WUSD vs DAI: Learn 8 easy-to-ignore details for better understanding WUSD
Regarding the advantages of the WaykiChain stable coin WUSD, we have already mentioned it in serial, such as risk emergency mechanism…
Regarding the advantages of the WaykiChain stable coin WUSD, we have already mentioned it in serial, such as risk emergency mechanism, innovative governance system, technical support for public chain conflict, etc. We are aware of different competitions on the same stage and we are not afraid to compete. We hope to provide a new perspective from another dimension so that everyone can understand the advantages of the WaykiChain stable coin.
This time, we will only make comparisons talk about the differences to let you see more clearly.
Regarding the object of comparison, in this issue, we have chosen the same type of stable coin that can be comparable, and it is also one of the mainstream of the current stable coin market: DAI.
Advantages of public chain tokens — fuel costs (fees)
Since MakerDAO is based on the implementation of smart contracts, and ETH Ethereum’s underlying account resources, lacking direct support for stablecoins, ETH needs to be converted into WETH (Wrapped ETH) in advance, which is a one-to-one mapping with ETH-20. It can be converted into PETH by WETH before the mortgage can be issued for DAI (DAI is another ERC-20 certificate). This has led to a problem, whether it is ETH converted to WETH, WETH converted to PETH, or reverse conversion, which requires fuel costs, which undoubtedly increases user costs. The WaykiChain stablecoin system does not have such a problem. Since both WICC and WUSD are based on the underlying currency of the public chain, the coining process from WICC to WUSD does not require complicated internal conversion, thus eliminating the conversion fuel required for contract token coinage. Of course, when it comes to handling fees, one more thing to mention: since WUSD is based on the bottom layer of the public chain, WUSD itself can be used as a transaction fee when transferring money, without having to pay like other stable currencies such as USDT and DAI. BTC or ETH is used as a handling fee. WUSD is the only stablecoin on the market that can do this.
2. The dominant gene of the consensus mechanism — the speed of the block
At present, the mainstream cryptocurrency-backed stablecoin including DAI is issued on the public chain of the PoW consensus mechanism, which makes the stablecoin transfer speed limited and cannot be circulated in more high-frequency scenes.
The WUSD is distributed on the WaykiChain public link of the DPoS+BFT consensus mechanism.
What kind of mechanism is this? Through the following dismantling, you can have a preliminary understanding.
First, DPoS is a consensus mechanism for authorizing equity. Compared to the PoW mechanism, DPoS does not waste power resources to compete for billing rights but instead counts each block in turn through the supernode. The BFT is the “Byzantine fault-tolerant algorithm”. When the DPoS consensus mechanism is added to the BFT algorithm, the block verification will no longer verify the block content by the supernode one by one in the block-out order, but the block node becomes the master node. After receiving a new block, each billing node broadcasts a new block to the entire network through the P2P protocol, so that each node obtains the latest determined block height in time: as long as more than 2/3 of the nodes pass the verification, the block becomes irreversible.
Compared to PoW, the DPoS+BFT consensus mechanism not only makes the WaykiChain faster but also speeds up the block validation.
Specifically, in the application scenario, under the PoW mechanism, the DAI transfer rate is as small as a few minutes, and in the case of congestion, it takes several hours to complete a transfer. The WUSD under the DPoS+BFT consensus mechanism only takes 3 seconds to transfer. This advantage will be more apparent in the application scenarios of high-frequency trading.
Specifically, in the application scenario, under the PoW mechanism, the DAI transfer rate takes just a few minutes, and in the case of congestion, it takes several hours to complete a transfer. The WUSD under the DPoS+BFT consensus mechanism only takes 3 seconds to transfer. This advantage will be more apparent in the application scenarios of high-frequency trading.
3. The cornerstone of stable coin system — the bottom of public chain
MakerDAO is a stablecoin system based on the contract layer. As a computer trading agreement that enforces contract terms, smart contracts are open to all users, which means that potential internal security vulnerabilities are exposed to hackers and are therefore more vulnerable.
On the contrary, since the WaykiChain’s stablecoin system is based on the bottom layer of the public chain, it is not easy to be attacked by similar contract layers through the underlying logic that is solidified, simplified, and strictly controlled. Therefore, the stable chain system of the WaykiChain is safer and more reliable than implementations such as the contract layer.
By the same principle, the WaykiChain DEX, as an organic combination of the underlying public chain, will be safer and more reliable than the contract-based DEX on MakerDAO.
4. Supply scalability in a multi-use scenario (scalable)
In the context of stablecoin, “expandability” is specific. So what is the scalability of the stablecoin?
If the supply of a stablecoin can closely follow the user’s need to hold the currency, then we can define that the stablecoin is scalable.
Who will be more expandable for these two stable currencies?
First of all, for DAI, we know that it is based on the ETH mortgage issued stablecoin, but its release is essentially due to the need for borrowing. In other words, its issuance is not because the market needs more of the currency, which is exactly the opposite of the definition of stablecoin scalability. From this perspective, it is even more like a digital pawnshop, not a stable coin.
Second, according to DAI’s interest rate system, there are such theoretical assumptions:
That is, when the DAI price is less than $1, CDP owners tend to buy DAI (less than one dollar) from the secondary market to repay their CDP’s DAI debt ($1), thereby increasing the demand for DAI in the market. Conversely, when the DAI is higher than $1 and the interest rate drops, it will stimulate users to issue more DAI through a mortgage, thereby increasing the market supply, causing the market price of DAI to fall
back to $1.
However, this is only a theoretical assumption.
In fact, due to the existence of the over-mortgage mechanism, professional arbitrageurs do not have a good exit mechanism in a trading cycle to completely
withdraw from the CDP. Therefore, it is actually difficult for arbitrageurs to profit from DAI transactions. The lack of a professional arbitrage model makes DAI fundamentally unexpandable. Its circulation will only be in a certain total range according to the range of price fluctuations, and the total circulation will not last long.
There is also a mechanism for over-collateralization. Why do we say that WUSD has higher scalability? Because the most essential difference between WUSD and DAI is that it is based on the bottom layer of the public chain, it can be circulated in the DApp of all WaykiChain public chain, can also have a large number of decentralized financial service scenarios as support. The public chain acts as the main currency token. So as long as the WaykiChain ecology is prosperous, as many application scenarios can be created for WUSD.
Therefore, in a popular way, the WaykiChain WUSD has a higher ecological expansion, which allows DApp to access WUSD more conveniently and cost-effectively, to promote the WaykiChain to expand the ecological application, and help DApps reach users more widely.
5. Different multi-asset mortgage
For the stablecoin system, whether it is the rise in the price of mortgage assets or the slow decline in prices, it is not a big problem.
The biggest challenge comes from the black swan event. If the price plunges, can the stablecoin be able to withstand it?
Since the black swan event often happens very quick, there is not enough time left for the market to react. Taking ETH as an example, if the value of ETH falls very sharply in a short period of time, then the CDP that needs to be liquidated in the system will proliferate, so large amount of ETH needs to be sold, which instead will cause ETH prices to fall faster, eventually leading to a plunge in the chain and the market to trample on.
WaykiChain stablecoin system sets a maximum amount of mortgage. This means that in the WaykiChain stablecoin system, the total amount of WUSD issued through WICC is limited by orders of magnitude. This has inhibited the above situation to a certain extent.
[in the stable chain system of the WaykiChain
The maximum amount of mortgage = WICC number * 25%]
Of course, some people may worry that if they do, the market size of the stablecoin will not be restricted? This led to another problem: the market size of the stablecoin.
In fact, when the WaykiChain’s stablecoin market has a greater demand for the size of mortgage assets, the WaykiChain stablecoin system will include cryptographic assets with larger market capitalizations such as BTC and ETH. Currently, WaykiChain has made important breakthroughs in cross-chain technology. In the future, liquidity funds that can be mortgaged can theoretically reach up to $100 billion to meet the needs of high-growth markets.
For MakerDao, it seems that the market value of mortgage assets will become the ceiling of DAI, and therefore it is also seeking a breakthrough. Recently announced the launch of “multi-asset mortgage DAI.” Even so, these multi-collateral assets are still based on Ethereum’s ERC20 assets, which can not improve the stability of DAI, and its own volatility is even larger than Ethereum, unable to achieve encrypted assets through cross-chain technology like Wikichain. Communion.
6. Stablecoin economy — a three-coin model
MakerDAO also issued the governance currency MKR, which is a token that is completely independent of ETH.
Although it seems that there is not much problem with the realization of the function of the stable coin system. However, as a three-currency system, if they cannot promote each other and influence each other, the value of the system from the overall utility of the public chain ecology is greatly reduced.
In the WaykiChain stablecoin system, in order to ensure the interest relationship between the WICC holder and the WGRT holder, voting participants in the WaykiChain super node campaign will receive the WGRT award.
The stablecoin WUSD focuses on various types of payment, application DApp, decentralized financial scenarios, and business and the main circulation token; the
public chain main currency WICC can be used to vote for nodes and the node obtains mining income and package fee income. WGRT Governance Coin can be used to enjoy the WUSD penalty and interest income while taking on the potential risks of the system. The three complement each other and promote each other to maintain the stability and development of the system.
7. Same black swan, different global patterns
In MakerDao’s white paper, “Global Settlement” will serve as the last gateway to maintain stability throughout the system. If there is a huge problem, the community can decide whether to make a global settlement or not, so the CDP owners can redeem their collateral assets in a stable state.
But the question is whether the “global settlement” can be carried out, which is determined by the MKR holder in the form of a community vote. Then, can human-made voting keep up with the urgency of the market?
Let’s think that the Maker Foundation has a large number of MKRs that can be directly settled globally, based on voting weights. But if this is the case, it will create a problem of being too centralized. This is a situation that no stablecoin wants to see.
For WUSD, once such a black swan event occurs, there will be another “global suspension” response: when the overall mortgage rate of the system reaches 80%, the system will immediately turn on the automatic protection mechanism and suspend all CDP-related activities. And after the market stabilizes, it’ll let the community initiate a restart proposal.
That will undoubtedly prevent the adverse effects of the black swan event in a timely manner, without losing the key attributes of decentralization.
8. Risk reserve fund
With regard to the necessity of a risk response situation, there is a bigger difference between the two, and it is also the world’s first WaykiChain currency stabilization system: risk reserve fund.
The WaykiChain risk reserve pool is WUSD. The source is mainly divided into two parts: one is the assets raised when the WGRT is issued, and the WUSD is replaced; the second is that when the system is liquidated, part of the penalty will be deposited in the risk reserve pool. In this way, the funds required for liquidation are pre-stored through the risk reserve fund, and the CDP can be closed even if the debt is insolvent.
In addition to DAI’s “last pass”, let WUSD have a solid defensive line.
In fact, the completeness of the WaykiChain stablecoin system goes far beyond this, but only by comparing the differences one by one, we can deeply understand the beauty of its mechanism. The development of the WaykiChain stablecoin system will more closely examine the practical application and needs of stablecoins in the industry. Of course, the most fundamental reason why many functions are realized is still the same — WUSD is based on the bottom layer of the public chain, this also explains why WUSD is better than other different types of stablecoins.
The End.
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