Beanstalk explained — a unique stablecoin protocol
Beanstalk, a very interesting name you would ask, what does it exactly mean? Well, not just the name but it also has a very unique utility associated with it.
What exactly is Beanstalk then?
According to the website, it is “Beanstalk is a decentralized credit based algorithmic stablecoin protocol”, but what is it exactly?
To put it in simpler words, Beanstalk is an algorithmic stablecoin which is pegged to the value of USD (US Dollar). It is although not just a stablecoin like others, Beanstalk addresses two major problems that are present in the current stablecoins — one being centralization and the other collateral requirements.
Beanstalk is exactly the solution to these problems, it is a decentralized, collateral-free stablecoin. Different from what’s present in the market which can’t be relied on due to high borrowing rates and their inability to cope up with the supply and demand, creating problems for the consumers that expect high yield out of their investment.
How do I take advantage of Beanstalk platform then?
Now that’s a very good question! Let’s get started, one step at a time.
There are a lot of basic things that should be known before you go and yield those rewards!
First things first.
Firstly, you would need a MetaMask or any wallet that supports Ethereum network and fill in ETH in that to buy Beans (the native token of Beanstalk).
Once you have the necessary amount to buy Beans, we are good to go!
Beans: It is the native token of Beanstalk, which is equivalent to 1 USD but varies due to demand, supply and its pool.
To buy the beans, you can use bean.money website, which is connected to Uniswap directly, you can swap your ETH for beans in the trade section.
We’ll visit the website https://bean.money/, and the first thing we see here is the:
Silo: which is basically the pool where Liquidity Pool tokens and Beans are kept. One can put their beans and Liquidity Pool tokens in the Silo. Silo is basically a magic-maker which then mints stalks and seeds (explained in later part of the blog).
The liquidity pool consists of Ethereum and Beans.
Silo creates Stalks and Seeds (which are not some sort of tokens or something that reflects in the wallet but something that’s inputted in the contract and values are associated your wallet address.
So what are Stalks and Seeds?
Here’s a visual representation which would help you understand the behavior of these two and what it exactly means:
So as seen in the figure, the Silo mints:
Seeds and Stalk whose value is stored by Beanstalk (doesn’t reflect in the wallet as tokens), people holding higher number of Stalks get voting rights on the protocol, they can be part of the governance process. Seeds turn into Stalks and this process recursively continues with passing seasons.
Seeds and Stalks are minted throughout Seasons.
Seasons are 1 hour long and they change after an hour, minting Seeds and Stalk in the process.
Every hour as seasons change, the price of Beans is also checked with respect to the US Dollar.
There are two possible conditions here:
> When bean’s price is greater than 1 US Dollar:
When this condition is met, in a Season where the price of a Bean is greater than 1 USD, the Silo will automatically produce more beans, with high supply and people getting more beans, they will sell the beans to bring down the price back to 1 USD, the people with LP tokens and beans staked in the Silo, will receive higher number of Beans.
Beans are minted and awarded to people holding stalks and seeds. And those with LP tokens staked get more Beans from the Silo, hence getting a chance to sell and get higher yield.
> When bean’s price is less than 1 US Dollar:
When this condition is met, “soil” is created in the field, the field is then ready for farming (“sowing”) — throw beans in soil, you would get some pods.
Field is the “Beanstalk credit facility”, where soil is a space in which beans are sowed. Sowing beans means staking them in the field, if the Soil is available and then one would get a Pod, which is a “debt asset” of the platform.
Pod is a temporary asset which can be redeemed after the price of Bean is recovered and then a Pod is equivalent to 1 Bean. So basically, 1 Pod = 1 Bean.
Note: There’s a 24 hour lock on withdrawing from Silo if you withdraw, this works as the dumping control mechanism to make sure the price maintains the stability.
You can also check the data regarding circulating supply, deposited beans, withdrawn beans etc on the website on the “Analytics” section. It has a very comprehensive yet simple outlook on the data and is very simple to analyze as well.
Hourly, daily and monthly charts for beans, field and silo are also natively available on the website:
With a very transparent and unique approach, the confidence in this token is very high. As mentioned above, people possessing stalks can also vote on the decisions on this protocol, this makes this a very friendly yet highly community-driven token:
Hope you guys have fun getting those beans! Sow your way into them!
They also recently announced their own BeaNFT Genesis Collection, which introduces a chance to win NFTs for sowing beans!