’re a holder of USDT or USDC and DAI and I have the choice of lending out my stablecoin for 10 or 15% a year or I can try to do better than that by making a market on Augur. It’s rarely cost effective for you because the borrowing costs are too high
The opportunity cost that's related to the lack of supply of USD has made many things not cost effective.
Beanstalk is able to solve this precisely because it does not have collateral requirements
There is already $134 billion dollars of stablecoins in DeFi, and the demand is much, much higher.
What are the biggest existential risks to the success of Beanstalk?
Punchline: Beanstalk is still in an infant stage. It needs neck support, and head support.
If you compare Beanstalk to BTC for example, to get from here to the level of BTC decentralization will take a lot of effort & organization on the part of the community.
So the biggest vulnerabilities is that we're still in the middle of the first major debt cycle for Beanstalk. However, that’s bullish over the long term.
Beanstalk tries to get its level around ~15% but during debt cycles it can go much higher than that. The fact that the debt level is very high and continuing to go higher is an indication that we're still in the debt cycle. The real thing to look at is the "available soil" which thus far will only start to come down in earnest when there's a disproportionate amount of time spent above the peg instead of below the peg ($1). The fact that the soil has remained high means we’re still in the debt cycle. Until that soil gets eaten through, were going to stay in the debt cycle.
There has been some withdrawals since we returned to peg, but the withdrawl data has been consistently low since returning to peg.
What that indicates is that the stalk and seed incentive structure is working. And the fact that that incentive structure is working goes up linearly over time, anyone who didn't withdraw yesterday, is less likely to withdrawal today. And they’re more likely to stick around for the next growth cycle.
What’s next for Beanstalk?
Creating Utility by Creating Stability
Stability is here. The next thing to focus on is getting beanstalk incorporated into a variety of other protocols where there is utility for a decentralized Stablecoin.
If members of the community have connections at decentralized protocols that would be interested, they should try to broker those connections.
The team are inspired by the volume and the quality of the conversations that they're having with high-quality capital allocators who want to invest in Beanstalk. Because Beanstalk is for people, not for VC’s or whales, there is no “management company” or offer agreement to sign. Those investors will sow and silo just like everyone else.
How can community help?
Beanstalk is looking for high quality developers. If you are one, and want to work with an amazing team, reach out to me (Bean Merchant) or Publius directly.
Beanstalk also wants to pay community members for content. Educational materials, memes, etc. More on that soon but feel free to drop a note in the discord under #skillset-volunteer and let us know how you’d like to help.
Connecting with other decentralized protocols that want a totally decentralized stablecoin integrated is the next step. If you know people at these protocols, those connections would be very useful.
Lastly, if you’d like to become a Scholar of the Bean, you should join the Bean Scholars call this Tuesday 6pm PT. Publius will be teaching members of the community how to better explain Beanstalk to newcomers so they can answer questions and build the community knowledge.
Bonus: What's the ultimate vision for stalks and seeds?
The plan is to create Stalk:Bean and Seed:Bean Uniswap pools. You will be able to deposit LP tokens for the stalk bean and seed bean pools for more stalk and seeds.
Because this crates Bean:Stalk and Bean:Seed pools the expectation would be that you would very quickly run out out Beans very quickly to stake the stalk and seeds. And this would organically create a lot of demand for beans.
Now the stalk and seeds can earn additional interest instead of just collecting dust in the silo.
This will have positive network effects on the price of Bean and now that stalk and seeds are liquid you can have a market that reflects the future growth expectations of Beanstalk without that translating to the price of Bean. So if short term inflation expectations are decreasing you'd expect the price of stalk to come down. So they'd sell stalk for Beans, and as they do that, they won't necessarily sell them into ETH they'll sell them into Beans.
Beanstalk will not just have a current market in the price of Beans but stalks will be able to reflect the state of Beanstalk in the future.
Timing on Seed & Stalk liquidity: Making Stalk & Seeds liquid may or may not be deeply integrated with the layer 2 implementation. Community has emphasized that Beanstalk should be supported on other EVM compatible chains. And specifically to do it in a way that creates a network effect around Beanstalk. Team has already figured out what scaling to layer 2 will look like. Basically the idea is that stalk seed and beans can be bridged through Beanstalk from one compatible chain to another.
The price would still be determined by the BEAN:ETH pool on Mainnet. But you could use the liquidity on other chains as well. But still have the accuracy of the main price.