Author: Jiang Haibo, PANews

Since 2019, Eco, which has raised a total of $94.5 million in 5 rounds of financing, has recently made new progress. On July 27, Eco announced the launch of a new encrypted wallet called Beam, which integrates account abstraction and can be used for payments on Layer 2 solutions such as Optimism and Base.

With a strong background, Eco's CEO Andy Bromberg is the co-founder of the cryptocurrency platform CoinList, which has received investments from top cryptocurrency institutions such as a16z Crypto, Coinbase Ventures, Pantera Capital, Founders Fund, and Lightspeed Venture Partners. Four years after the project started and received funding, Eco finally released its first tweet on July 16, and PANews will interpret the mechanism of Eco in the following text.

Eco and Two Tokens: A Currency Experiment

Eco is a reserve and payment currency designed to be a decentralized alternative to fiat currency. There are no stablecoins anchored to the US dollar in its system, and it aims to "maximize the wealth in Eco" through governance. Eco can be seen as a "currency experiment," and if successful, Eco will also become a money game for all players in the ecosystem to win together.

The basis of this experiment in Eco is two tokens: ECO and ECOx.

ECO is the basic token of the Eco protocol, used for daily savings and payments. Its initial supply is 10 billion, but the supply can be changed based on the currency policy formulated by the "trustees" elected by users. The ECO token is formulated using the "Weird ERC20 Token" framework, including some unique features:

• Supports rebase functionality. The balance of the owner can be adjusted based on the "linear inflation factor" in the contract, which means that ECO, like stETH, cannot be directly used in many DeFi protocols and requires an encapsulated version similar to wstETH.
• Can be upgraded. The core logic of the token can be modified at any time through governance by managing the ECO token through a delegate.
• Can be paused. There is a circuit breaker that can be paused in the event of a bug.
• Rollback. Transfers or authorizations to the zero address will be rolled back if the transfer fails.
• Authorizations can be updated. The authorization amount can be changed through decreaseAllowance and increaseAllowance, and the transferFrom method will also issue an Approval event to update the authorization amount.

ECOx is a deflationary token with a maximum supply of 1 billion, and it is transferable. Each ECOx represents a certain percentage of the ECO supply and can share the growth potential of Eco by holding ECOx.

ECOx can destroy and mint ECO, but this process is irreversible. Both are in circulation and can be traded on Uniswap. As of August 2, 1 ECOx can be converted into 9.8 ECO. According to CoinGecko's data, in the secondary market, the price of ECOx is about 20 times that of ECO, with prices of 0.348 USD and 0.017 USD, respectively.

Governance and Currency Policy

One of Eco's features is its flexible currency policy, which can adjust the currency supply of ECO through governance. Both ECO and ECOx can participate in Eco's governance, with ECO having a voting weight of 1 and ECOx having a voting weight of 10.

Users can delegate their voting rights to "trustees" after pledging ECO or ECOx, and they can change their delegation at any time. Trustees are the formulators of the currency policy in Eco. Before obtaining the qualification of a trustee, they need to connect their wallet to Discord or Twitter to create an Eco ID to make themselves known to others.

Currently, Eco's official website has announced more than 20 elected trustees, who come from founders in the DeFi industry, former Federal Reserve employees, bank researchers, cryptocurrency researchers, and operators. The official website also provides their LinkedIn or Twitter links. The currency governance is carried out by a group of elected trustees in cycles to maximize the total wealth held in Eco.

Users can delegate all of their voting rights to a single trustee. In this case, transfers can be made without canceling the delegation, and the transfer process will automatically revoke the delegation. Partial delegation is also possible, in which case transfers can only move unallocated funds.

The Eco governance page shows that the currently effective currency policy only includes the basic interest rate. From July 22, 2023, to November 21, 2023, locking ECO can earn a 7% annualized return, similar to a bank time deposit.

In addition, Eco has some currency policies that have not yet taken effect, including:

Basic inflation rate, which changes the holder's balance proportionally through currency policy.

Random inflation, which randomly distributes ECO tokens to some addresses, similar to a lottery.

Transaction fees, where ECO transfers will incur transaction fees paid in ECO tokens, which will accumulate in pledged ECOx. Delegators can also charge an additional transaction fee through currency policy.

Launching Three Products to Promote Eco Currency Adoption

In addition to the Eco currency, the development company Eco, Inc. has developed the Eco App and sponsored others to develop various applications to increase the adoption of Eco currency. The following three applications have been announced on the official website.

Eco App: Positioned as a fintech company, it has payment, savings, and remittance functions. It can also be used to make payments or send Eco points, earn points when making payments, and receive cash back from partners. The Eco App has partnered banks and can provide insured deposit services.

Beam Wallet: A digital wallet that allows payments to anyone at any time and can be used on Optimism and Base. Users need to connect their Twitter account and add a password first, and then they can make transfers using ECO or USDC. It is also possible to spend 600 ECO to register a domain name for Beam in the wallet, which can be used during transfers.

Tender: Provides instant encrypted payment functionality for merchants through a simple and user-friendly interface.

Roadmap

As a project that started in 2019, Eco's progress has been less than satisfactory. According to the official website, the project went live on October 28, 2022, and updated its roadmap in November 2022, stating that it would make ECO compatible with Uniswap V2 in the short term, create an encapsulated version of the ECO token, activate trustee elections and currency policies, launch a grant program, and enable temporary governance, among other plans. These plans have now been largely realized.

The long-term roadmap includes several potential system upgrades and research areas.

In the first phase, Eco will initiate the distribution of ECO tokens, including allocation to partners and individuals, similar to the points distributed to users in the Eco App, which can be redeemed for tokens.

The second phase will involve upgrading the currency policy, increasing governance flexibility, and expanding from Layer 1 to Layer 2. As mentioned earlier, the currently effective currency policy only involves locking ECO tokens for a period to receive a fixed basic inflation.

The third phase will involve extensive governance improvements, novel economic designs, upgrading Eco ID V2, and launching public product funding, among other initiatives.

Conclusion

Eco aims to create a currency system that is different from previous products, not anchored to the US dollar, and aims to maximize the wealth in the ecosystem through governance. Its goal is to first become a medium of exchange and evolve into a store of value over time. The unique feature of Eco may lie in its adjustable currency policies, which are determined by trustees through governance and can be adjusted based on actual economic conditions.

In terms of positioning, Eco aims to become a store of value similar to certain algorithmic stablecoins. However, both the ECO and ECOx tokens are not anchored to the US dollar and have a high level of uncertainty.

From the time of fundraising to the launch of the product in recent years, Eco has missed the golden period of development for projects in the algorithmic stablecoin category. Even with the endorsement of top VCs, launching a new, highly volatile token in the current environment and getting it widely accepted as a means of payment and store of value will still be challenging.

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