Autonity represents an innovative approach to blockchain economics, with its focus on capital efficiency, unique staking models, and a robust tokenomics framework.

This article delves into the various aspects of Autonity’s economic design, including its native liquid staking model, tokenomics, the functionality of its Auton Stabilization Mechanism (ASM) and Autonomous Currency Unit (ACU).

Dissecting the Efficiency of Capital in Autonity’s Liquid Staking Model

Capital Efficiency refers to the optimal utilization of capital to achieve the highest possible returns while minimizing risk. In Autonity, capital efficiency is significantly enhanced through its liquid staking model, which allows stakers to earn staking rewards while maintaining liquidity.

Native Liquid Staking

Mechanism

Stakers deposit (NTN) in the staking contract to receive a liquid staking derivative token(LNTN) in return. This derivative can be used in other DeFi applications.

Pros

• Liquidity: Stakers retain liquidity, allowing them to trade or use derivative tokens in other financial products.

• Flexibility: Enables users to participate in DeFi while still contributing to network security.

Cons

• Complexity: More complex than traditional staking, requiring careful management of derivative tokens.

• Smart Contract Risks: Risks associated with potential vulnerabilities in the staking and derivative contracts.

Non-Liquid Staking

Mechanism

Stakers lock their assets in a staking contract without receiving any liquid derivative.

Pros

• Simplicity: Easier to understand and manage, with fewer moving parts.

• Stability: Lower risk of smart contract failures as there is no need for derivative tokens.

Cons

• Lack of Liquidity: What happens to your funds when they are staked, the answer is that it is locked,you can’t use them for anything

Autonity Tokenomics

Autonity’s token ecosystem includes several key assets, each with distinct roles:

• Auton (ATN): The primary stablecoin used for transactions within the Autonity network. It is maintained at a stable value through the Auton Stabilization Mechanism (ASM) and is used for various applications, including payment and staking.

• Newton (NTN): Used as collateral in the collateralized debt positions (CDP) to mint ATN. NTN role is to ensure fluid liquidity within the whole network while also ensuring its stability.

• Liquid Newton (LNTN): Represents staked NTN in a liquid form. This token allows users to participate in staking while retaining liquidity for other uses.

Auton Stabilization Mechanism (ASM): Keeping the Balance

The stability of Auton (ATN) is paramount for the integrity of the Autonity ecosystem. This is where the Auton Stabilization Mechanism (ASM) steps in, ensuring that ATN remains close to its target value, the Autonomous Currency Unit (ACU). Let’s unravel how ASM functions and why it’s so crucial.

Purpose of ASM

ASM’s primary role is to maintain the stability of ATN by adjusting its supply and managing Collateralized Debt Positions (CDPs). It’s the financial backbone that ensures ATN doesn’t deviate significantly from its target value.

How ASM Functions

1. CDP Management: Users deposit NTN to borrow ATN. ASM manages this process, adjusting borrowing costs based on the ATN/ACU ratio.

2. Minting and Burning: ASM mints ATN when users borrow and burns ATN when they repay, thus controlling the supply.

3. Liquidation: If a CDP becomes under-collateralized, ASM triggers liquidation to protect the system’s integrity.

ASM Process

1. CDP Creation: Deposit NTN → Mint ATN.

2. Borrowing: Adjust borrowing costs based on ATN/ACU ratio.

3. Repayment: Burn ATN → Return NTN.

4. Liquidation: Liquidate under-collateralized CDPs.

By dynamically adjusting borrowing costs and managing CDPs, ASM ensures that ATN remains stable and reliable, providing a solid foundation for the Autonity ecosystem.

Autonomous Currency Unit (ACU)

The Autonomous Currency Unit (ACU) is the benchmark against which ATN’s stability is measured. It’s a carefully curated index of seven major currencies designed to minimize volatility and provide a stable reference value.

How ACU Functions

Currency Basket Composition:

• AUD (Australian Dollar)

• CAD (Canadian Dollar)

• EUR (Euro)

• GBP (British Pound Sterling)

• JPY (Japanese Yen)

• SEK (Swedish Krona)

• USD (United States Dollar)

Calculation:

Index Value: Computed from the weighted average of the basket currencies.

Purpose

Minimize exposure to individual currency fluctuations and provide a stable value reference.

ACU Composition and Calculation

Basket Currencies → Weighted Average → ACU Value

The ACU serves as a reliable reference, helping to stabilize ATN and ensuring consistent value across the Autonity ecosystem.

Use Cases Built on Autonity’s Tokens and ASM

1. DeFi Applications: Lending and Borrowing: Users can leverage NTN and LNTN in decentralized lending platforms, accessing liquidity while earning interest. Stablecoin Payments: ATN can be used for transactions within the network and for various payment applications.

2. Collateralized Loans: CDP Creation: Users can create CDPs to borrow ATN against NTN collateral, using the borrowed funds for investment or liquidity needs.

3. Staking and Liquidity Provision: Staking Rewards: Users who stake NTN or LNTN can earn rewards and participate in governance while maintaining liquidity.

4. Governance Participation: Protocol Changes: NTN and LNTN holders may participate in governance decisions, influencing protocol upgrades and changes.

5. Economic Stability: Price Stability Mechanism: The ASM ensures that the value of ATN remains stable, providing confidence in its use as a reliable currency.

Conclusion

Autonity’s economic and tokenomics design highlights a sophisticated approach to blockchain stability and efficiency. By incorporating native liquid staking, a robust stabilization mechanism, and a carefully structured token ecosystem, Autonity addresses critical challenges in maintaining stability and liquidity. Whether for staking, collateralized borrowing, or DeFi applications, Autonity’s model offers innovative solutions for managing capital and ensuring economic stability within the blockchain ecosystem.