The Rise of Gyroscope: a New Path for Stablecoins?
Gyroscope has raised $4.5 million in seed funding to create a stablecoin called Gyro Dollars (GYD) with an innovative, all-weather reserve design. The funding round was co-led by Placeholder VC and Galaxy Ventures and included several renowned investors
Gyroscope is a new cryptocurrency project that aims to create a self-stabilizing money system that can adapt to market conditions and maintain a stable value. The project was launched in 2021 by a team of developers who sought to solve some of the problems associated with traditional stablecoins, such as centralized control and susceptibility to market volatility. They claim to have created a new third path between centralized and algorithmic stablecoins.
What’s behind Gyroscope?
The technology behind Gyroscope is based on the concept of self-stabilization, which is a property of distributed systems that allows them to automatically recover from disruptions and maintain their functionality. In the case of Gyroscope, the self-stabilizing mechanism is designed to regulate the supply and demand of the Gyro stablecoin and keep its value stable.
The main focus of the protocol is its stablecoin, known as $GYD or Gyro dollar, which is denominated in US dollars and stabilized through various mechanisms within the protocol. The first of these mechanisms is an "all-weather" reserve design, which aims to safeguard the reserve from any potential damage. The reserve is designed in such a way that any trouble faced by one of the assets held within it only affects a small portion of the reserve, rather than the entire reserve. The reserve holds assets that back at least 100% of the value of Gyro dollars issued at any given time. Currently, the assets held in the reserve vaults consist mainly of other stablecoins, but this may change as the protocol develops.
Additional features
Additional mechanisms such as price-bounded AMMs, a cross-referenced data feed, a dynamic stability mechanism, and optimistic governance are in place to stabilize the system. These mechanisms work alongside algorithmic price bounding to ensure the system remains stable.
Gyroscope uses a custom oracle design called the Triangulated Price Feed (TPF) and a custom Balancer Pool LP token (BPT) oracle to get data and price feeds. Instead of relying on one oracle provider, the TPF design uses multiple on-chain data sources to determine the relative price level and then checks that price against various oracles. The system of prophets Gyroscope uses aims to minimize trust and tolerate failures.
The Gyroscope protocol is life in a beta version as gyro proto (p-GYD) on Polygon for testing purposes before the full launch on Ethereum. The development team behind Gyroscope, FTL Labs, temporarily retains control over the protocol. Once live on Ethereum, the power will be in the hands of a DAO as part of its decentralized structure.
Final thoughts
While Gyroscope's technology seems innovative, it is difficult to determine whether it can survive the ongoing bear market or become another scam, given the latest notorious crash of Do Kwon's Luna's UST algorithmic stablecoin. The collapse of TerraUSD destroyed around $40 billion in value and sent shockwaves through the crypto industry that are still reverberating today. It is crucial to note that every new project comes with a certain level of risk, and investors should conduct thorough due diligence before investing in any crypto project. However, Gyroscope's approach to stablecoin design seems promising, and its all-weather reserve design is a unique and innovative solution to the issues facing stablecoins today. If the startup can execute its plans successfully, it may become a significant player in the crypto industry.
