High-flying DeFi protocol takes on stablecoins with supply-elastic token

A DeFi protocol says it offers a fresh perspective on supply-elastic tokens, which have exploded in popularity across the decentralized finance sector.

Benchmark Protocol’s goal is to create a bridge between traditional finance and the crypto markets — all while adopting and refining a proven rebase algorithm introduced by Ampleforth.

The supply of MARK tokens is adjusted by tracking the movements of the CBOE volatility index (VIX) — also known as the “fear index” — in a smart and fast process.

Whereas other supply-elastic tokens target a price of $1 by adjusting for U.S. inflation, Benchmark Protocol’s target price is a composite international reserve asset known as Special Drawing Rights (SDR.) This is dubbed as the world’s most stable currency thanks to how it consists of the dollar, euro, pound, yuan and yen.

“Integrating such exposure provides a level of consistency and stability lacking from traditional stablecoins,” the Benchmark Protocol team explained. “By utilizing the SDR, holding the MARK token fosters increased adoption rather than exposure to just one currency, which creates a larger user base and delineated exposure to markets around the world.”

Mitigating volatility

Spikes in the VIX ultimately increase the token supply in the Benchmark Protocol — a correlation that aims to reduce the impact of liquidation events and act as a hedging mechanism. Supply is rebalanced within five hours of the New York Stock Exchange closing to reduce arbitrage activity, and to coincide with the capital markets, no supply adjustments are made on the weekend.

Benchmark Protocol says crypto enthusiasts may prefer MARK to stablecoins because of how it has a global inflation risk profile instead of a single currency risk profile, is shielded against inflation, and addresses collateralization risk, where stablecoins can become insolvent because the collateral backing it is now worth less than the asset that was issued.

A comprehensive liquidity pool rewards program known as The Press has already been rolled out, along with single-asset staking. Two trading pairs — MARK-ETH and MARK-USDC — are now available on Uniswap, and this list of supported pairs is going to be expanded over time.

Benchmark Protocol says that a unique feature of The Press means unclaimed rewards are not subject to supply adjustments — helping to promote long-term price stability around the peg.

Over time, it’s hoped that MARK will serve as a compelling alternative for stablecoins.

‘Filling an important gap in DeFi’

A plethora of dynamic collaborations have been unveiled in recent month, with Benchmark Protocol being onboarded onto Fulcrum, bZx’s margin platform. This ecosystem relies heavily on tokenization — and provides a decentralized environment for tokenized lending and margin trading.

When the news was announced back in November, Benchmark Protocol founder Harrison Woytko said: “With a suite of features available on the bZx network, onboarding to Fulcrum has been on the team’s radar since the initiation of our Protocol. One of my favorite features is allowing users to personalize their collateralization exposure.”

Elsewhere, Benchmark Protocol also confirmed it is utilizing RenVM to ensure the protocol “can excel in a cross-chain environment” — allowing MARK tokens to move seamlessly between networks in a blockchain-agnostic fashion. Ren’s alliance includes a consortium of DeFi projects, including the likes of Aave and Matic Network.

“When I think about Ren, the concept of creating and applying mainstream decentralized finance channels for all of crypto and creating a connection with broader capital markets is the real driver for collaboration,” Woytko added at the time.

Benchmark Protocol has also been building on Solana to further enhance its cross-chain capabilities — boosting liquidity in the broader DeFi sector. Integration is set to be completed in the second quarter of 2021, a significant step in ensuring that blockchain networks are able to communicate with each other and no longer exist in silos.

Looking ahead, the project says it is determined to continue refining its algorithms to enhance precision — delivering true utility to the supply-elastic ecosystem and enabling tangible use cases to be deployed in the short term.