Beanstalk AMA with CRE8R DAO
Primer: This is a summary of the key highlights from the CRE8R DAO AMA with Beanstalk’s anonymous founding team - Publius. Here, Publius shares more about how BEAN, Beanstalk’s native algorithmic stablecoin, has performed over the past ~6 months. Publius also discussed the great community that has grown to form Beanstalk’s bedrock and the updates coming soon to the protocol.
Publius
Pseudonym that the founders of Beanstalk use to preserve their anonymity
Big believers in decentralization and do not believe that having doxxed founders are helpful to the long term success of the protocol
Publius is more a homage to the Federalist Papers rather than the Roman Empire
Greatly inspired by Alexander Hamilton, who had a huge influence on the creation of the predecessor to the current banking system
Hamilton wrote, “A national debt if it is not excessive will be to us a national blessing; it will be a powerful cement of our union.”
Beanstalk also follows these guiding principles
Just as the Federalist Papers were a series of articles justifying the adoption of a new governing system (the US Constitution), the Beanstalk white paper seeks to lay a foundation and argue for a better monetary system
Regarding Anonymity
Beanstalk Farms is a team comprised of both doxxed and anonymous people, including Publius (founding team), who remain anonymous
The main reason for anonymity is to avoid a situation similar to what happened to Basis in 2017
Basis Cash was an attempt at a different algorithmic stablecoin
Raised $133 million dollars in an ICO, backed by a pretty high-quality team and a great whitepaper
Eventually forced to shut down - ostensibly by the government - and returned all the ICO money back to the investors
“The question becomes, if you're serious about creating that issuer [of new money], it seems that you really have to make decentralization as high a priority as possible. And having a founder or CEO is a major glut on the road to true decentralization.
- Publius
Publius want to make Beanstalk an issuer of new money, so having a founder/CEO is a major glut in the road to decentralization
Government Regulations
It’s clear from recent events over the last 2 to 3 years that stablecoin providers will be highly targeted by regulation
Beanstalk is designed from first principles to be autonomous; nothing except acquiring a majority stake in its governance token stock and attacking the protocol on-chain can stop it
Currently, no single point of failure and there is no exposure to the traditional finance world that other stablecoin providers have
Interesting to see what will happen to Terra with their recent sponsorship of the Washington Nationals
They are poking the bear - remains to be seen if this is a good decision in the long run
Regulations are coming. It is a matter of how you play it, as opposed to asking whether it is coming or not
The federal government leverages their control of the USD as the global medium of exchange to conduct foreign policy; hence the government’s focus on preserving that hegemony
Beanstalk
What Beanstalk is about
Beanstalk is a decentralized algorithmic credit-based stablecoin issuer
Bean is the first stablecoin issued by Beanstalk and is pegged to USD
If the supply of BEAN is too low (or the demand for it is too high), such that the current price on a time-weighted average every hour is above its peg at $1, Beanstalk mints BEAN to increase the supply and decrease the price
If the price is too low because there is excess supply, Beanstalk is willing to borrow BEAN by issuing debt. Creditors/lenders willing to lend Beans can purchase Beans on the open market and lend them to Beanstalk, decreasing the supply and increasing the price
Beanstalk uses a fundamentally different approach to issuing stablecoins that does not use collateral but instead relies exclusively on its ability to attract creditors when the price is low to return the price of one Bean to its peg
By making a fundamental trade-off of collateral for credit, Beanstalk maintains an uncapped supply
Shortage of stablecoins is a huge issue and leads to high borrowing costs, which makes doing anything across DeFi very expensive
The current shortage is due to the high cost of holding collateral in a bank account to mint new stablecoins
“The fact that there is now a stablecoin that in theory should have much lower borrowing costs than any other stablecoin that currently exists, has the opportunity to radically change the state of DeFi potential. Beanstalk has now been in existence for a little over six months, which is by far the longest lifetime of any attempt at an algorithmic credit-based stablecoin.”
- Publius
Other stablecoins have a negative carry associated with them but BEAN has a neutral carry because there are no taxes or borrowing costs associated
In fact, it is even positive carry in some cases because users can deposit BEAN in the Silo to earn interest
Other stablecoins in the future?
As long as Beanstalk has a strong credit history and people are willing to lend to it, the specific denominations of its stable assets do not matter
A USD-pegged BEAN is the first stablecoin issued by Beanstalk because there is high demand for USD stablecoins on Ethereum
Publius expect that in a multi-chain world, there will be high demand for different assets pegged to different values
Beanstalk in theory could issue a wide variety of different stablecoins
Beanstalk can be hard to understand. Any advice for a person to get involved with Beanstalk?
No cookie-cutter answer because different people have different risk and return profile
The Beanstalk Discord is the best place to ask questions
Ex: recently someone asked what the protocol was all about on a Saturday evening. Many people jumped in with different resources offering help
Beanstalk Farms is working on putting together a more complete set of educational resources, with videos and other materials, to make it easier to learn about the protocol
Price history of Bean
Thoughts behind Bean price action over the last few months
Beanstalk has been live for the past ~6 months
During the first 4 to 5 weeks, Beanstalk’s market cap went from ~$2.5 million to $40 million in a couple of hours
The price of BEAN went from $1 to as high as $4 before crashing down to as low as $0.24
The apes who had successfully exploited other algorithmic stablecoins (like ESD, DSD, Basis Cash) in the past came in as early as possible
They quickly realized that Beanstalk couldn’t be exploited so they left the system
This was a good stress test for the model because of the huge capital inflow and outflow
“And so when we take a big step back, you had like a very big, very violent, let's call it a month-long cycle in September, October, and then you had more of a three month less violent, less volatile, but slightly longer cycle in November, December, January.”
- Publius
In November 2021 around Thanksgiving, there was a huge inflow into Beanstalk over a short period of time, pushing the price up to $1.40
This was more manageable compared to the protocol’s first growth cycle
There are still some inefficiencies in the model particularly when the price of BEAN is above $1
Beanstalk was willing to issue too much debt, so it exited the cycle with a higher debt level than it started off, which is not a good thing
Decreasing debt level and the price are two things that Beanstalk optimizes for
How to take advantage of the price movement of BEAN?
Beanstalk does not make a guarantee of the price of Bean being a dollar, unlike a collateralized model that has convertibility
Instead, it creates a series of incentives to make sell BEAN attractive when its price is above peg and buying BEAN attractive when its price is below peg
When the price is <$1, Beanstalk creates Soil, which represents the willingness to borrow BEAN in return for interest payable to lenders
The best way to get the highest rate of return is to lend BEAN to Beanstalk when the price is below $1 and sell when the price goes higher than $1
In most cases, it’s not rational behaviour to buy BEAN when its price is significantly above its peg
The rate at which the system can grow is not dependent on the willingness of people to buy significantly above $1
The minting schedule of BEAN is not based exclusively on the time-weighted average price but also accounts for the excess or shortage of BEANs in the Uniswap liquidity pool
When the system was young, there was a lot more inefficient behaviour than there is now, with arbitrageurs now coming in to buy BEAN when the price is below $1 and selling when it is above $1
Thoughtful rational investors are harder to come by, particularly in crypto where the name of the game is to pump and dump
Roadmap
Generalized Silo and Minting
Silo (the equivalent of the Beanstalk bank) is going to be generalized to facilitate wider adoption and integration of BEAN in the larger DeFi ecosystem
Currently only supports deposits for BEAN and LP tokens for the Uniswap BEAN-Eth V2 Pool
Generalization means that the Silo will start accepting deposits from any token based on a whitelist, starting with fungible tokens
The first addition will be the LP tokens for the BEAN:3CRV pool
Generalized minting of BEAN
Currently, minting is based on a function of the time-weighted average and liquidity-weighted average excess/shortage of BEAN in the Uniswap BEAN-ETH V2 pool over the previous Season (each Season is ~1 hour)
Going forward, other pools like the BEAN:3CRV pool will also be used to determine the number of BEAN minted in a Season
This will decrease the magnitude of deviation from peg necessary to mint a similar amount of BEAN
The combination of the generalized Silo and generalized minting will increase the utility of BEAN and Beanstalk, in addition to further stabilizing Bean price
Stalk and Pod Exchange
Stalk, the governance token of Beanstalk is currently illiquid, but will become liquid in the next few months
This will increase the ease with which Beanstalk can be integrated with other DeFi protocols because it will have a protocol native yield-bearing token in addition to a protocol native stable asset
The Farmers Market was launched very recently. This is a decentralized exchange for Pods (Beanstalk’s native debt asset)
Multichain
Important for Beanstalk’s long term success that Beanstalk can be integrated with other protocols on different blockchains and L2s
However, it is not anywhere near ready for shipment because of the scope of the project
Complicated to preserve the security and decentralization of the individual chains that it operates on
Education
To improve the documentation and educational materials around Beanstalk
Trying to maintain the whitepaper as a living document to have a single source of truth that people can reference and use to learn more about the protocol
Currently on version 1.7.0 and working on version 1.8.0 to reflect the generalized Silo
“The hope is that Gitbook will be a central place, hopefully hosted in a decentralized fashion, for all of the resources and be that single source of truth in a centralized location for people to come and learn about Beanstalk.”
- Publius
Will be incorporating the whitepaper into the open-source Gitbook
Decentralization
There are many facets of decentralization
Avoiding single points of failure
Distribution of ownership of the governance token
Diversity of the core team
The number of people working on the project
“Decentralization is a spectrum - it's not really a binary, and so the goal of Beanstalk is to increase decentralization continuously over time.”
- Publius
The goal is to continuously increase decentralization on all these fronts
Beanstalk is already at a high level of decentralization compared to many other protocols
Community
People who formed the community
Many community members call themselves Farmers
Publius aren’t big on hierarchy
Honestly not sure how so many people joined the community
Could be due to the collaboration with CRE8R DAO a few months ago
Tried to always put out high-quality material that is consistent and honest
That marketing material attracted a set of like-minded people who joined and contributed
“So we're very excited by the quality of the community, perhaps more than anything other than or even more than the performance of BEAN, which is really cool as well.”
- Publius
The community is full of people who seem to lack ego
Everyone just wants to help each other and are collaborative and kind
Those who blow off their top are met with kindness, considering how easily online people are disturbed
Quoted this in a previous interview after the September 2021 “pump and dump”:
“The real goal is to attract people that are curious, and people that are really interested in putting in the time. And, you know, I don't say this lightly, but the people that came in and then quickly left the system last week are kind of the opposite."
Publius still feel similarly and are happy to have attracted people to the community who are curious, thoughtful, and intelligent
Organization of the Community
There are paid members and non-paid members of the community
Beanstalk Farms, which is the decentralized development organization working to benefit Beanstalk, has people working actively in full-time and part-time capacities
There are about a dozen individuals working full-time along with Publius
Another dozen or two are working part-time
Beansprout is the Beanstalk accelerator
Both Beanstalk Farms and Beansprout were funded through an on-chain vote by the Beanstalk DAO (Silo)
Work Structure and Compensation
The community on Discord deals primarily with general community initiatives
The structure of the community is project-based, so anyone who wants to work on a given project can hop in and contribute
Beanstalk Farms fills in the gaps and helps keep projects moving forward
There is a 1.2 million BEAN budget for Q1 approved by the Beanstalk DAO for Beanstalk Farms
People working for Beanstalk Farms can receive their payment in BEANs, Pods (debt asset of the protocol), or some combination of the two
Pods can only be harvested in the future on a first in first out basis while BEAN can be used right away
Pods are non-fungible and it can be hard to estimate when they mature and can be harvested
The first set of Pods was issued around September or October 2021, and were harvested (paid out) around November. Beanstalk has issued a lot more debt since then, so it is hard to estimate when the recently-issued debt will mature
The recent launch of the Farmers Market, which is the decentralized exchange for Pods, has brought new liquidity into Beanstalk for Pods that are not yet redeemable for BEAN
Most Beanstalk Farms members choose to receive all or a large part of their payment in Pods, which creates full alignment with Beanstalk over the long term
Who inspires Publius?
Besides Alexander Hamilton, who was mentioned earlier, Publius is also inspired by Lex Fridman from the Lex Fridman podcast
Lex has created a new space for thought, innovation, and dialogue that did not previously exist
Lex has created an environment where somebody like Francis Collins, the director of NIH, can come in and say what he thinks and yet be met with kindness, curiosity, and openness
Publius think that that is truly inspirational because it is emblematic of the community that they are trying to foster with Beanstalk
All information presented above is for educational purposes only and should not be taken as investment advice. Summaries are prepared by The Reading Ape. While reasonable efforts are made to provide accurate content, any errors in interpreting and summarizing the source material are ours alone. We disclaim any liability associated with the use of our content.