Brinc.fi: Minimizing Downside & Sustaining Upside During Market Volatility
When there isn’t a clear positive direction regarding crypto and DeFi, problems start to arise in the form of downside volatility. Thus, uncertainty is always the ingredient that causes overheated markets to start cooling down. DeFi, of course, is not excluded from this cycle.
But, the question of ‘why’ the market is uncertain isn’t as important as ‘what’ is uncertain since there’s one thing that’s clear: Crypto and DeFi are still highly speculative and almost all crypto-assets are subject to massive drawdowns. In the past two months, bitcoin is down approximately 46% from its all-time high of sixty-nine thousand dollars and most other coins and tokens are down much more.
The Brinc.fi protocol was created to address these problems by providing intrinsic value and a fundamentally valuable asset. Additionally, because of the way users can earn via the protocol, users participating in the platform are not only able to offset some of the market fear and uncertainty but even generate returns.
$BRC: Bonding Curve Supports Prices
Using a mathematical formula, bonding curves are used to create markets, manage liquidity, and execute orders. As a result, the price of $BRC is also algorithmically calculated according to its current circulating supply, and its reserves.
Therefore, price is always following along the curve in relation to the supply. The token price rises along the curve when buying occurs ($BRC is minted), whereas the token price declines along the curve when selling occurs ($BRC is burned).
Because of the bonding curve, $BRC has some unique properties that benefit it during periods of uncertainty:
- An unlimited supply, a continuous token model which reverses inflation
- A high reserve ratio, which decreases the token’s volatility
So while these properties may have been mentioned in the past articles, let’s dive a little bit deeper into what benefits they bring.
$BRC: Unlimited, Continuous Token Model That Reverses Inflation
As many market participants will know, when the circulating supply of a token or coin is increasing but there is no increase in demand, this will usually result in price depreciation. However, $BRC inverses this and only mints more $BRC when the chosen reserve asset such as DAI is bonded to the curve (i.e. bought).
As a result, one of the ways that $BRC supports the price is by completely reversing the relationship between inflation and token supply. Thus, removing one of the problems inherent in almost all cryptocurrencies and stablecoins. Instead of the decrease of price with an increasing supply, BRC actually appreciates in price as supply goes up. All this is done automatically through smart contracts.
The beauty of using smart contracts is that there is no third party or market maker needed to do the minting or burning of $BRC. Because of the clear and well-defined rules of $BRC, it removes all third-party intervention.
High $BRC Reserve Ratio Reduces Price Sensitivity
Not all bonding curves are the same. Therefore, depending on the reserve ratio between the reserve asset and the token, each buys or sell can have more or less impact on the price. The higher the reserve ratio, the lower the price sensitivity, and in contrast, the lower the reserve ratio, the higher the price sensitivity.
Since $BRC is almost completely reserve-backed (i.e. high reserve ratio of 70%), price movements are much less sensitive to each sell or buy.
Additionally, due to the deep and immediate liquidity provided by the bonding curve contract. The contract is the counterpart and always holds enough buyback reserves. Thus, greatly reduces slippage when a market participant wants to sell or buy from the bonding curve.
Brinc.fi: Provides Multiple Potential Avenues For Returns
Most assets or tokens only have one way they’re able to generate profits for their users: the price appreciation of the token itself. For example, a user buys and holds the asset until it reaches its target price and sells.
What the Brinc.fi protocol does differently is allow users of the platform two ways of generating returns through its dual token model. Of course, $BRC can also increase in price, however, by staking $BRC on the protocol, rewards can be generated in the form of $gBRC. Moreover, $gBRC is also able to appreciate in price as demand increases!
Thus, not only are users getting the potential price upside of $BRC and $gBRC but $gBRC is also being accumulated by users who stake on the Brinc.fi protocol.
In a market downturn, although $BRC is going to be less volatile, it doesn’t mean that it’s completely protected from panic and sell-offs. However, even if $BRC drops in price, the accumulated $gBRC rewards will act as an additional buffer to decrease the amount of volatility that has occurred from the drop in price. As a result, users are heavily incentivized to stake their assets to accumulate rewards!
Conclusion & Key Takeaways
Again, a bonding curve essentially is based on the concept that a token’s price is determined by how many tokens were minted. I.e. If more tokens are issued, the value will be higher. Furthermore, it provides a fixed price discovery mechanism that is both transparent and resistant to tampering (because of the blockchain).
Because of the bonding curve, $BRC has additional properties that give it inherent value, relatively stable price movements, and reverses inflation. Moreover, through participating in the Brinc.fi protocol, users can capture the upside of the price appreciations of $BRC and $gBRC, while also accumulating rewards through staking. Thus, participating in the Brinc.fi ecosystem is a great way to hedge market uncertainty!
