Welcome to Bimbo Capital Review, where we share interesting projects and their implications. None of the following is financial advice.
Follow us on Twitter: Bimbo Capital
Zephyr, the protocol.
Zephyr is a protocol that enables privacy by inheriting Monero’s privacy features and stability via a triple asset model with native currency, stablecoin, and a reserve coin.
Why is this important? Zephyr Protocol emerged as a groundbreaking stablecoin protocol following the Luna collapse and tried to improve the model. This article delves into the intricacies of the Zephyr Protocol, exploring its components, tokenomics, future prospects, and our investment decisions.
The Zephyr Protocol: Privacy and Stability Combined
Zephry utilizes a triple asset model consisting of ZEPH, ZephUSD, and ZephRSV.
ZEPH is the native currency of the network
ZephUSD is the stablecoin pegged to the value of the USD
ZephRSV acts as a reserve token for reserve providers.
It employs a mineable Proof of Work mechanism, mirroring Monero's total supply but with a slightly slower emission curve.
Inspired by the Monero and Haven Protocol, the Zephyr Protocol stands out with its DJED stability mechanism, which avoids the pitfalls of traditional stablecoin models.
Core Elements of Zephyr Protocol
1. Zephyr Stable Dollars (ZUSD)
ZephUSD is a private, untraceable stablecoin backed by an overcollateralized Zeph reserve, ensuring stability and security.
It's a novel approach in the stablecoin arena, where the underlying asset for future work is electricity, offering a unique perspective on asset-backed stability.
$ZSD is interesting because of its PoW element as an underlying asset needed to produce future work- electricity, making it intrinsically valuable.
Liquidation, i.e., redeeming stablecoins if there are not enough reserves to cover the existing stablecoins (when the reserve ratio is less than 100%, you will receive R/number of stablecoins). In other words, if there’s a liquidation event, you’d receive less $ZEPH based on $ZehpUSD. Redeeming actions of ZephUSD at a reduced rate under these conditions serves to bolster the protocol reserve as opposed to further damaging the network state.
2. Zephyr Reserve Shares (ZRS)
ZephRSV, the reserve coin of the Zephyr network, is issued to users who contribute Zeph to the reserve, creating a system where holders benefit from the appreciation of the base coin, $ZEPH. This model ensures that in scenarios of reduced reserve ratios, the system self-corrects by incentivizing users to bolster the reserve, thereby maintaining stability.
In scenarios where the reserve ratio drops, users are incentivized to deposit ZEPH in exchange for ZephRSV (reserve tokens) at a discounted rate, thus bolstering the reserve. In the worst-case scenario, where reserve ratios fall below 1, the value of ZephUSD corresponds to the actual share in the reserve.
If collateralization drops below 100%, the treasury can mint more reserve shares by adding ZEPH into the reserve, increasing the collateralization of ZSD.
3. Zeph Token
Zeph plays a pivotal role in the Zephyr ecosystem, being the central token used for minting and redeeming ZUSD and ZRS. This interplay of tokens creates a dynamic yet stable environment for users.
Competitive Edge and Innovations
Zephyr Protocol differentiates itself from other stablecoins by its unique approach to supply growth, reserve ratios, and price determination. With a 400% minimum reserve ratio and a pricing oracle that factors in both spot and moving average prices, Zephyr Protocol provides a robust and potentially more reliable stablecoin system than its competitors.
Launch, Tokenomics, and Mining
Zephyr Protocol had a fair launch, with no ICO or presale. Protocol has a maximum supply of 18.4 million tokens, with about 10% in circulation.
Tokenomics in Detail
The emission curve of Zephyr is designed to favor early adopters, reducing dilution over time, so a very similar schedule to Monero, but with a slower emission.
Total Supply: 18.4 Million (+ tail emission 0.6 ZEPH p/block)
Block Time: 120 seconds
The protocol has a pre-mine of 500,000 ZEPH to handle operational costs and adverse market conditions, ensuring long-term stability and resilience.
The emission schedule below:
Mining and Community Engagement
Zephyr's mining community is thriving, with many miners already active. Zephyr currently has around 10,000 miners, while Monero has about 18,000 and is at about 1/3 of Monero's hash rate at about 1GHz/s.
The correlation between the mining hash rate and the network's price underlines the protocol's growing adoption and market capitalization.
On the 17th of November, there are talks about Bitmain potentially using their X5 to mine via the new firmware, after which they’d potentially sell their miners after profiting from the mining and dump the coins. Mr.D from the Discord server put it: “Mine privately, accumulate coins, dump miners on market, profit”. Something to follow as Zephyr might potentially do a fork and move to a different PoW (RandomX v2 or some other algo that's eliminating ASICs).
The hash power has gone to +1ghz as of the 17th of November 2023.
The Future of Zephyr Protocol
Zephyr Protocol's potential lies in its ability to integrate into various ecosystems, with plans to establish $ZSD as a viable alternative to USDT. The protocol envisions multiple exchange listings and merchant integrations, enhancing the utility and reach of ZSD.
Example of one of the first integrations can be seen at https://zephyrpayments.com/blog.
While the protocol shows promising prospects, caution is advised due to its current all-time high values and the speculative nature of recent price movements. However, the potential for a cult-like following and its unique position in the market make it an intriguing option. Disclosure: We've been deployed in the protocol since late September, entering at an average price of $2.95.
Zephyr Protocol is a novel stablecoin market approach combining privacy, stability, and accessibility. We see it as a formidable USDT alternative for users seeking these privacy and stability elements.
With its unique tokenomics, robust mining community, and clear vision for the future, Zephyr Protocol is poised to impact the world of cryptocurrency significantly.
While establishing numerous $ZSD quote markets or even introducing ZSD-USDT markets on various exchanges, the stablecoin usage could benefit it's utility, and reduce exposure to centralized entities like Tether or Circle.
- Loading comments...