Bidao is the project of a new stablecoin which, however, differs from other stablecoins due to the fact that it is issued on Binance Chain.
It is an algorithmic stablecoin anchored to the value of the American dollar, similar to DAI.
It looks like an attempt to replicate the success of the most famous algorithmic stablecoin, DAI, but on the Binance blockchain.
In fact, the model on which Bidao was created is very similar to that of DAI before it became multi-collateralised.
DAI was created as a decentralised algorithmic stablecoin based on smart contracts on the Ethereum network, with ETH as collateral and Maker (MKR) as the governance token.
BAI is an algorithmic stablecoin based on smart contracts on Binance Chain, with Binance Coin (BNB) as collateral and BiDao (BID) as the governance token.
From this point of view, BAI appears very similar to DAI, although with some differences mainly related to the blockchain and the governance.
The differences between the different stablecoins
The Ethereum blockchain makes the ERC20 DAI token extremely widespread, while BEP2 tokens like BAI have a more limited range. In contrast, Binance Chain allows faster transactions, thanks to the Proof-of-Stake, while the Proof-of-Work of Ethereum makes them slightly slower.
In addition, DAI is over-collateralised, while BAI is only 100% collateralised.
The goal of Bidao would be to develop its own blockchain in order to detach the stablecoin from Binance Chain, so that it can also be used on other blockchains like Ethereum, Tezos, and EOS.
The problem, however, is that neither BAI nor BID are currently tradeable on any public exchange, not even on Binance, so right now it is just a project that aims to raise funds to finance its development.
DAI, on the other hand, is traded on dozens of exchanges, so that its actual stability can also be verified. Moreover, the fact that it is based on Ethereum smart contracts makes it a truly decentralised stablecoin, although governance is still in the hands of MakerDAO.
The BID ICO started in the third quarter of 2019 and will end only in the third quarter of 2020, with a total offer of 1.95 billion tokens, promising 3% returns to those who will hold BID tokens in stake, even during the still ongoing ICO.
BID differs from other stablecoins in that it is algorithmic, i.e. automatically managed by a smart contract, while classic stablecoins are backed 1:1 by other assets.
For example, the best-known stablecoin anchored to the value of the US dollar is Tether (USDT), and in this case, there is no smart contract to adjust its value. Simply, the issuer guarantees that owners of USDT tokens who want to exchange them for USD could always do so, at any time, at a 1:1 exchange rate.
Algorithmic stablecoins such as DAI and BAI, on the other hand, have as collateral a cryptocurrency with a volatile value, such as ETH or BNB, which cannot be exchanged at a rate of 1:1. They are called algorithmic precisely because there are algorithms that manage the issuance and conversion, so as to keep the value fixed at about 1 USD, but without using USD as collateral.
By contrast, Tether and the other stablecoins backed by the dollar do not need algorithms, because the value is given by the fact that they represent the collateral with a 1:1 ratio.
There are also stablecoins anchored to the value of other currencies, or linked to other assets such as gold, but the latter are fundamentally different from stablecoins anchored to the value of fiat currencies because they are not alternatives.
Stablecoins such as DAI or USDT can be used instead of the US dollar since they faithfully replicate its value, but with some extra advantage given that they run on decentralised blockchains such as Ethereum.