Decoding $DUCA - Live AMA #2

In the episode of Decoding Duca which took place on May 17, 2024, Svea Berlie and Patrick Huisinga discuss the upcoming launch of Ducata, the innovative concept of programmatic money, the overarching mission to impact societies positively, and more! Read our notes below to learn more.

Background

Svea Berlie (Host) – Head of Community at Ducata

Patrick Huisinga (Guest) – Founder and CEO of Ducata

Ducata – a decentralized financial framework based on a Reflexivity Protocol that produces programmatic money $DUCA

Ducata Introduction

Patrick says there’s a lot happening and the team is working towards a launch next month, aiming for the second week of June 2024. He says that everything is looking good but there’s still a lot to handle. He expresses excitement about the project, mentioning the progress on the Testnet and the extreme testing they’ve done to ensure stability and sustainability of the yields.
Svea highlights ongoing marketing efforts and the current pre-sale. Svea notes Maria Navarro’s addition to the team, helping them expand beyond their initial Dutch audience. She appreciates the support from the Dutch community and highlights their belief in a Dutch project with big dreams.
Patrick appreciates the support from the Dutch community and dives into the motivation behind starting the project six years ago. He shares his background in entrepreneurship and various industries, which led him to crypto in 2017. Patrick was fascinated by the potential of blockchain technology and its early stages. He saw it as an opportunity similar to the early internet, where new initiatives had the potential to seize significant positions.
Patrick highlights the project’s goal to have a social impact rather than just making money. He highlights the issues with current currencies, especially in countries with high inflation rates, and the need for sound, high-quality currency. The project started with the idea of creating a stablecoin but evolved into creating programmatic money.

Defining Success for $DUCA

Svea mentions the work being done with media partners and the effort to simplify the communication around $DUCA. She highlights the challenge of moving away from technical jargon to more accessible language, emphasizing the term “programmatic money” over “stablecoin.”
Svea asks Patrick about his definition of success for $DUCA, whether it’s related to market adoption, market cap, or practical use in daily life.
Patrick responds by expressing that, in many ways, $DUCA is already a success due to the development and launch of the idea and protocol. He views the successful implementation and availability of $DUCA as major milestones. He highlights the importance of making $DUCA accessible to people in countries with unstable currencies, such as Nigeria and Argentina, where stable value assets are crucial for maintaining purchasing power.
Patrick also mentions traditional success metrics like market cap and TVL, stating that while these are important, his personal measure of success focuses on $DUCA reaching and helping people who truly need a stable value asset. He hopes to expand $DUCA’s adoption and have it become a significant player in the DeFi space, potentially surpassing other decentralized stablecoins like $DAI.
Svea talks about Ducata’s goal of maintaining purchasing power for users. She mentions the initial focus on the DeFi community for launching and testing the protocol, but also notes the future aim of making $DUCA accessible to everyone, eventually enabling people to use it for everyday purchases like coffee and groceries.

Roadmap to Mass Adoption

Svea asks if there is a timeline for mass adoption. Patrick responds that they aim for it to happen as soon as possible. He explains that they plan to kick off their multi-chain strategy later this year, starting with a launch on Ethereum mainnet. Despite Ethereum’s high costs, it provides security and reliability. The strategy includes expanding to markets like South America, where stable value assets are in high demand due to unstable local currencies. Patrick highlights that their unique selling points, such as maintaining purchasing power and providing an autonomous yield, are crucial for mass adoption.
Svea expresses excitement about the protocol’s launch and the ability to swap tokens like $DCM (stability token) for $DUCA and $DUS (pegged to USD). She says that $DUS could be a significant trigger for mass adoption due to its attachment to the US dollar and the yield it offers, protecting against depreciation.
Addressing a question about liquidity pool insights, Patrick explains that each pool will start with approximately 100,000 tokens each, though this amount could be adjusted based on the pool’s functionality. For example, in a $DCM-$DUCA or $DCM-$USDC pool, the number of tokens might vary slightly depending on the starting price. He elaborates on the mechanics of liquidity pools, stating that a net inflow of roughly $170K is needed to hit the target price of $7.25/$DCM, which is the starting price for distribution.
Patrick further explains that demand for $DCM will come from multiple angles, such as users buying $DCM with $USDC or seeking $DUCA or $DUS. This demand is generated because the protocol needs to rebalance liquidity pools when tokens are withdrawn, creating more $DUCA and generating demand for $DCM. He highlights that the fundamental value proposition of $DCM is its central role in all protocol activities, making it a valuable and interesting asset to own or speculate on.

DUCA vs UST: Navigating the Endogenous Collateral Landscape

Svea mentions that someone compared $DUCA to Terra Luna’s $UST due to the endogenous collateral and asks Patrick to highlight the differences. Patrick explains that while there are similarities, there are key differences that make $DUCA distinct and more robust. He points out that $UST and $LUNA had a symbiotic relationship that led to their collapse because they couldn’t ensure an exit market under all circumstances. This collapse happened due to the lack of continuous demand, which is crucial for any capitalistic model.
Patrick highlights that the biggest challenge for a system based on endogenous collateral is to maintain demand even when there’s a selling pressure. He says that while this challenge can’t be fully solved, it can be managed effectively. The solution lies in having a triple token economy like Ducata, which breaks the symbiotic relationship between the stable asset and the volatile asset, thus providing more stability.
He further explains that $DUCA includes mechanisms to handle worst-case scenarios progressively, referring to a “lender of last resort” concept, which helps maintain demand for one of the assets regardless of market conditions. This approach ensures that there is always a mechanism in place to turn things around, maintaining stability within the system.
Patrick adds that while exogenous collateral models like $USDC are stable because they are backed by real-world assets, they don’t fulfill the goal of creating a new currency or form of money, which is $DUCA’s aim.
Patrick elaborates that the concept of programmatic money and the Reflexivity protocol are central to $DUCA’s model. The reflexivity protocol, based on George Soros’ theory, highlights the importance of perception in the market, where perception and prices influence each other. This understanding is key to maintaining the stability and value of $DUCA, making it a next-level solution in the realm of programmatic money.

The Approach of $DCM

Svea asks a question about $DCM being compared to rebase tokens like Ampleforth’s $AMPL. She mentions the potential Achilles heel and the challenges with exchanges listing rebase tokens.
Patrick acknowledges the challenges but clarifies that $DCM uses the rebasing mechanism differently. Unlike $AMPL, which aimed to create a stable value by adjusting the supply based on price fluctuations, $DCM uses rebasing as a fee structure. This approach ensures that fees are charged regardless of user actions, making the protocol more resilient during market fluctuations.
Patrick explains that many stablecoin models rely on arbitrage opportunities to maintain stability. However, this dependency on user actions can fail when the market sentiment turns negative, and everyone runs for the exit. In contrast, $DCM’s sustainable incentive model, based on rebasing, allows the protocol to charge fees independently of user actions, ensuring stability even in adverse conditions.
He explains that this mechanism not only creates stability but also provides a powerful tool for token economies. Patrick predicts that using rebase mechanisms for utility tokens will elevate tokenonomics to the next level.
Patrick says that addressing the concern about exchanges listing rebase tokens can be challenging due to the technical complexities of handling rebasing. However, he is not overly concerned about $DCM being listed on centralized exchanges. The primary focus is on $DUCA and $DUS, while $DCM is more suited for users who understand and can leverage its advanced mechanics.
Svea adds that while $DCM is available in the presale, it might not be the best choice for everyone. $DUCA and $DUS are more suitable for those who prefer simplicity. She also mentions how Natalia, Ducata’s content writer, described $DCM and $LPD as a mini stock market, reflecting their dynamic interaction within the protocol.
Patrick then addresses another question about $DCM escaping a death spiral if under pressure. He explains the concept of “Clean Float,” where the demand in the stability pool increases as $DCM’s market value drops. This mechanism ensures that users convert $DCM to $LPD, stabilizing the price by reducing selling pressure.

Reinforcing Demand: The Strategic Role of $DCM in DUCA’s Ecosystem

Svea highlights an important point that while the protocol creates demand for $DCM through various mechanisms, such as the clean float, it also ensures that $DCM is essential for minting other tokens like $DUCA and $DUS, reinforcing its demand across multiple avenues. This structure is designed to maintain and increase demand for $DCM, preventing a death spiral and ensuring stability.
Patrick elaborates on where the extra yield comes from, explaining that in DUCA’s programmatic money system, the yield is derived from the protocol’s autonomous nature, which can define its own rules. He explains that the $DUCA exchange value algorithm adjusts the value based on CPI data and other economic indicators, ensuring that the yield is maintained without affecting the protocol’s collateralization ratios. This ability to adjust values internally sets $DUCA apart from systems reliant on exogenous collateral.
Addressing the demand for $DCM, Patrick explains that the protocol incentivizes holding and using $DCM through mechanisms like clean float. This creates a scenario where, as the market value of $DCM drops, the demand in the stability pool increases, pushing users to convert their $DCM to $LPD and stabilize the market. This mechanism ensures that there is always demand for $DCM, preventing a collapse.
Regarding the complexities of $DCM and its mechanics, Svea assures that while a masterclass might not be in the works, there will be articles and content to help users understand the basics and make informed decisions based on their risk appetite.

DUCA’s Yield Mechanism and Resilience Against Economic Attacks

Patrick acknowledges the inherent constraint related to $USDC but explains that the scalability of $DUCA is not purely constrained by it. The protocol can scale indefinitely, but $USDC acts as an intermediary token.
Patrick explains that as more $USDC is used to buy $DUCA, the Automated Market Operator (AMO) will rebalance by using excess $USDC to buy $DCM in the $DCM-USDC pool, thus increasing the market value of $DCM. This process ensures there is no scalability friction, although the amount of $USDC in the pools limits how much can be exited. As the protocol grows, liquidity outside of the protocol will increase, allowing more exit options beyond the DUCA Market Maker (DMM).
Regarding economic attack factors, Patrick welcomes arbitrageurs as they provide market efficiency. The protocol invites arbitrage activities, which help in maintaining a balanced market. While there is potential for short-selling attacks, the protocol has mechanisms to counteract such pressures. The clean float mechanism, along with other protocol features, ensures that downward market pressure can be reversed, making it difficult to collapse the protocol. The protocol’s control over market conditions, including the ability to increase fees and buy back $DCM, creates a challenging environment for those attempting economic attacks.
Patrick highlights that while profit can be made through short-selling, the extent of the profit is limited by the protocol’s defensive mechanisms. He invites participants to engage with the protocol while noting that its design is meant to withstand such challenges and maintain stability.

DUCA vs. CBDCs: Balancing Digital Benefits with Privacy Risks

Patrick discussed the concerns about Central Bank Digital Currencies (CBDCs) and their potential for misuse. He says that while CBDCs could offer digital benefits, they pose significant risks related to privacy, control, and misuse of power. The centralized nature of CBDCs could lead to unprecedented control over individuals’ financial activities, raising concerns about personal freedom and privacy.
Patrick contrasted this with $DUCA, which is designed to minimize centralized control and empower individuals. $DUCA aims to create a new form of money that operates independently of government control, promoting financial democracy and protecting users’ purchasing power without the risks associated with CBDCs.
Regarding access to liquidity pools through aggregators, Patrick explained that initially, users would need to access the pools via the Ducata website. This is due to technical limitations that prevent integration with aggregators before the launch on the mainnet. However, the goal is to enable aggregator access as soon as possible post-launch to enhance integration and user convenience. The temporary reliance on the Ducata website is a practical necessity, but efforts are underway to transition to aggregator access swiftly.

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Show Information

Medium: Spotify
Show: Decoding DUCA
Show Title: Decoding Duca Episode 5 – Live AMA #2
Show Date: May 17, 2024