Bean

BEAN is an on-chain stablecoin pegged to the US Dollar but is not backed by any reserves. Instead, BEAN relies on (a) a credit market comprising willing participants who manipulate the supply and demand for BEAN and (b) other financial incentives from the protocol to influence the peg of BEAN.

BEAN's design substantially draws inspiration from failed algorithmic stablecoins such as Empty Set Dollar and Basis Cash.

When BEAN's price is <$1, holders of BEAN are incentivized to lend their BEANs to the protocol (which burns BEANs to reduce supply), and when price is >$1 new BEANs are minted and distributed between governance stakeholders and BEAN lenders.

Governance rights in BEAN are earned by depositing whitelisted assets for liquidity and stability management. However, voting is performed entirely off-chain. Voting decisions are implemented by a governance Multi-Sig comprising entirely of anonymous contributors. The Multi-Sig has unrestricted control over the protocol's smart contracts as governance enforcement does not exist.

BEAN's short and long-term stability is primarily contingent on Beanstalk Protocol's ability to attract BEAN lenders when BEAN is below the peg.

Bluechip does not believe that the protocol will be able to guarantee the existence of lenders when the situation demands it. The failures of Empty Set Dollar and Basis Cash are clear warning signs. Further, the lack of restrictions on the anonymous Multi-Sig signers is another major cause of concern.