AMA Recap: Terry Lam from NUTS Finance / acBTC
Section 1: The Selective Questions
Uniswap Detective:
Hello Terry @terrynuts, thanks for coming to answer a few questions with us in the Selective. :) Admittedly, your project is quite difficult to fully wrap one’s head around — hoping we can make sense of it for everyone today.
Terry L. | NUTS Finance:
Thanks for hosting Detective @UniswapDetective
Happy to share more!
Uniswap Detective:
Glad you could make it, I know much of the community has been eager to hear more details, as am I!
Let’s get into it then.
Q1) Alright, first, can you tell us what the acBTC token is, and what it’s being made to accomplish? Try to keep it as simple as possible, and we can go into the details of its functionality and tokenomics later.
Sure, acBTC is a composite asset made up of a basket ERC20 BTC. Currently the basket contains WBTC and renBTC.
Meaning, a WBTC holder or renBTC holder can mint acBTC directly.
The purpose of introducing acBTC is to maximize the usability of ERC20 BTC currently on the Ethereum network but acBTC is also an ecosystem. The ecosystem contains multiple DeFi protocols such as Swap, Savings and Lending.
So in simplest terms, acBTC is a composite asset that aims to increase the usability of all ERC20 BTC through more efficient financial use cases.
Uniswap Detective:
So, am I right in saying it’s essentially a stable-coin that consists of various other tokens with similar functionality — such as WBTC and renBTC?
Terry L. | NUTS Finance:
Yes you could look at it that way
Some DeFi experts have actually compared us to ‘mStable + Curve”
Because mStable is a composite basket of stablecoin (at fixed proportion) and Curve obviously is a amm swap protocol.
Because the assets stored in the acBTC composite basket is essentially used for acSwap, that’s why people have made that comparison.
Except obviously we are dedicated to serving ERC20 BTC, whereas the other two projects mentioned mostly service stablecoins
Uniswap Detective:
Interesting comparison and yes I could see how they mean there.
That’s your edge right, not many are serving ERT20 BTC so you’re really one of the first mover here.
Q2) For anyone who needs the lesson, can you quickly explain what an ERC20 BTC token is, and what they’re used for?
Of course, ERC20 is obviously a token standard on the Ethereum network. ERC20 BTC essentially is the ERC20 version of BTC on Ethereum.
In other words, multiple projects are working on the wrapping/unwrapping problem. WBTC, renBTC, HBTC, imBTC for examples are all robust projects trying to move liquidity from the native Bitcoin network onto the Ethereum network.
Your next question might be, why would people want to move BTC liquidity onto Ethereum?
The simple answer is Ethereum allows for smart contract applications. Meaning, if BTC is moved onto the Ethereum network, it can be used in more efficient financial use cases.
Terry L. | NUTS Finance:
Whereas, BTC staying on the BTC network the most you could do it hold it or spend it
Uniswap Detective:
Right, so it gives BTC holders a chance to enter the DeFi space. Currently their BTC is a great investment long term but in terms of using this effectively now, they don’t have that many options.
Options that offer competition rates for using their BTC as collateral I should say.
Terry L. | NUTS Finance:
That’s correct!
Options, lending, insurance, derivatives, savings, are all forms of financial applications that have proven to be working or getting to work state.
Uniswap Detective:
Ok, understood. It seems like a great solution (and a needed one) for a extremely broad market, being BTC holders.
Terry L. | NUTS Finance:
So essentially, acBTC’s primary focus is to work with the ERC20 BTC that is already on the Ethereum network, empowering them to become more usable through our own set of protocols
Terry L. | NUTS Finance:
Absolutely
Afterall, BTC is still the largest and most credible crypto asset. Right now there are only roughly 150k ERC20 BTC on the Ethereum network but there are roughly 16mm bitcoin so you could imagine the size of the opportunity.
Uniswap Detective:
Right, so a massive gap in the market really really and not much competition. Interesting.
That leads me to the next question.
Q3) acBTC is unique in that it is essentially a basket of other ERC20 BTC tokens. What advantages does a “basket” of ERC20 BTC tokens have over a lone ERC20 BTC?
Great question. I am sure everybody has heard of the term diversification. It’s like buying a few blue chips stock instead of putting it all into one stock.
This analogy goes a long way, maybe besides Apple and Tesla haha
But generally it’s safer to diversify to avoid single point of failure and this analogy also applies to ERC20 BTC.
Right now the existing ERC20 BTC solutions either use a centralized custodian or a decentralized node network to solve for the wrapping/unwrapping process.
However, what happens if the centralized custodian fails or the network of decentralized node colludes. That would lead to single point of failure.
Therefore, the acBTC basket aims to improve single point of failure (system risk) by including various forms of ERC20 BTC.
Uniswap Detective:
Yea, that’s makes sense. Of course security is one of your top priorities. I know you work closely with an Auditing/security partner but mitigating the risk through that diversification is also key.
Terry L. | NUTS Finance:
Notice I said “improve” and not completely “mitigate” because at this point we have to be honest that only with acBTC we cannot single handedly mitigate single point of failure
But having a composite basket definitely reduces the chance of single point of failure.
That’s why we are actively looking at other ERC20 BTC projects and talking to BTC holders to see how they feel about adding a new constituent to the acBTC basket to further derisk.
So expect the acBTC composite basket to continue to grow as the space matures.
Uniswap Detective:
Ok, understood. You can never really rule out other factors but through your method, it’s greatly reduced.
Q5) I know you mentioned it before, but can you walk us through the acBTC minting process?
Minting is acBTC actually very simple.
If you are already holding WBTC or renBTC, you can visit https://app.acbtc.fi/mint
To mint acBTC directly. It’s minted on a 1 to 1 basis based on the basket composition.
Also, there is no minting fees right now. So we encourage everyone to give it a try.
For those who currently don’t hold WBTC or renBTC, you could wrap native BTC by using either renBridge or go through any of the WBTC merchants.
And for those who owns ERC20 BTC tokens such as USDC, ETH, etc. you can directly buy WBTC from Uniswap or any other DEXes or CEXes
So in simple terms, once you have WBTC or renBTC, you can directly mint acBTC at no additional cost (besides gas fees)
Uniswap Detective:
Right so even if you are not a BTC holder and wanted to partake in minting acBTC.
You can just swap your ETH on Uniswap for WBTC or renBTC and then use your platform. Sounds very simple to get involved.
Terry L. | NUTS Finance:
Correct.
This is how the Mint application looks like.
Uniswap Detective:
The interface is nice and simple, similar to using Uniswap really.
You’ll have a system in place to promote a more balanced basket of ERC20 BTC tokens, can you touch on this briefly?
Terry L. | NUTS Finance:
Just to clarify. The question is how do we maintain balance for the acBTC composite basket correct?
Uniswap Detective:
Yes that’s right.
So I mentioned earlier in the session that people compared us to mStable + Curve.
So our swap application is actually build on top of Curve’s stableswap algo but we modified the amplication coefficient.
Meaning, we are making the slippage parameter tighter.
So for those who are not familiar with Curve. Ultimately it’s a DEX with different asset pools. Users deposit assets (ie. USDC, USDT) get a LP token and earn CRV.
What’s important to know is that the deposited assets are kept in the pool.
So up to this point, it’s very similar to acBTC composite basket.
However, for us, we set a ratio limit between the different constituents in the acBTC basket. Meaning if a certain constituent surpass a certain threshold, it would be reflected in the mint amount and redeem amount.
So let me give you a simple example. If the acBTC composite basket is currently 50/50 between WBTC and renBTC.
When a user mints acBTC, he/she will get 1 acBTC by depositing WBTC because the basket is fully balanced.
However, when the basket weight shifts to let say 60% WBTC 40% renBTC. Then a user minting acBTC with WBTC will get less than 1 acBTC. This way to encourage users to deposit with renBTC instead.
This is the balancing mechanism we have in our acBTC composite basket
Mission:
If I may, I think this picture helps clarify things, too.
Terry L. | NUTS Finance:
Thanks for the assist @crypto_mission
Clutch haha
Uniswap Detective:
Yes, I get what you mean. It’s actually a very simple but effective way of ensuring the basket is as balanced as possible.
Terry L. | NUTS Finance:
Correct. To mitigate arbitrage but we are not completely against arbitrageurs.
The ecosystem need them to balance things out but obviously an overdose is unhealthy just like anything.
Uniswap Detective:
I think its clear what acBTC is, why there is a demand and how to mint with your simple Swap function.
Q6) Okay so once I have my acBTC tokens, what can I do with them on the platform?
Right now with acBTC you can participate in the Savings application (show up as Rewards in the frontend).
You can stake acBTC to earn AC and acBTC. This is the only use case for acBTC as of today but we are working on acLoan, which allow users to collateralize acBTC at a more robust LTV ratio.
acLoan will be launched before the end of Q1 2021. Also, we are working on a number of partnerships with lending platforms basically allowing them to support acBTC as collateral assets.
Similar to how WBTC is accepted on Compound or Aave despite the fact that the LTV is not very competitive.
Uniswap Detective:
Great, so right now we can mint acBTC to earn AC and acBTC.
Then in the coming months you will have acLoan launched for further utility. I know its very early stages but you guys are moving very fast!
Q7) Alright, I think we have a decent understanding of the acBTC token and platform, but this isn’t the only token in the ecosystem — what is the purpose of the AC token?
So a layman response is, AC Is a governance token for the acBTC ecosystem just like every other DeFi projects but since this is a selected group, I will share more:
Unlike most DeFi projects on the market, AC holders can participate in decision making of the acBTC ecosystem. Specifically, parameters that would require decision making includes:
1. Protocol fees. I mentioned we have multiple protocols in the acBTC ecosystem (acSwap, acVault, acLoan, Mint, Redeem).
These applications can all be charged a transaction fee. However, we would like to let AC Holders make decisions on how much the fee setting should be.
2. Add/removal of constituents to/from the acBTC composite basket.
If let say the community does not feel sBTC (sorry picking on sBTC) to be a suitable asset because they are not natively backed by BTC then AC holders can vote on this decision.
3. AC Emission Structure, this one is what alot of people are interested in. Essentially our token economics is divided into Phases to align with our product development, community building and market liquidity.
If for example the community has decided for us to add another application such as option for example.
Then it would make sense to reserve an amount of token to help bootstrap usage and promote the option application.
In that case, AC holders can vote to reduce AC emission schedule because we are planning for another Phase to launch a new application so that enough AC can be saved for the later phase.
4. AC holders can participate in liquidity mining right now
So to recap quickly:
1 to 3 will be launched once ACoconut DAO is initiated, which will be in Q1 2021.
Unlike alot of projects, we dont have the DAO setup right from the get go because we need to build a real and diverse community supporter base first.
A lot of the projects who issue governance tokens initially launch a DAO but most of the token holders are already insiders or pre-allocated or pre-mined.
But for us, we decided to launch the project first, build the community, then setup the DAO. Some may disagree the approach but we feel this is the right way to operate a DeFi project.
4 is live, so users holding AC can very much get effective yield by providing LP to uniswap
Sorry I rambled on again but I hope you understand why I say we are quite different than existing projects with governance tokens.
Uniswap Detective:
No don’t be sorry! I was going to add some comments there but you’ve done a great job summarizing the utility of AC for our viewers. You’re clearly passionate about this project!
Thank you @TerryNUTS 👏
Section 2: Community Questions
Q1) Why did you call it ACoconut?
Glad you asked. A lot of people don’t know and thinks ACoconut sounds silly. So ACoconut is a play-on word of Account.
Account is essentially what Blockchain technology is designed for, to keep account and keep balance. So ACoconut = Account = ledger = blockchain technology. Many optics behind the name haha.
Q2) Are you concerned at all about price levels of AC token and potential dumps?
No because our token economics are designed based on 3 pillars.
1. Product development.
2. Community building.
3. Market liquidity.
Q3) Once and for all — how differs acBTC from wBTC / RenBTC?
WBTC and renBTC works on bridging bitcoin liquidity from Bitcoin network to Ethereum network. acBTC works on different use cases to empower WBTC and renBTC.
So in short, we are not competing with WBTC or renBTC.
We are building on top of the ERC20 BTC liquidity by providing more efficient use cases. Dont worry, this will not be the last time I answer this question.
Important links:
acBTC:
Telegram Chat: https://t.me/acbtc_community
Website: https://acbtc.fi
Twitter: https://twitter.com/NUTSFinance/
Medium: https://medium.com/nuts-foundation
The Selective Ape Community
Telegram Chat: https://t.me/TheSelectiveApe
Telegram Announcements: https://t.me/TheSelectiveApes
Twitter: https://twitter.com/ApeSelective
