In AMMs protocol such as Uniswap and Balancer, the ratio of assets in the pool has to be proportional due to the constant product function, the LP token is just a proprietary rata claim on the pool + fees. In QIAN V2, the design concept of QSD is similar to this. QIAN V2 can be understood as a pool similar to AMM, and the LP token is the stablecoin QSD. The design purpose of QIAN V2 is to continue to ensure that QSD is successfully mintable/redeemable with collateral equivalent to the target price and KUN tokens through the current collateral ratio. This ratio of the two assets (collateral and KUN) dynamically changes based on the price of the stablecoin.

The ratio of the underlying assets (collateral and KUN) dynamically changes based on the price of the QSD. If the QSD price is dropping, then the protocol tips the ratio in favor of collateral and less in the KUN token to regain confidence in QSD. If the QSD price rises above the target price, the QIAN V2 protocol's collateral ratio will change in the direction of increasing the proportion of the KUN token algorithm. With the algorithmization of QSD, which will allocate excess collateral to KUN token holders who call the buyback function. Anyone can burn KUN tokens equivalent to the excess collateral and call the buyback contract to get excess collateral. The "buyback swap" function always keeps value accruing to the governance token any time there is excess fees/collateral/value in the system.

The dynamic change of collateral/stability continues. QIAN V2 uses AMM game theory to test different collateralization ratios, incentivize recollateralization through arbitrage swaps, and redistribute excess value back to KUN holders through a buyback swap. The protocol starts at a 99.8% collateral ratio at the genesis and might or might not ever get to purely algorithmic.

The novel insight use market forces itself to see how much of a QSD can be algorithmically stabilized with KUN token so that it keeps a tight band around the target price. Purely algorithmic/rebase designs like Basis, ESD, and Seigniorage Shares have wildly fluctuating prices as much as 40% around $1 that take days/weeks to stabilize before going through another cycle. This is counterproductive and assumes the market actually needs a stablecoin with 0% collateralization. From the perspective of stablecoin design, this high volatility of purely algorithmic stablecoins is counterproductive and is not conducive to its final widespread promotion and combination with other DeFi applications. QIAN V2 doesn't make this assumption. Instead, it measures the market's preference. It finds the actual collateral ratio which holds a stablecoin tightly around $1, periodically testing small differences in the ratio when the price of QSD slightly rises/drops. QIAN V2 uses AMM concepts to make a real-time fractional-algorithmic stablecoin that is as fast at price recovery as Uniswap and Balancer are at keeping trading pools correctly priced.

QIAN developers believe that the fractional-algorithmic design like Frax and QSD are paradigm shifting for stablecoins. It is fast, real-time balancing, algorithmic, governance-minimized, and extremely resilient. To create a trusted stablecoin and all of the crypto community can embrace and practice cryptocurrency development since the advent of bitcoin.

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