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Empty Set Dollar (ESD) / Dynamic Set Dollar (DSD)

ESD was one of the firsts of its kind and a well known attempt to build a decentralized, scalable stablecoin. Beanstalk is in many ways inspired by ESD—in order to benefit from supply growth you either had to lend ESD to the protocol (sowing in the Field) or lock your ESD in the DAO (depositing in the Silo). DSD was similar but the epoch time was changed from 1 day to 1 hour, which helped with more frequent supply increases / debt issuance. However, the price of both tokens death spiraled shortly after launch and the prices now both sit below $0.01.

The protocols had a few inefficient mechanisms that led to their crashes.

Supply increase: ESD/DSD minted supply based on (price * total supply). Using the total supply while ignoring the liquidity pool that sets the price caused significant overinflation when the price was above peg. Beanstalk increases the supply by the liquidity and time weighted average shortage of Beans in the liquidity pools over a given Season (accounting for that liquidity).

Debt market: The debt issuance in ESD/DSD was primarily based on the debt level. This caused a tragedy of the commons problem, where lenders were incentivized to wait for other people to lend in order to get a higher interest rate, until eventually nobody lent. Beanstalk instead measures the TWAP, the debt level, and the change in demand for Soil in order to let the market define the interest rate (Temperature). Because the Temperature is set by the market and is not predefined (and adjusts somewhat slowly), lenders are incentivized to sow as soon as possible given the First In First Out nature of the Pod Line, rather than waiting for the Temperature to increase.

Withdrawing from the DAO: When the ESD/DSD price was below peg, there was no incentive to leave your tokens deposited in the DAO. In Beanstalk, there is an opportunity cost to withdrawing from the Silo a la your compounding Stalk rewards. By withdrawing, you burn your associated Stalk and Seeds that have accumulated during your time in the Silo.

Basis Cash

Basis Cash was another algostable attempt that had a couple primary issues, resulting in its current price below $0.01. Like ESD/DSD, it did not account for liquidity in its minting schedule—Beanstalk only mints the amount of Beans that would need to be sold to move the TWAP price back to peg.

Basis Cash also did not handle inorganic demand well, resulting in the price jumping up over $100. Beanstalk has what’s known as a Flood, a condition that is met when both the Pod Rate is less than 5% and the Bean price is above a dollar for more than 1 Season. Basically, when there aren’t many Pods and there is excessive inorganic demand for Beans (people buying Beans above $1), Beanstalk must have some fail-safe mechanism for bringing the price back down. During a Flood, Beanstalk will mint Beans, sell them on the market for ETH, and distribute that ETH to Silo Members (June 2022 edit: Beanstalk now sells Beans on the market for 3CRV and distributes that 3CRV to Silo Members).

This is the mechanism that saved Beanstalk during the pump and dump in September 2021.