Hacker News Reader

Comment by austinmoninger | Hacker News Reader

I think you're on the right track regarding increasing the "weather" when the price is below the dollar peg — however this isn't quite to spur demand, it is to remove beans from circulation. This is what happens when you "sow beans", the protocol burns them and in exchange you get a locked-in interest rate (in pods), and you get paid out when all the lenders in front of you (the pod line) get paid out.

(and again, this is an activity that is incentivized when bean price is below $1 in order to bring the price back up)

Admittedly, the metaphors can get dense but personally once I started to wrap my head around it they were quite helpful!

View on HN

> This is what happens when you "sow beans", the protocol burns them and in exchange you get a locked-in interest rate (in pods), and you get paid out when all the lenders in front of you (the pod line) get paid out.

ohh, i misunderstood the lockup conditions around lending. so the protocol properly does decrease circulation. still at the expense of an increased maximum supply, but with the rate at which that new supply enters circulation controlled for independently (by the "bean supply").

i don't see any mechanism to decrease the maximum supply. over the very long term, it seems that the system becomes increasingly unstable the longer that the bean demand growth is below the Weather rate. the bean demand growth ought to have some resemblance to the general rate of return, so the uncertain thing here is: will lenders lend at advantageous rates to Beanstalk after it establishes itself as a good creditor? or will lenders demand an outsized return for lending to Beanstalk, on account of their money being locked up for an indeterminant duration? i see arguments for both, but it's pretty academic: it looks like there's enough runway in the system that these "very long term" preponderances are mostly irrelevant in this stage of defi.

interesting project.

> will lenders lend at advantageous rates to Beanstalk after it establishes itself as a good creditor? or will lenders demand an outsized return for lending to Beanstalk, on account of their money being locked up for an indeterminant duration?

One would think that once Beanstalk has an even more robust credit history, lenders with lower risk profiles would be even more inclined to lend to Beanstalk! Once you have a sufficient credit history I don't think the "indeterminate" lock up period will be a deterrent (that's what high weather helps mitigate in the near term).

The protocol is in a debt cycle right now (as indicated by the market cap being $50M while the pod line of lenders is $390M), but in the long run the debt level should be much more reasonable and the market cap will be significantly larger than the pod line.

> interesting project.

Agreed! There are a lot of new, interesting aspects to this specific algo stablecoin that I haven't seen before. And the best part is that it's working! All other non-collateral algo stablecoins failed within a month (like ESD, Basis Cash, etc), but Beanstalk has been chugging along for 4-5 months now. I think the Lindy effects are strong here.

Reply on news.ycombinator.com