Starting from 2019, Eco has raised a total of $94.5 million from 5 rounds of financing and has recently made new progress. On July 27th, Eco announced the launch of a cryptocurrency wallet called Beam, which integrates account abstraction and can be used for payments on Layer 2 solutions such as Optimism and Base.
Eco has a strong background, with CEO Andy Bromberg being the co-founder of cryptocurrency platform CoinList. The project has received investments from top crypto institutions such as a16z Crypto, Coinbase Ventures, LianGuaintera Capital, Founders Fund, and Lightspeed Venture LianGuairtners. After 4 years of starting the project and raising funds, Eco finally tweeted on July 16th, and LianGuaiNews will interpret the mechanism of Eco in the following text.
Eco and two tokens: a currency experiment
Eco is a reserve and payment currency designed to be a decentralized alternative to fiat currencies. There is no stablecoin pegged to the US dollar in its system, and it hopes to “maximize wealth in Eco” through governance. Eco can be seen as a “currency experiment”, and if the experiment is successful, Eco will also become a money game in which all players in the ecosystem can win together.
The basis of this experiment by Eco is two tokens: ECO and ECOx.
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ECO is the base token of the Eco protocol, used for daily savings and payments. Its initial supply is 10 billion, but the supply can be adjusted based on the currency policy set by the “trustees” elected by users. ECO tokens are formulated using the “Weird ERC 20 Token” framework and include some unique features:
Supports rebase function. The balance of the owners can be adjusted based on the “linear inflation coefficient” in the contract, which means that ECO, like stETH, cannot be directly used in many DeFi protocols and requires an encapsulated version similar to wstETH.
Can be upgraded. The ECO token can be managed through a proxy, and the core logic of the token can be modified through governance at any time.
Can be paused. There is a circuit breaker that can be paused in case of bugs.
Rollback. Transfers or authorizations to the zero address and failed transfers will be rolled back.
Allowance can be updated. The authorization amount can be changed through decreaseAllowance and increaseAllowance, and the transferFrom method will also emit an Approval event to update the authorization amount.
ECOx is a deflationary token with a maximum supply of 1 billion, and it is transferable. Each ECOx represents a certain percentage of the ECO supply and can be used to share the growth potential of Eco by holding ECOx.
ECOx can be burned to mint ECO, but this process is irreversible. Both tokens are in circulation and can be traded on Uniswap. As of August 2nd, 1 ECOx can be converted to 9.8 ECO. According to CoinGecko, in the secondary market, the price of ECOx is about 20 times higher than the price of ECO, with prices of $0.348 and $0.017 respectively.
Governance and Monetary Policy
One of the features of Eco is its flexible monetary policy, which can adjust the currency supply of ECO through governance. Both ECO and ECOx can participate in the governance of Eco, with ECO having a voting power of 1 and ECOx having a voting power of 10.
Users can delegate their voting power to “delegates” after staking ECO or ECOx, and can change the delegation at any time. Delegates are the creators of monetary policies in Eco. Before qualifying as a delegate, they need to connect their wallet to Discord or Twitter, forge an Eco ID, and make themselves known to others.
Currently, Eco’s official website has announced more than 20 elected delegates, who come from founders of the DeFi industry, former Federal Reserve employees, bank researchers, cryptocurrency researchers, and operators, etc. The official website also provides their LinkedIn or Twitter links. The monetary governance is conducted by these elected delegates in cycles to maximize the total wealth held in Eco.
Users can delegate all their voting power to a single delegate. In this case, transfers can be made without canceling the delegation, and the delegation will be automatically revoked during the transfer process. Users can also make partial delegations, in which case transfers can only move funds that have not been delegated.
According to the Eco governance page, the currently effective monetary policy only includes the base interest rate. From July 22, 2023, to November 21, 2023, locking ECO can generate an annualized return of 7%, similar to a bank fixed deposit.
In addition, Eco has some unreleased monetary policies, including:
Base inflation rate, which changes the balance of holders proportionally through monetary policy.
Random inflation, randomly allocating ECO tokens to certain addresses, similar to a lottery;
Transaction fees, ECO transfers will incur transaction fees paid in ECO tokens, which will accumulate in the staked ECOx. Delegates can also charge an additional transaction fee based on this through monetary policy.
Launch of Three Products to Promote Eco Currency Adoption
In addition to the Eco currency, Eco, Inc., the development company of the project, has also developed the Eco App and sponsored others to develop various applications to increase the adoption of Eco currency. Currently, the following three applications have been announced on the official website.
Eco App: Positioned as a fintech company, it has payment, savings, and remittance functions. It can also be used to make payments or send Eco points, earning points and receiving cashback from partners during payments. Eco App has partnered banks and can provide insured deposit services.
Beam Wallet: a digital wallet that allows you to make payments to anyone at any time, and can be used on Optimism and Base. First, users need to connect their Twitter account and add a password, and then they can make transfers using ECO or USDC. You can also spend 600 ECO to register a Beam domain name in the wallet, which can be used when making transfers.
Tender: provides instant encrypted payment functionality for merchants through a simple and user-friendly interface.
As a project that started in 2019, Eco’s progress has been disappointing. According to the official website, the project was launched on October 28, 2022, and an updated roadmap was released in November 2022, stating that Eco will be upgraded in the short term to be compatible with Uniswap V2, create a wrapped version of the ECO token, activate trustee elections and monetary policies, initiate grant programs, and enable temporary governance functions. These plans have been largely implemented.
The long-term roadmap includes several potential system upgrades and research areas.
In the first phase, Eco will launch the distribution of ECO tokens, including allocation to partners and individuals. The points previously distributed to users in the Eco App can be exchanged for tokens.
In the second phase, the currency policy will be upgraded, governance flexibility will be improved, and expansion from Layer 1 to Layer 2 will be implemented. As mentioned earlier, the current effective currency policy only involves locking the ECO token for a period of time to obtain a fixed base inflation.
In the third phase, extensive governance improvements, novel economic designs, upgrade of Eco ID V2, and initiation of public product funding will be carried out.
Eco aims to create a currency system that is different from previous products, not anchored to the US dollar, and maximizes wealth in the ecosystem through governance. Its goal is to first become a medium of exchange and gradually transform into a store of value over time. The uniqueness of Eco may lie in its adjustable currency policies, which are determined by trustees based on governance decisions and can also be adjusted based on actual economic conditions.
In terms of positioning, Eco aims to be a store of value tool, similar to certain algorithmic stablecoins. However, both the ECO and ECOx tokens are not anchored to the US dollar and have a high degree of uncertainty.
From the perspective of the years from fundraising to product launch, Eco missed the golden period of development for algorithmic stablecoin projects. Even with the endorsement of top VCs, it will still be difficult to launch a new token with high volatility in the current environment and make it widely accepted as a payment and storage currency.