we are building the #Doxa_dollar a DEFI product (stablecoin) that is backed up cycles. I was told DFINITY does not support any product built using cycles with grants or any other initiatives. I have seen a number of cycle based products such as #cyclestation, #XTC and #cycleOps. To me Such products are novel and distinctive and only found on #ICP. Doxa is here to put ICP ecosystem on the top. I would like to hear from the community or DFINITY regarding the foundation not supporting cycle based DeFi products.
I guess cycles are a bit sketchy since the whole point was that you can only burn ICP to get cycles but not the other way around due to possible manipulation.
Things should be a lot easier now with the CyclesLedger…it just came out a couple of weeks ago.
Here’s my perspective that cycles is not recommended as underlying asset for stablecoin:
First, there is no mechanism or entity that can enforce a fixed exchange rate of 1:1 between cycles and XDR. In reality, the current market value of cycles tends to be volatile and consistently lower than the actual XDR rate.
Second, a significant imbalance between the demand and supply of cycles. This can be seen in the huge gap between the protocol exchange rate to burn ICP to cycles and the cycles secondary market rate, making cycles a highly risky asset to serve as collateral for a stablecoin.
Third, there is no demand or utility use cases of cycles beyond ICP ecosystem itself. So it carries an inherent risk within it
Lastly, cycles are merely a derivative product of ICP. I think, it would be safer to use ICP itself as collateral instead of cycles.
Thanks, we definitely get you
I don’t know the reasons but I do know that the CYCLES-TRANSFER-STATION was denied a grant twice, once in January 2022 and the second time in April 2023.
The stability of the CYCLES as a stablecoin is tied to the current cycles-burn-rate of the network. The higher the cycles-burn-rate, the more cycles are being purchased and then burned every second. The more cycles are being purchased every second, the more liquidity there is for people looking to sell their cycles.
At the CTS market, many ICRC-1 tokens cluding SNS tokens trade against the cycles, creating a stable trading scenario for the tokens where the price of ICP does not sway the price of the token. The CTS market creates an opportunity for the SNSs to sell their native tokens for cycles instead of dipping into their ICP treasury. For the other side, it creates an opportunity to buy ICRC and SNS tokens using the cycles, which is a key piece of the cycles ecosystem, and this need will become stronger as the cycles solidifies into the standard native stablecoin on the world-computer.