No, SISHI is not a stable coin. Rather, SISHI aspires to become an algorithmic reserve currency backed by other decentralized assets. Similar to the idea of the gold standard, SISHI provides free-floating value its users can always fall back on, simply because of the fractional treasury reserves SISHI draws its intrinsic value from.
Each SISHI is backed by assets in the treasury, not pegged to it. Because the treasury backs every SISHI with all assets in the treasury, the protocol would buy back and burn SISHI when it trades below its intrinsic value. This has the effect of pushing SISHI price back up to the fair value. SISHI could always trade above its fair value because there is no upper limit imposed by the protocol.
At a high level, Sishi Finance consists of its protocol-managed treasury, protocol-owned liquidity (PCV), Dynamic Bonding Mechanism (DBM), and Dynamic Staking Rewards (DSR) that are designed to control supply expansion.
Bonding generates profit for the protocol, and the treasury uses the profit to mint SISHI and distributes them to stakers. With LP bond, the protocol is able to accumulate liquidity to ensure system stability.
As the protocol controls the funds in its treasury, SISHI can only be minted by the protocol. This also guarantees that the protocol can always back 1 SISHI with assets in the treasury. You can easily define the risk of your investment because you can be confident that the protocol will indefinitely buy SISHI below its fair value with the treasury assets until no one is left to sell.
As the protocol accumulates more PCV, more runway is guaranteed for the stakers. This means the stakers can be confident that the current staking APY can be sustained for the long term because more funds are available in the treasury.
It is extremely important to understand how early in development the Sishi Finance protocol is. The network is currently tuned for expansion of SISHI supply, which when paired with the staking, bonding, and yield mechanics of Sishi Finance, results in a fair amount of volatility.
SISHI could trade at a very high price because the market is ready to pay a hefty premium to capture a percentage of the current market capitalization. However, the price of SISHI could also drop to a large degree if the market sentiment turns bearish. We would expect significant price volatility during our growth phase so please do your own research on whether this project suits your goals.
When you buy and stake SISHI, you capture a percentage of the total supply of SISHI (market cap) which supply is fixed at 21 million SISHI. This is because your staked SISHI balance also increases along with the circulating supply. The implication is that if you buy SISHI when the market cap is low, you would be capturing a larger percentage of the market cap.
Rebase is a mechanism by which your staked SISHI balance increases automatically. When new SISHI are minted by the protocol, a large portion of it goes to the stakers. Because stakers only see staked SISHI balance instead of SISHI the protocol utilizes the rebase mechanism to increase the staked SISHI balance so that 1 staked SISHI is always redeemable for 1 SISHI.
APY stands for annual percentage yield. It measures the real rate of return on your principal by taking into account the effect of compounding interest. In the case of Sishi Finance, your staked SISHI represents your principal, and the compound interest is added periodically on every epoch thanks to the rebase mechanism.
One interesting fact about APY is that your balance will grow not linearly but exponentially over time.
As illustrated above, your SISHI balance will grow exponentially over time thanks to the power of compounding. Let's say you buy a SISHI for $100 now and the market decides that in 1 year, the intrinsic value of SISHI will be $2. Assuming a daily compound interest rate of 2%, your balance would grow to about 1377 SISHI by the end of the year, which is worth around $2754. That is a cool $2654 profit! By now, you should understand that you are paying a premium for SISHI now in exchange for a long-term benefit. Thus, you should have a long time horizon to allow your SISHI balance to grow exponentially and make this a worthwhile investment.
There is no clear answer for this, but the intrinsic value can be determined by treasury performance. For example, if the treasury could guarantee to back every SISHI with 1 BUSD, the intrinsic value will be 1 BUSD. It can also be decided by the future DAO. For example, if the DAO decides to raise the price floor of SISHI, its intrinsic value will rise accordingly.
Let’s say the protocol targets an APY of 100,000%. This would translate to a rebase rate of about 0.6328%, or a daily growth of about 2%.
If there are 100,000 SISHI tokens staked right now, the protocol would need to mint an additional 2000 SISHI to achieve this daily growth. This is achievable if the protocol can bring in at least 2000 BUSD daily from bond sales. If the protocol fails to achieve this, the APY of 100,000% cannot be guaranteed.
No. Once you have staked SISHI with Sishi Finance, your staked SISHI balance will auto-compound on every epoch. That increase in balance represents your rebase rewards.