Introducing Eclipseum — The Antifragile DeFi Asset

No statements within this article should be interpreted as financial advice. Eclipseum is an experimental asset. Use at your own risk.

I am excited to introduce Eclipseum to the Ethereum and DeFi communities. Eclipseum (ECL) is an ERC-20 token designed to be an antifragile, high liquidity, low downside volatility asset that will hopefully prove to be an effective store of value, collateral, and DeFi primitive.

Quick Facts

1. Eclipseum contract address:
   0x08e411220e47e3fc43bfb832186aba95108f2861
2. Deployed to Ethereum mainnet on 11/11/2020 at 9:45AM EST
3. Open source smart contract, code available on Github and Etherscan
4. Audited by Trail of Bits
5. No VC investors, no pre-launch token sale. Developed and deployed by a solo developer.
6. Price downside volatility mitigation game theory distributes buyers and sellers more evenly throughout time.
7. ECL can be bought and sold directly on the ECL liquidity pool in the Eclipseum contract, providing credible neutral token issuance. A user interface for interacting with this liquidity pool is available at eclipseum.org/app
8. Includes a liquidity pool containing DAI and ETH which transfers half of all transaction fees to the ECL pool. Thereby ETH/DAI price volatility generally increases the ECL price.
9. Elastic supply system that mints or burns ECL from the ECL liquidity pool in response to every ECL trade, reducing price volatility and increasing liquidity.

Quick Links

1. Eclipseum.org
2. Eclipseum Historical Chart
3. Whitepaper
4. Security Audit
5. ECL on Uniswap
6. Telegram
7. Github
8. Etherscan
9. Discord
10. Subreddit

Six Core Value Propositions

1) ETH Price Volatility Value Capture

Eclipseum features an AMM liquidity pool, which contains DAI and ETH.

This pool enables users to buy and sell DAI and ETH. As the ETH price changes on external markets, this liquidity pool is traded as profitable arbitrage opportunities emerge.

Half of the 0.3% transaction fee on every trade is transferred to the ECL pool in the form of ETH, increasing the price of ECL.

Therefore, ETH/DAI price volatility generally increase the ECL Price in ETH.

2) High Liquidity and Trustless ECL Trading

Eclipseum is designed to provide high liquidity to ECL traders through a second AMM liquidity pool containing ECL and ETH.

The ECL pool contains ECL and ETH and enables users to buy and sell ECL in exchange for ETH directly with the Eclipseum smart contract.

A 0.3% transaction fee is paid by the the trader on every transaction, and this fee stays within the ECL pool.

The ECL liquidity pool enables ECL price discovery to occur directly on the Eclipseum smart contract. All circulating ECL tokens originate from being bought from the ECL liquidity pool, providing a credibly neutral ECL token issuance mechanism.

3) Elastic Supply System

Eclipseum features an elastic supply system that mints or burns ECL tokens from the ECL pool in response to every ECL trade.

When ECL is bought from the ECL pool, ECL is minted into the ECL pool.

When ECL is sold to the ECL pool, ECL is burned from the ECL pool.

This enables the ECL circulating supply to absorb some of the fluctuations in supply and demand, resulting in a more stable ECL price.

4) Price Downside Volatility Mitigation

Eclipseum contains game theory that is designed to minimize the ECL price downside volatility. This is done by incentivizing ECL buyers to buy ECL immediately after ECL is sold by a different user. This creates a more balanced distribution of buyers and sellers throughout time, and results in less price downside volatility.

This chart compares ECL price to arbitrary asset “ABC”. While both asset prices increase the same amount overall, the ECL price does so with less downside volatility, as buying and selling is distributed more evenly throughout time.

The implementation details of how this is accomplished are discussed later in this article.

5) Decentralization

Eclipseum is entirely decentralized as it does not include any access control privileges or governance, and has fair and credibly neutral token issuance. The deployer of the contract has no special abilities and does not receive any free ECL tokens. All users have equal rights when interacting with the Eclipseum smart contract.

6) Immutability

Eclipseum is entirely immutable as the smart contract functionality cannot be changed once it is deployed. The contract does not include any upgradeability, contract pausing, or emergency stop functionality.

How Eclipseum Works

Eclipseum is composed of two liquidity pools.

The ECL pool contains ECL and ETH, enabling users to buy and sell ECL in exchange for ETH.

The DAI pool contains DAI and ETH, enabling users to buy and sell DAI in exchange for ETH. The DAI pool is likely to be utilized primarily by arbitrage traders.

The liquidity pools utilize the constant product automated market maker (CPAMM) algorithm to calculate the amount of tokens a user receives in given transaction. This is the same algorithm used by Uniswap liquidity pools. However, the Eclipseum pools do implement additional logic including ECL mint and burns, and ETH transfers between the two pools, all of which is explained in this article.

The ECL Price in ETH can easily be calculated using the equation below:

ECL Token Issuance & Distribution

Eclipseum utilizes a novel and credibly neutral approach to token issuance. When the contract was first deployed, 100,000 ECL tokens were minted into the ECL liquidity pool. The only way users can obtain ECL tokens are by buying them from this liquidity pool. No user, including the deployer of the contract receives any ECL tokens for free.

When a user buys ECL from the ECL liquidity pool, the elastic supply system mints new ECL tokens into the ECL liquidity pool. This allows the ECL liquidity pool to scale proportionally to the ECL circulating supply. Eclipseum’s elastic supply system ensures the circulating supply of ECL tokens will never exceed 6 times the quantity of ECL held in the ECL liquidity pool. This is how the ECL pool ensures a significant amount of liquidity for ECL traders.

Transaction Functions

Eclipseum contains five functions that enable users to transact ECL, ETH, and DAI with the two liquidity pools. These five functions are explained in detail below.

Buy ECL Function

The Buy ECL function enables user to buy ECL from the ECL pool using ETH. This function always results in an increase in the ECL Price in ETH, and an increase in the ECL Total Supply.

1. ETH spent by the user is transferred to the ECL pool.
2. ECL is sent from the ECL pool to the user.
3. ETH is transferred from the ECL pool to the DAI pool to balance the quantity of ETH in each pool.
4. ECL is minted into the ECL pool.

Sell ECL Function

The Sell ECL function enables users to sell ECL to the ECL pool and receive ETH in return. This function always results in a decrease in the ECL Price in ETH, and a decrease in the ECL Total Supply.

1. ECL sold by the user is transferred to the ECL pool.
2. ETH is transferred from the ECL pool to the user’s account.
3. ECL is burned from the ECL pool.

Soft Sell ECL Function

The Soft Sell ECL function enables users to sell ECL to the ECL pool and receive ETH from both pools, and DAI from the DAI pool. This function always results in a decrease in the ECL Total Supply, a decrease in the ECL Market Cap in ETH, but does not decrease the ECL Price in ETH. This function can be beneficial for ECL sellers to use over the Sell ECL function in certain situations, which are explored later in this article.

1. ECL sold by the user is transferred to the ECL pool.
2. ETH is transferred from the ECL pool to the user.
3. ETH is transferred from the DAI pool to the user.
4. DAI is transferred from the DAI pool to the user.
5. ECL is burned from the ECL pool.

Buy DAI Function

The Buy DAI function enables users to buy DAI from the DAI pool using ETH. This function always results in an increase in the DAI Price in ETH within the DAI pool.

1. ETH spent is transferred from the user’s account to the DAI pool.
2. DAI is transferred from the DAI pool to the user’s account.
3. Half of the 0.3% transaction fee is transferred to the ECL pool in the form of ETH.

Sell DAI Function

1. DAI sold is transferred from the user’s account to the DAI pool.
2. ETH is transferred from the DAI pool to the user’s account.
3. Half of the 0.3% transaction fee is transferred to the ECL pool in the form of ETH.

Eclipseum Game Theory

Now that Eclipseum’s value propositions and main five transaction functions have been explained, we can dive deeper into the Eclipseum game theory.

Elastic Supply System

The elastic supply system serves multiple functions outlined below.

1. The elastic supply results in less price volatility. When ECL is bought, ECL is also minted in the ECL pool. When ECL is sold, ECL is burned from the ECL pool. This has a dampening effect on price changes that result from transactions on the ECL pool.
2. The elastic supply provides more liquidity. Since there is a dampening effect applied on price changes from ECL pool transactions, ECL buyers or sellers can receive better prices if transactions are split into multiple smaller transactions. This both provides more liquidity to ECL users, and also results in smaller price changes due to ECL pool transactions.
3. The elastic supply system allows ECL to be issued directly from the ECL pool. Since ECL is minted or burned from the ECL pool in response to each trade, the ECL balance of the ECL pool scales relatively proportionally to the ECL circulating supply.

Soft Sell ECL Function

The Soft Sell ECL function is an alternative function to the Sell ECL function that can be advantageous for ECL sellers to use in certain situations. Unlike the other four transaction functions, the Soft Sell ECL function does not utilize the CPAMM algorithm.

The Soft Sell ECL function transfers to the user ETH from the ECL pool, ETH from the DAI pool, and DAI from the DAI pool in proportion to the amount of ECL sold divided by the ECL circulating supply. Similarly to the Sell ECL function, the Soft Sell ECL function also burns ECL from the ECL pool.

When a user sells ECL using the Soft Sell ECL function, the ECL Price in ETH does not decrease. However, since ECL is burned from the ECL pool in this transaction, the ECL total supply, ECL circulating supply, and ECL market cap all decrease.

Under normal conditions, ECL sellers will receive more total value from using the Sell ECL function instead of the Soft Sell ECL function. However, after large ECL selloffs, the Soft Sell ECL function may become favorable for ECL sellers.

The ECL Price Ratio can be utilized to discern which sell function is favorable for ECL sellers to utilize. The ECL Price Ratio is defined as the Soft Sell ECL Price in ETH divided by the standard ECL Price in ETH. If the ECL Price Ratio is greater than one, than ECL sellers will receive more total value from utilizing the Soft Sell ECL function. Otherwise, they are better off using the Sell ECL function. The ECL Price Ratio can be calculated using the equation below.

Pool ETH Ratio Equilibrium

The Pool ETH Ratio is defined as the ratio of ETH held in both liquidity pools, and can be calculated using the equation below.

The Pool ETH Ratio is a critical value enforcing the Eclipseum game theory, and particularly the ECL price downside volatility mitigation. Since the Buy ECL function transfers ETH from the ECL pool to the DAI pool if necessary to balance the quantities of ETH, a Pool ETH Ratio of 1 represents an equilibrium state. When the Pool ETH Ratio is greater than one, the ECL price in ETH is more likely to increase than when the Pool ETH Ratio is less than one.

There are three game theoretic mechanisms backing up the Pool ETH Ratio, which are explained below.

1. When the Pool ETH Ratio is greater than one, there is more total value in the DAI pool than in the ECL pool. This means that transaction fees captured by the DAI pool and transferred to the ECL pool will in general be larger.
2. When the Buy ECL function is used, the contract attempts to balance the amount of ETH in both liquidity pools. When the Pool ETH Ratio is larger, less ETH is transferred to the DAI pool, and more ETH remains in the ECL pool increasing the ECL price in ETH.
3. The larger the Pool ETH Ratio is, the larger the ECL Price Ratio is. The closer the ECL Price Ratio is to one, the less the ECL Price in ETH is to decrease, since at that point ECL sellers would likely transition to using the Soft Sell ECL function.

The Buy ECL function transfers ETH from the ECL pool to the DAI pool as necessary to maintain a Pool ETH Ratio of one. However, the Sell ECL function does not transfer any ETH to or from the DAI pool. So when ECL is sold using the Sell ECL function, the Pool ETH Ratio increases. This incentivizes user to Buy ECL. This asymmetry between the Buy ECL and Sell ECL functionality is where Eclipseum derives it’s price downside volatility mitigation.

Conclusion

Eclipseum is designed to be an antifragile, credibly neutral, decentralized, immutable, and intrinsically valuable asset to serve the Ethereum, DeFi, and cryptocurrency communities. I encourage you to join the Eclipseum community through the subreddit, discord, or to reach out to me directly at taylor@eclipseum.org.