Float Protocol (FLOAT)

Basics

• Based in:
• Started in / Announced on:
• Mainnet release:
• A non-pegged stablecoin

Audits & Exploits

• Bug bounty program can be found [insert here].
• From their blog (9-3-2021): "We have done and will go far beyond the norm for security checks."

Bugs/Exploits

• From Week in Ethereum (22-1-2022):

"Float Protocol ~$1 million exploit, Uniswap V3 price oracle manipulated."

Governance

Admin Key

• From their blog (9-3-2021):

"We have implemented all of the major controls you would expect of the protocol and under a multisig behind a 48h timelock contract."

Treasury

• From their blog (6-2-2021):

"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."

Token

Token Allocation

• From their blog (9-3-2021):

50% — Community distribution

10% — Community governed treasury

5% — Initial team members reward (These are locked for 12 months after the initial mint ceremony of FLOAT.)

35% — Post launch liquidity incentives

Utility

• BANK (6-2-2021):

"BANK is a token that serves three purposes:‌

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

Other Details

• Has FLOAT and BANK as tokens (20-3-2021).

Coin Distribution

• From their blog (20-3-2021):

"We went for a “Democratic Launch” where we distributed a large proportion of our BANK governance token to active governance participants in other platforms. We did this by way of a cap on deposits of $30k and a whitelist. The result has been around 4,000 addresses buying or farming BANK so far."

Technology

• Whitepaper can be found [insert here].
• Code can be viewed here.

Implementations

• Built on: Ethereum

How it works

• From their blog (20-3-2021):

"Like Reflexer, FLOAT is a non-pegged stablecoin. The starting price of FLOAT will be $1.618 (the golden ratio in Mathematics). In contrast to RAI, the target price of FLOAT is positively correlated with increased demand for FLOAT and, like RAI, positively correlated with the price of ETH.

Float is a two-token partly collateralised system. It uses collateral (just ETH in V1) which it stores in what we call the “Basket”. Similar to FEI, users cannot directly arbitrage collateral out of the Basket. Rather, the protocol uses the Basket to bring the price back to target through Dutch Auctions (these are auctions where bids start at the highest possible price and descend downwards towards the minimum (reserve) price). One of the main goals of the system is to ensure there is always a target amount of collateral relative to the target price of FLOAT, which we call the “Basket Factor” (initially 100%).

If the price of FLOAT is above its target price, any user can start an auction (initially it can only be started if a minimum of 24h has passed but that requirement will be lowered and then completely removed as participants become more comfortable with how the system works). Once an auction starts, the system mints and sells new FLOAT, starting at market price + some premium (an undesirable trade in most cases) and slowly lowers the offer price in steps towards that of the target price.

At every step where there is an active arbitrage opportunity (where the price offered in the auction is below the market price), arbitrageurs will buy FLOAT from the protocol and sell it on the market for a small profit. In buying FLOAT from the protocol, arbitragers pay a blend of ETH and BANK (the second token in the Float system).

For example, let’s assume the target price was $2, the market price was $4 and the Basket Factor was 200%. Let’s say that one of the offered price steps in the auction was $3.90 (so there is a clear arbitrage opportunity of $0.10). $2 of the $3.90 would be paid in ETH and $1.90 paid in BANK. The BANK given to the protocol would be permanently burned by the protocol. By doing this, the protocol is ‘storing’ the extra volatility into the BANK token. BANK can be actively used in contractions if the Basket Factor is below 100%. We can also see that after the expansion, the Basket Factor will be lower and slowly edge towards the target.

Contractions in FLOAT. If the market price of FLOAT is below its target price, the protocol offers to buy FLOAT from the market in the form of a “Reverse Dutch Auction.” This is where the seller (in this case the protocol) tells the buyers what bids it would accept in increasing steps.

The starting step is the market price minus some discount. This is slowly increased by the protocol in steps until the price researches the target price. If the Basket Factor is below 100% (i.e. the value of the collateral in the system is below the value of FLOAT in circulation), the Protocol will buy FLOAT from the market with a mix of ETH from the Basket and freshly minted BANK. This is the inverse of what happens in an expansion. In this instance, the cost of ‘refilling’ the Basket Factor is covered by the BANK holders. The FLOAT bought is instantly burned.

One of the cool things about the protocol is that the process of a contraction always increases the Basket Factor (the amount of collateral we have relative to the amount of FLOAT on the market). This is because in a contraction, FLOAT is bought from the market below its target price

(As a side note, in v1 there are few incentives for speculators to get involved when the price is below peg. However, we plan to introduce a bond-like system in future releases. Equally, in order to balance protecting purchasing power with price volatility, we plan to introduce an interest-based system to increase/lower demand for FLOAT in a more granular way.)"

Roadmap

• Can be found [Insert link here].

Competition

• Other (algorithmic) stablecoins like Fei Protocol and RAI. Float created a write up with its differences (20-3-2021);

"In contrast to RAI, the target price of FLOAT is positively correlated with increased demand for FLOAT and, like RAI, positively correlated with the price of ETH. In comparison to RAI, FLOAT will be stable in the short-run (since the on-demand auction mechanism will be very efficient in correcting the market price) but its value will change more in the long-run. Specifically, FLOAT will be more sensitive to changes in the price of its collateral (just ETH in V1). We purposely designed FLOAT this way to protect the long-term purchasing powers of users. This means it should change in value more aggressively than RAI, but with a smoothness and low-volatility.

However, since there is no free lunch, this does mean that in the case of a prolonged drawdown of crypto prices and an extended lack of demand for stablecoins (specifically FLOAT), the target price of FLOAT will trend downwards (in a less volatile and dampened way) with its collateral."

Pros and Cons

Cons

• From their own comparison blog (20-3-2021):

"Similar to FEI, one of the major risks for FLOAT is a collateral-value-drop induced “bank-run”. In this instance, if the price of ETH were to decrease a lot, the protocol would adjust by moving the target price down slowly over time (how fast depends on how the market price behaves relative to the target price). Contractions would be paid for by the Basket, supported by BANK.

Funnily enough, a big and sudden sell-off of FLOAT would actually be beneficial for the protocol. It allows the protocol to quickly boost its Basket Factor. This is because with every contraction auction, the protocol ends up with a higher % Basket Factor (since the protocol buys FLOAT off the market below the target price for which it aims to have 100% collateral, leaving excess collateral in the Basket which that can go towards supporting the rest of the FLOAT in circulation if future contractions arise).

However the risk with FLOAT is that, should the price movements be severe enough for a prolonged period, liquidity and speculative demand for BANK could disappear. This would mean the protocol would struggle to fully correct the price back to target (eventually the protocol would not have enough in the Basket or through newly minted BANK to support the FLOAT price). Instead, the protocol would rely on target price movements to absorb all the pressure over time. Unlike Fei, Float would still function as designed except the target price decline would be larger than ideal.

One nice feature about the Float design is that as the protocol gets more usage and there is more stability and market acceptance for BANK, the Basket Factor can be voted down (by governance) to less than 100%. This would make the protocol more capital efficient and close to a truly independent digital currency."

Team, Funding, Partners

Team

• From their blog (6-2-2021):

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

• Anonymous (9-3-2021):

"We decided to be anonymous founders. We are aware that anonymity has become synonymous with scams. However, one of our fundamental principles is that an open source protocol should come before the people which are making it. Crypto was started in the spirit of anonymity, particular the adage “verify don’t trust”."

• 0xMaki; multisig

(:

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