This is a guide on how to buy Basis Cash tokens BAC, BAS, and BAB. It is crucial to understand the difference between these tokens before you buy any Basis Cash tokens. This is because the risk/return parameters for these tokens are completely different. This guide will help you understand the Basis Cash protocol and the role that BAC, BAS, and BAB play in the ecosystem.
What is Basis Cash?
Basis Cash is a seigniorage based stablecoin ecosystem. This means the Basis Cash protocol is able to mint new “stablecoin” units at a price cheaper than its face value, and give this newly created value to the “shareholders” of the protocol. Here’s the definition of seigniorage:
profit made by a government by issuing currency, especially the difference between the face value of coins and their production costs.
The Basis Cash protocol is based on an older idea during the 2017 ICO boom from a team called Basis. The original Basis team produced the whitepaper and explained how they want to build this system. Unfortunately, due to VCs aping in with zero due diligence (literally – they raised $100s of millions without a real product in the market), the project shut down after regulatory concerns.
As we now enter the 2020-2021 period of DeFi boom where projects like YFI are close to billion dollar protocols, there is a renewed interest in these projects. The Basis Cash team has chosen to remain anonymous and launch the protocol. There are no VCs or investors. There is no pre-sale. There are no regulators to please. It is a free market of ideas.
How Does Basis Cash Work?
Since Basis Cash is an algorithmic seigniorage stablecoin, the main question to answer here is how the peg to the dollar is maintained. Basis Cash technically targets the DAI price which itself targets a value of 1 USD.
In order to do this, the Basis Cash protocol has stabilizing mechanisms whenever the value of the stablecoin deviates from 1 DAI.
If the stablecoin falls below 1 DAI, then BAB is issued. If the stablecoin rises above 1 DAI, then seigniorage rewards are given to “shareholders” to increase supply and bring price back to parity.
Understanding Basis Cash Tokens: BAC, BAS, and BAB
It is paramount to understand the different tokens in the Basis Cash ecosystem before you put any money to work.
- BAC: This is the stablecoin of the Basis Cash ecosystem, aka “Basis Cash”. The target rate is 1 BAC = 1 DAI. If there is a deviation of more than 5%, measured via a Time Weighted Average Price (TWAP) over the last 24 hours, then the protocol stabilization mechanisms kick in.
- BAS: This represents the “shares” of the Basis Cash protocol, aka “Basis Shares”. When the price of 1 BAC exceeds 1 DAI, the supply of BAC expands. This costs nothing to the protocol, hence seigniorage. This seigniorage is captured by the BAS holders (who stake BAS in the ‘Boardroom’). BAS therefore works like a ‘share’ – if the BAC price rises, the supply increases and the increase in supply goes to BAS holders in the form of a ‘dividend’.
- BAB: These are “Basis Bonds” priced at the square of the price of BAC when BAC is below 1 DAI. Therefore is 1 BAC = 0.8 DAI, then 1 BAB = 0.64 DAI. In this scenario, anyone can take 64 DAI and get 100 BAB. If the price of BAC gets back to parity of 1 DAI, then each BAB can be exchanged for a BAC. Therefore, the conversion is 64 DAI -> 100 BAB -> 100 BAC -> 100 DAI (when parity is reached) for a profit of 36 DAI or 56.25% returns on initial investment.
How to Buy Basis Cash Tokens
If you want to buy Basis Cash tokens, first decide what you want to buy.
- Buy BAC if you believe BAC will retain its peg to DAI and that’s what you want.
- Buy BAB if you believe BAC will eventually reach DAI parity and make a short-term investment with high returns.
- Buy BAS if you believe the overall BAC marketcap will go up due to BAC demand and stake in the Boardroom to capture seigniorage from BAC minting (via dividends).
To buy BAC and BAS, the best way is via a DeFi aggregator like 1inch. This sources liquidity from multiple decentralized exchanges including private market makers. This will usually give you the best execution price. You can buy BAC on 1inch or buy BAS on 1inch.