[CHI] - Chi Gastoken Collateral Onboarding Application

Hello,

This is my proposal to include Chi Gastoken (CHI) as a collateral asset for MCD.

1) Who is the interested party for this collateral application?

wjmelements, founder of bitcog LLC, former engineer at TrustToken, MetaMask, and Snapchat

2) Provide a brief high-level overview of the project, with a focus on the applying collateral token.

1 CHI corresponds to 1 SELFDESTRUCT refund, currently worth 24000 gas. It’s value tracks the product of its ~36000 gas creation cost and the long-term “safeLow” gasPrice. It’s primarily used by traders on 1inch Exchange to offset gas costs by up to 50%, but anyone can mint or redeem it.

ERC20 Address: 0x0000000000004946c0e9f43f4dee607b0ef1fa1c

3) Provide a brief history of the project.

Chi Gastoken was 1inch.exchange’s submission to the 2020 ETHGlobal hackathon. 1inch.exchange launched Chi Gastoken 45 days ago as a more-efficient alternative to the long-established GST2. It has overtaken GST2 in AMM liquidity and volume but hash reached 1/3 of GST2’s market capitalization in that short time.

4) Link any available audits of the project. Both procedural and smart contract focused audits.

No audit available

5) Link to any active communities relating to your project.

1inch Telegram
1inch Twitter

6) How is the applying collateral type currently used?

Investors primarily acquire CHI in anticipation of saving gas during network congestion, during which network bandwidth is more valuable.

Gastokens provide stability to the gas price by both consuming cheap bandwidth and doubling bandwidth under high demand.

Chi is directly integrated within 1inch.exchange, but other services may integrate it, and they would hold their value even if 1inch ceased to exist.

7) Does one organization bear legal responsibility for the collateral? What jurisdiction does that organization reside in?

No, CHI is fully decentralized and trustless.

8) Where does exchange for the asset occur?

Uniswap V2 and Airswap

7 Likes

Given that work is proceeding on EIP 1559, I’m not sure whether it is worth the effort to onboard gas tokens as collateral.

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  • EIP 1559 is not scheduled for any upcoming fork
  • EIP 1559 does not break gas refunds
  • EIP 1559 will increase the gas price (and therefore the price of CHI) by incentivizing miners to use less than the current 11 mgas block limit.
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The combined market cap for CHI+GST2 has surpassed $1m

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CHI market cap has surpassed $1m

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CHI market cap has surpassed $2m

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Greenlight Poll

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CHI now trades on Mooniswap, which has overtaken UniswapV2 in CHI AMM liquidity.

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CHI supply (1375185) is now 75% of GST2 supply (18,417.02), and CHI has 4.16x the AMM liquidity of GST2.

CHI AMM Liquidity: 137932
96792 in Mooniswap
41127 in UniswapV2
13 in UniswapV1

GST2 AMM Liquidity: 330.99
324.58 in UniswapV2
6.41 UniswapV1

I predict CHI will overtake GST2 in market cap by the end of September.

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Chi is too small a marketcap to be accepted as collateral.

Though I have a bag, I’m not sure I’m for this. So I guess I’m against.

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Mixed feelings.

I guess this markets depend on:

  • gas price levels
  • gas price volatility

Is (decentralized) computing demand “infinitive”? Probably.
L2 solutions will probably lower gas prices, but demand will follow.
IIRC ethereum blocks are constantly full since beginning 2020 and currently it’s hard to imagine this not being true anymore.

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Other proposed collateral passing greenlight, currently without opposition, has 1/4 the market cap and requires third-party trust. Gastokens are trustless and have considerable upward potential both in supply and in price. CHI gastokens have doubled in supply in the last month, and tripled in price, while increasing 15x in AMM liquidity between Mooniswap and Uniswap. As of my last post, 10% of CHI is locked in AMMs, so it is very liquid for its market cap.

No, L2 solutions will become more popular with higher gas prices, but they will only add to L1 demand.

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My understanding is that the market cap of either of these tokens is a useless statistic, as they can be minted and burned at will. I can mint x CHI right now and allow its market cap to surpass that of GST2 and subsequently use these same tokens for arb. In this scenario, I did not add/rm value from the the token price but I did “manipulate” the market cap greatly. Am I thinking about that incorrectly?

Go and try. It would be very difficult for you to do better than just buying from AMMs on any reasonable scale because the gas market is efficient.

You would be manipulating the entire gas market greatly, and like all market manipulation, you would lose massive sums of money.

Good.

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One thing to note is that there’s a ~2x inefficiency. The gas price has to double for you to actually save money. And on top of that, you can only use CHI gas token to save 50% on gas costs, you’re still going to have to spend Ether at that high gas cost too.

So there’s inefficiency in burning, and as @wjmelements mentioned, it’s also hard to mint it to. You need to participate in gas auctions. And you lose money if you’re too eager to mint gas.

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I understand. However, I am speaking from strictly from a market cap perspective.

I claim that the market cap of these tokens is a vanity metric. As a better example than the one I produced above—imagine that 100x the current totalSupply of GST2 were minted 3 years ago when the token was first created. That would mean that the market cap of GST2 would be $140M right now. In that case, the USD value of each token in this scenario would be equivalent to what it is today. That 100x number could just as easily be 1x or 1000x, but the USD value of the tokens would still remain bounded by the floor and ceiling while the market cap could be anywhere from 1x to 1000x what it is now.

As an FYI, the ceiling mentioned above is the gasPrice and USD price combo where someone can mint and sell for a profit in a single tx and the floor is the gasPrice and USD price combo in which arb bots will buy and use the token for a profit in a single tx. There are already bots performing both actions right now.

I do not disagree with what you are both saying. I am pointing out that these token’s value can be better described by the bounded floor and ceiling of the cost of their mintability/useablitiy relative to the current gasPrice.

Well some people will find the market cap quite relevant, in the context of an onboarding application.

Also it’s relevant because it takes quite a while to mine gastoken without major market impact.

The open interest for a call options seems relevant.

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@shane I don’t think your concerns about market cap are unique to gas tokens.

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Genuine question: do you think that CHI would be more likely to be voted to be included as a MKR collateral option if there were 100x in existence and thus the market cap was 100x? I do not know the answer to that.

This is a good point! I think an important difference is that open interest is capped at the number of outstanding shares available to create the option contract whereas there is no such cap with these specific tokens.

I agree! I would argue that any freely mintable and burnable token are subject to these points. We just don’t see many of these.

Yes

A comparable cap is all historic gas.

The TrueCurrencies are currently passing greenlight unopposed and also have this property.

2 Likes