Announcing Float Protocol and its democratic launch

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Float Protocol

8 min readFeb 5, 2021

Crypto needs its own denomination. Whilst it is natural to compare things in price to the dollar (and this is why most stablecoins aim to be worth $1.00), it makes sense that if crypto is to build a new financial system, it should denominate itself in a currency of its own. Naturally, the dollar is a symbol of traditional, centralised finance. As such a new stable currency, that doesn’t try to be worth $1.00, is needed.

To this end, Float Protocol is building the decentralised monetary system of the future. At the heart of the protocol is the FLOAT token. It is designed to be the first truly native internet currency.

Stable but floating

‌Unlike most stablecoins, whilst FLOAT is designed to be stable and have significantly lower volatility than most cryptocurrencies, it is not designed to hold its price at $1.00. Instead, like most major fiat currencies, it is designed to float and change value over time.

FLOAT is stabilised through frequent auctions to expand or contract the supply. It is also partly supported by a ‘Vault’ of cryptocurrencies that are used as part of the auction process.

‌FLOAT is also supported by a second token, BANK. This token serves three purposes: first to take the profit created in times of excess demand for FLOAT, second to support the price of FLOAT from time to time and third to govern the Float protocol.

The Protocol’s tokens will be distributed as part of a ‘Democratic’ Launch, starting Sunday 7th February at 22:00 UTC (details below).

A non-pegged stablecoin

When we talk about a ‘stablecoin’, we usually mean a coin that is stable relative to something we care about. In the case of most stablecoins, they care about being stable to the dollar. More specifically, they aim to be worth exactly $1.

We believe there are several issues with this approach. First, it can be challenging to maintain an exact peg, especially in phases of lower demand. Second, there are increasing regulatory pressures that are especially aimed at stablecoins backed by USD. Third, in times of expansionary monetary policies (such as now), people’s purchasing power is constantly being eroded. Finally, given the global nature of crypto, it does not make sense to have its major stable currency be one tied to one particular state’s fiat currency.

FLOAT is fundamentally different. It aims to have low short term volatility, allowing it to be practically used as a unit of account. However, over the long term FLOAT’s value should change according to its own demand and the demand for the underline cryptocurrencies in its “vault”. As such, FLOAT’s value should gradually change as crypto is more or less valuable and, as a result, protect the purchasing power of users in the long-run.‌

How will the price of FLOAT behave over time

At the start, we will give FLOAT an arbitrary price. Initially, this will be $1.618, which is the Golden Ratio in Mathematics.

After launch, the FLOAT target price will move slowly and trail the cryptocurrency “economy,” represented in the system by the cryptocurrencies stored in the vault.

Here is a simulation which shows how the FLOAT target price would have behaved during 2020 given the ETH prices involved (in this case, the ETH price mostly trended up).

What is BANK token

BANK is a token that serves three purposes:‌

To take the profit created in times of excess demand for FLOAT.
To sometimes support the price of FLOAT in times of too little demand.
Governs the Float protocol.

How does the protocol stabilise the price of FLOAT?

We stabilise the price of FLOAT by controlling the supply of FLOAT on the market.‌

If the price of FLOAT is away from its target price, we want to change the supply by minting (expansion) or buying up and burning FLOAT (contraction). We do this through a dutch auction (in an expansion) and a reverse dutch auction (in a contraction), respectively.

In these auctions, arbitragers will be given the opportunity to buy new FLOAT below market price (in an expansion) or sell FLOAT above market price (in a contraction) to make a profit. In doing so, arbitragers will very quickly change the supply of FLOAT on the market. The reason we chose the auction model is a) it allows us to intervene in the market without having to trade FLOAT ourselves and b) it also allows the system to be very efficient.

More information is available in the docs.

Democratic Launch and Distribution

Why a Democratic Launch

We will be distributing BANK ahead of the launch of the Float Protocol in order to incentivise engagement and participation. We will do this via a Democratic Launch.

As part of this Democratic Launch, participants will be able to deposit into several pools in order to earn a distribution of BANK. These pools will not be used for anything. The purpose of them is to distribute BANK, build an active user base and provide signalling.

Usually with these types of launches, big players arrive early, farm most of the token and control the governance moving forward. We do not want this to be the case. Instead, we want the protocol to run by its actual users, particularly those who are engaged and active. In short, we are supporting the little guy.

To do this, we will initially have a whitelist of the addresses (those who participated in the governance of various major defi protocols) that can participate in the first phase of the farm, as well as a cap on the amount one can deposit per pool. More details are available below.

Initially, there will be two phases of distribution. In Phase 1, as mentioned above, BANK will be distributed to a wide range of very active, smaller participants. In Phase 2, BANK will be distributed to anyone in order to enable initial price discovery and there will be incentivised liquidity pools for BANK.

In general (excluding any minted as part of any contractions), there will be 168,000 BANK to be circulated during the first year. There will likely be inflation of BANK after year one but this will be voted on by governance.

Overall BANK distribution schedule

Community distribution: 50% — Phase 1–37.5%, Phase 2 12.5%.
Team tokens: 5% (locked for 12 months after initial mint ceremony).
Treasury: 10% (Minted at the start of Phase 2 and controlled by governance).
Post-launch liquidity incentives: 35% (5% initial float mint, 30% voted on by governance but currently reserved for various liquidity incentives and partnerships).

Community Distribution

To participate in the official distribution, please visit https://ipfs.io/ipns/floatprotocol.eth/ set up on IPFS.

Before Phase 1 begins, there will be another announcement with all the deployment details and contracts.

Phase 1 (Beginning Sunday 7th February 22:00 UTC and lasting 6 weeks in duration)

The goal of the first phase is to distribute tokens to a wide range of smaller, very active participants.
To achieve this, we are introducing a whitelist where only addresses that have been active governance participants in other protocols are eligible.
The original whitelist was composed of addresses that participated in the offchain governance of any protocol on Snapshot.page and/or onchain governance on Compound, MakerDao or MolochDao. During Week 2 after a successful snapshot vote, we expanded the whitelist to include delegators on Compound, voters on Yearn, voters on UMA, delegators on YAM, voters and escrowers on Curve and delegators and voters on Uniswap. The new whitelist is this.
There will be 3 pools to farm BANK: DAI, USDC and USDT.
Each day, 1,500.00 BANK will be distributed, or 500 BANK per pool. In total, 10,500 BANK will be distributed per week.
There will be a limit of 10,000 tokens deposited per pool.
As mentioned, these deposits will not be used for anything. The purpose of them is to distribute BANK, build an active user base and provide signalling.

Phase 2 (Beginning Sunday 21st March 22:00 UTC and lasting 2 weeks in duration)

The second phase is meant to offer a wide distribution to communities of the top DeFI protocols and to enable initial price discovery for the BANK token.
All limits on participation will be removed (including per address and per pool).
Additionally, new non-stablecoin pools will be added. The full announcement will be available 1 week before the start of Phase 2.
Each day, 1,500.00 BANK will be distributed.
During phase 2, we will also incentivise a liquidity pool for BANK-ETH in order to allow better price discovery
Once again, these deposits will not be used for anything except signalling and building an active user base.

Float minting ceremony

Once the protocol has been audited and the 8 week distribution period has passed, the initial FLOAT minting ceremony will happen. During this period FLOAT will be available to buy in exchange for Ethereum and the purchase will be incentivised with 5% of the BANK supply distributed pro rata. More details on how much FLOAT will be available for purchase and the exact mechanism for the initial minting ceremony will be released 1 week before the 8 weeks initial distribution period has passed.

Team tokens

As an incentive to keep building Float Protocol and its ecosystem, the team will receive 5% of the BANK tokens. These are locked for 12 months after the initial mint ceremony of FLOAT.

Treasury

In order to pay for costs associated with FLOAT, for future development and any initiatives that may arise, 10% of the BANK tokens will be reserved for the Treasury. These will be minted at the start of Phase 2 and allocated by votes of the governance.

Post-launch liquidity incentives

In order to maintain liquidity for BANK, each month the Float Protocol governance will decide liquidity incentives for BANK pools.

Team

Float Protocol is built by Abbey road, an anonymous group of hackers who are researchers at the world’s leading institutions. 🤘

Docs

For more information, please read our docs.

Contracts

Available here.

Follow us

Website — https://www.floatprotocol.com/ (also available via: https://ipfs.io/ipns/floatprotocol.eth/#/pools)

Twitter — https://twitter.com/FloatProtocol

Telegram — https://t.me/officialfloatprotocol‌