Kaal claims by topic: tokenomics

431 atomic, individually citable claims from the published work of Wulf A. Kaal tagged tokenomics.

Regulatory competition for a bundled product of statutes plus courts is only a realistic possibility if relatively high supply side hurdles can be overcome to induce states to enter the market for corporate law. 2004
A jurisdiction supplying corporate law as an unbundled statutory product faces low fixed costs, principally statute drafting, and near zero marginal costs, because additional users impose no new adjudication costs and registration costs are insignificant. 2004
If central banks were to purchase contingent capital securities issued by systemically important institutions in the primary or secondary market as part of monetary policy, the prospect of internalizing bank failure costs would be undermined, and primary market purchases could also undermine market participants' confidence in these instruments. 2012
The Dodd-Frank Act added an inflation adjustment to the qualified client standard, requiring the SEC to adjust any dollar amount test within one year of enactment and every five years thereafter. 2013
The unprecedented growth of the private fund industry combined with the low interest rate environment created by post crisis quantitative easing drove private fund managers to reach for yield. 2014
The SEC's denial of the Winklevoss Bitcoin exchange traded fund on grounds of susceptibility to fraud reflects the agency's distrust of the crypto asset class as a whole, and especially of funds that trade digital currencies. 2017
The SEC's reasoning against the Bitcoin exchange traded fund does not transfer to blockchain based private investment funds, because such funds trade a diverse array of cryptocurrencies rather than Bitcoin alone and reach a much narrower investor audience, which curtails investor risk. 2017
Cryptocurrency gains are massively underreported to the IRS: despite Bitcoin rising from under twenty dollars in 2013 to over twelve hundred dollars in 2017, the IRS received only around 900 Form 8949 filings indicating crypto gain or loss over four years. 2017
Despite early cautioning and a call for action from its own commissioners, the SEC has not addressed core issues pertaining to the recognition of blockchain technology applications in finance. 2017
The SEC rejected the Winklevoss Bitcoin ETF application on the ground that the unregulated nature of Bitcoin made the proposed fund susceptible to fraud. 2017
Initial coin offerings have overtaken venture capital as a funding channel for blockchain start ups, raising 331 million dollars in twelve months, and may become an alternative funding method for traditional companies as well. 2017
Disenfranchised communities will increasingly be able to afford the buy-in to a DAO, and increasing access to DAOs eradicates a possible income based or wealth based bias, since participation requires purchasing a coin or token. 2017
Because the total supply of DAO tokens is pre-determined in code, dilution by central administrators such as government officials or self-interested or biased executives is impossible. 2017
Initial Coin Offerings are the most efficient means of financing entrepreneurial initiatives in the history of capital formation, because they minimize transaction cost and democratize finance while dis-intermediating banks. 2017
Tokens sold in an ICO are structurally different from equity: they do not generally confer ownership rights, no right to dividends, and no claim on company assets in bankruptcy, so the risk and reward profile of a token is not that of a share. 2017
ICOs cannot be qualified as donations and are therefore distinguishable from crowdfunding, because ICO participants acquire a financial stake in the company and, as the case may be, a right to vote on future decisions. 2017
The pre-ICO price of a cryptocurrency is set arbitrarily by the start-up team that structured the offering, while post-ICO price dynamics are left to supply and demand determined by the network of participants rather than any central authority. 2017
An issuer can pre-define monetary policy in crypto economics by fixing the number of tokens created and issued, and a maximum token issuance combined with controlled token supply releases can make small increases in demand drive token prices higher. 2017
To avoid a token price crash, token escrow accounts should provide usage and access controls that assure investors escrowed tokens will not be issued at a discount, and lockups or phased releases of escrowed tokens further minimize crash risk. 2017
Adjusting the commercial benefits attached to a token operates as a quasi fiscal policy tool: increasing those benefits raises aggregate demand for a given token supply and can offset the depreciating effect of a large supply in circulation. 2017
Adjusting commercial benefits associated with a token issuance is preferable to blunt monetary intervention, because it avoids more drastic measures such as emergency sales, building token reserves, or changing the token supply in circulation. 2017
Token holders, unlike shareholders in the traditional corporate infrastructure, cannot vote for or against directors or nominate directors, so ordinary ICO investors have no governance channel and simply must trust the promoters and their business intent. 2017
The only real control power available to token holders is the decision to hold or sell their tokens, and even that exit right may be unavailable until the token is fully listed on an exchange. 2017
Because the token supply is controlled by ICO promoters who must reserve tokens for future funding needs, token holders can be diluted by later issuance of reserve tokens and their token value can be diminished without any ability to protect themselves against such events. 2017
Hardcoded lockup periods can protect token holders against supply side induced devaluation, but they also decrease the token economic flexibility the promoter team needs to raise additional funds, so the remedy trades investor protection against issuer financing capacity. 2017
Because token offerings are built on open source code, the utility of an issued token can at any time be recreated in another token with essentially identical features at marginal cost, so investors cannot rely on the implicit promise that promoters and developers will increase the value of the acquired token rather than launch a duplicate. 2017
ICO promoters should not allow tokens to be traded before the underlying protocol network or application is live, and should not use a landing page that focuses almost exclusively on the ICO while providing less content on the product, project, technology, and team. 2017
When a fee bearing evidence of work post enters the platform, half the newly minted sem tokens are staked in the poster's name as an upvote bet and the other half are staked against the post and left unassigned, so the poster's only direct reward for off-platform work is a contested stake. 2018
Every validation request opens a betting pool in which experts stake expertise specific sem tokens for or against the post, the winning side splits the losing side's stakes, and upvotes win ties. 2018
The author concedes an arbitrage attack is feasible when experts fail to police their expertise and a significant share of the technically fungible tokens is offered on an exchange, since a malicious actor can then buy 51 percent of the tokens, vote against common sense, and sell before the tokens lose value. 2018
Acquiring 51 percent of the tokens by paying fees and winning betting pools costs roughly six times the value of the entire quantity of sem tokens in a healthy expertise, even when the bench makes no effort at all to police the incoming fees. 2018
The token economy is inflationary at equilibrium, and this inflation is a feature rather than a defect because it improves security and discourages rent seeking holding of reputation. 2018
Because earlier minted tokens pay out more than later ones at a steady fee rate, later experts have less motivation to join, and the remedy available to the bench is to change the exchange rate between fees and sem tokens to attract new recruits. 2018
The author contests Houy's claim that killing a proof of stake currency costs nothing: on this platform the token's value is calculably predictable rather than merely a function of public opinion, and signaling an intention to buy tokens usually raises the price rather than triggering a race to the bottom. 2018
The proposed fix is to value tokens by how the post was received and cited: tokens minted at a node with a large branch of positive references are worth more, while tokens from a post whose betting pool was close to 50-50 are worth less in future salaries than tokens from a post with uniform agreement. 2018
Reputation on the platform is domain specific by construction: a separate type of ERC-20 token is minted for each expertise tag, so reputation earned in one domain confers no voting power, salary claim, or selection weight in another. 2018
Any survey of token models is necessarily incomplete, because the economic experimentation inherent in crypto-economics continuously generates new token models and incentive designs. 2018
In decentralized systems the functions previously performed by policy designers, central bankers, and economists in centralized markets are taken over by the token designer for the respective token economy. 2018
The democratization of monetary policy in token economies creates a serious problem, because token designers lack the qualifications and institutional functions that centralized central banking distributes across multiple institutions and their staff. 2018
An issuer's ICO strategy can pre-define the token economy's monetary policy by predetermining the fixed number of tokens created and issued in the ICO. 2018
To avoid a token price crash, escrow accounts holding unissued tokens should carry usage and access controls assuring investors that escrowed tokens will not be issued at a discount, with lockups or phased releases minimizing crash risk. 2018
Increasing the commercial benefits attached to a token heightens the aggregate demand for that token's given supply, which is why benefit adjustment functions as a quasi-fiscal policy tool. 2018
Commercial benefits attached to a token issuance can offset depreciated supply scarcity, meaning the dilutive effects of a large supply of the token in circulation. 2018
Adjusting the commercial benefits of a token issuance lets the issuer avoid more drastic monetary interventions such as emergency sales, building token reserves, or changing the token supply in circulation. 2018
Combining quasi-fiscal policy, increasing benefits attached to tokens, with monetary policy, increasing supply in circulation, may or may not have an effect on the market price of the tokens. 2018
The balance between the commercial benefits and use cases attached to a token and the scarcity of its supply is critical in the issuance of a token offering. 2018
Many token whitepapers omit information necessary for a full economic analysis, and the research team could not find a single project among the top 100 that had examined blockchain governance fully. 2018
Of the top 100 tokens, fifty-six held an ICO and thirty-eight did not. 2018
Among the top 100 tokens, currency and utility models are the most common, USDT is the only purely Stablecoin token, Steem and Maker are both Stablecoin and utility, and only four tokens are asset-backed. 2018
The utility token model dominates the top 100 tokens, but the utility category as coded includes tokens that behave like a security, and no Howey test was performed in this research. 2018
Seven of the top 100 tokens could not be classified into any token model, with NEM, VeChain, ICON, and Lisk qualifying as outliers with no justification and SUB's whitepaper failing to disclose which model best describes the token. 2018
Thirty-two of the top 100 tokens have inherent value, for example as a currency, and thirty-two derive their underlying value from giving holders permission to use a digital service. 2018
Permission to use a service via the token took over as the dominant type of underlying value in June 2017, and the author sees multiple indicia that this trend toward tokens granting rights to use services will continue. 2018
Seventy-two of the top 100 tokens cap the number of tokens that will ever be issued, a deflationary model of token issuance. 2018
Under a deflationary token model, prices are expected to increase because of the fundamental scarcity of token supply. 2018
The remaining twenty-eight tokens in the dataset use inflationary models that operate similarly to fiat currency, contemplating no maximum issuance and a continuing minting process that gives the issuer more flexibility. 2018
Unlike deflationary token models, inflationary token models permit the use of stability mechanisms, which is why inflationary designs may become more popular as the cryptocurrency market matures. 2018
Sixty-six of the top 100 tokens are user facing, letting ecosystem participants handle the token directly, while thirty-four are layered and operate underneath another token, platform, or chain. 2018
Layered tokens are expected to remain more popular in the future because the interoperability of tokens generally assures survivability. 2018
Sixty of the top 100 tokens allow or intend inter-system functionality, while thirty-two are fundamentally restricted to use within a given ecosystem. 2018
App-specific tokens exert less influence over value from other projects and typically fail to support a broader user market, because their limited use curtails user access. 2018
The data support the conclusion that interoperability as a means of survivability dictates token design, with a majority of tokens seeking a broader base of users by making the token interoperable. 2018
The emergence of inflationary token models and the increasing interoperability of token models are the core developments for the industry visible in the data. 2018
Increased interoperability of tokens optimizes survivability, and the data suggest token designs are increasingly focused on longer term survivability designs. 2018
Long-term survivability of token designs may depend more on infrastructure capabilities than on temporary fixes made within token designs themselves. 2018
Reputation tokens supply a staking mechanism that incentivizes high quality work and task completion by workers, and that simultaneously lets requesters verify and track worker quality, integrity, and quantity. 2018
Sharing all work fees with the expertise creates a positive feedback loop: the more fees flow to the platform, the more reputation is worth, and the more workers prefer reputation tokens to one time fees. 2018
Centralized approval processes and identity requirements for worker registration significantly limit the registration of new micro task workers. 2018
Initial Coin Offerings provide unprecedented liquidity and efficiency for capital formation while minimizing transaction cost. 2018
Unlike other means of capital formation, ICOs allow promoters to raise funds without sacrificing equity, so proceeds can be used exclusively for product development. 2018
ICOs lower barriers to entry for a diverse body of investors and thereby increase the diversity and heterogeneity of start-up funding. 2018
ICOs enable borderless online sales with fewer points of friction, letting promoters bypass typical legal, jurisdictional, and business hurdles by marketing directly to a worldwide investor pool. 2018
Unlike shareholders in traditional corporate structures who can vote for or nominate directors, ICO investors have no control whatsoever over promoters. 2018
The absence of mandatory disclosure requirements for ICOs leads many promoters to make irregular or no disclosures about the platform over time, producing a significant lack of transparency in the ICO market. 2018
Because crypto platforms have no product and no revenue to offset costs, the funds they raise must typically last for the entire lifecycle of the platform, forcing them to set aside a large number of tokens for future funding needs. 2018
ICO investors have no preemptive rights or other anti-dilution protections, so they may be diluted if promoters later issue more reserve tokens to additional investors. 2018
Because ICOs give investors very limited assurances through upfront and continuous disclosures, the token market is highly volatile. 2018
Token holders typically receive no liquidity preference protecting them if the platform they invested in goes bankrupt or terminates. 2018
The UK Financial Conduct Authority takes the position that ICOs may be regulated as securities depending on the aspects and rights the coin holder obtains through holding the coin, assessed case by case. 2018
In Singapore there is no direct regulation of digital tokens under the Securities and Futures Act unless the currency is linked to an ownership or security interest in the issuer's assets or property. 2018
Under German law the decisive factor in classifying a token is which rights are associated with it; labels such as participation token, utility token, or payment token give only initial guidance and cannot be relied upon outside a comprehensive and binding regulatory classification. 2018
The National Bank of Slovakia takes the view that cryptocurrencies are not money because countries enjoy monetary sovereignty. 2018
Meaningful and secure reputation tokens supply the incentives needed for secure proof of stake consensus in block production, which eliminates the unsustainable inefficiencies of proof of work based blockchains. 2018
Block producers are selected pseudo randomly with weight proportional to their Anchor token holdings, so a participant with more reputation is more likely to be selected to produce a block. 2018
New reputation tokens are minted in every validation pool for every block, so block production is strongly encouraged through a larger share for the successful producer while policing is only gently encouraged through a shared allocation to all active members. 2018
Anchor tokens are highly inflationary because new ones are minted in proportion to the SEM denominated transaction fees collected in each block, so a member must keep participating simply to maintain their relative power. 2018
Sockpuppet accounts grow their reputation value much faster than honest users can in a Web of Trust, because sockpuppets validate each other, and the system is therefore flawed and should not be used where fungible currency is at stake. 2018
Because the stakes in SPoS are reputation tokens that are far less fungible than cryptocurrency stakes, long term probity is incentivized and many short term arbitrage opportunities are eliminated. Fungibility of the staked asset is what makes short horizon attacks profitable in other proof of stake systems. 2018
Because at least half of the sem tokens minted when a user buys in with a fee are shared with the community that polices the application, the ability to purchase tokens does not open a profitable 51% attack; the authors claim a mathematical proof that this feature alone eliminates the incentive. 2018
Because almost all other blockchains distribute perfectly fungible currency tokens through initial sales or mining, there is a clear, computable answer to how much it would cost to corrupt or destroy a chain running a proof of stake protocol on cryptocurrency stakes. 2018
SPoS prevents the long range attack without token locking, because a false chain cannot be manufactured with more total validation than the real chain: votes are transactions moving validators' sem tokens under their public keys, so upvotes cannot be forged from existing tokens. 2018
Experts who fail to participate in the validation pool are punished stably rather than abruptly: because the system is inflationary and they gain none of the newly minted sem tokens, their holdings become a smaller percentage of the total and earn a smaller share of future reputation weighted salaries. 2018
The reference system lets each validated new post change the relative value of sem tokens created in the graph of connected earlier posts, so the value of a past contribution depends on how important later users judge it to be. This gives the forum the structure of a weighted directed acyclic citation graph. 2018
Finality in SPoS is measurable because forking away from a given block would cost the community all sem tokens created on the chain after it, and that quantity equals half of all fees sent since the block was produced. 2018
Because each sem token carries a different value depending on the post that minted it and on its position in the reference graph, the total value is difficult to determine, which makes it almost impossible to execute a 51% attack by purchasing tokens on an exchange. 2018
An attacker who buys sem tokens directly from the platform by sending fees must spend at least twice, and more likely six times, the entire historical value of the platform, so the griefing factor is a minimum of 2 with an average of 6. 2018
Under the worst case model with no admission safeguards and no other users paying fees, a malicious group must invest at minimum twice the total sem tokens of the system to reach 50% voting power in the validation pool, because half of every fee it pays mints tokens for the existing good faith experts. 2018
The sem token economy is inflationary at equilibrium, and the authors argue this is a feature: inflation improves security and discourages rent seeking by penalizing holders who do not use their tokens to evaluate posts. 2018
Because earlier sem tokens represent a larger percentage of the total and therefore pay out more, later experts have less motivation to join when fees are at a steady state; the authors propose that the bench may need to change the fee to token exchange rate to recruit new members. 2018
The DAO raised more than 150 million dollars from approximately 10,000 investors through a crowdfunding campaign in May 2016, with DAO Tokens designed to be fully transferable and tradable on peer-to-peer exchanges like shares in a listed corporation. 2018
Unlike a conventional corporate loyalty program, company or industry tokens offer liquidity, because platform participants can sell and transfer them on crypto exchanges or secondary markets, which integrates the token and the platform into the mainstream economy. 2018
Because token holders are not locked into the program, issuing coins or tokens becomes a straightforward and relatively simple way for a platform to attract capital without issuing shares in the company. 2018
Issuing coins or tokens across all ecosystem participants creates a level playing field and helps establish a flatter, community-owned platform that is not based on the traditional hierarchies between shareholders, executives, managers and staff. 2018
A one token one vote mechanism in existing decentralized protocols with on chain governance resembles a plutocracy, because holders of a significant share of total token supply hold more power than the rest of the members. 2019
Token concentration in existing decentralized protocols is extreme: on and around September 12, 2017, 4.11 percent of bitcoin addresses controlled 96.53 percent of the total bitcoin supply. 2019
Optimized DAO governance should pay members only indirectly, through fungible salary tokens issued in proportion to non fungible merit tokens, because the indirect economic effects remove corruptive elements and make the design more attack resistant and stable in the long run. 2019
Reputation based staking removes the corruptive elements of fungible tokens from voting because third parties are less likely to be able to take over a non fungible asset that is organically grown and maintained through actual expertise in the DAO subject matter. 2019
DAO member reputation should be designed as inflationary rather than as a permanent stock, so that non use such as non staking or non voting leads to value depreciation. 2019
Despite an early call for regulatory leadership from Commissioner Stein in 2015, the SEC has not addressed core recognition questions for blockchain in finance, including cryptocurrencies, tokens as securities, and DAOs as investment advisers. 2019
The SEC's rejection of the Winklevoss Bitcoin ETF, reasoned on Bitcoin's unregulated nature and susceptibility to fraud, reflects agency distrust of the crypto asset class as a whole rather than a narrow product objection. 2019
The unifying interest of DAO token holders in raising token value means they will voluntarily perform optimization tasks, because doing so is directly in their own interest. 2019
Personal data, preferences, and opinions can only be limitedly commercialized inside centralized structures, whereas in decentralized structures the same assets can be tokenized, valued, and mobilized, including in real time. 2019
Growth in stable cryptocurrencies traces back to attempts to combine the benefits of cryptocurrencies and blockchain with remedies for market volatility, and the growth data suggests demand for volatility management products will keep increasing. 2019
People will not enter into long term smart contracts without a stable currency to refer to, since no renter and landlord will gamble future wealth on a lease that may halve or double in value in any given month. 2019
Because of their disciplining and market stability enhancing effects, stable cryptocurrencies form the backbone of the financial technology infrastructure required for any distributed app economy and decentralized commerce to emerge. 2019
A DAO's profit distribution weights across present workers, past workers, protocol designers, and governance designers should match the DAO's current values, since a greater share for new workers attracts new workers, a greater share for older workers signals long term stability, and a greater share for protocol designers attracts innovation. 2019
The disillusionment with political institutions after the 2008 to 2009 financial crisis inaugurated a new form of technological decentralization, of which the 2009 Bitcoin protocol is the leading result, conceived as an alternative to the shortcomings of the financial system. 2019
Bitcoin proved that a decentralized system can automate the transfer of valuable digital currency without intermediaries and without a centralized authority for recourse, doing so efficiently, securely, cheaply and expeditiously. 2019
The authors propose that insurance underwriting be operated by a Decentralized Autonomous Organization in which cryptocurrency tokens function as claims on the future cash flows of the underwriting business. 2019
The reputation tokens of the underwriting DAO are separate and distinct from the cash currency that insureds use to pay premia; the two must not be conflated. 2019
Tokens in the proposed DAO function as reputation because an agent's proportional token holdings will grow over time only if that agent follows sound and successful underwriting practices. 2019
Participation in underwriting is gated by token ownership: only token holders may underwrite insurance policies in the DAO, and inbuilt processes assign new business among them. 2019
Insurance premia are treated as revenue of the entire DAO rather than of the underwriters who wrote the policy, and are shared among DAO participants; consequently the value of a token is a function of the DAO's expected future cash flows. 2019
Because newly minted reward tokens go only to agents who stake tokens on policies, passive holders are diluted over time, which pushes agents toward active underwriting while still permitting passive investment. 2019
The design requires underwriters to stake or encumber tokens against each policy they underwrite, and those encumbered tokens serve to secure the underwriters' promises. 2019
The number of tokens an underwriter must encumber is set by a preset formula whose objective is to make the value of the encumbered tokens sufficient to meet any claim arising at any point in the policy's life. 2019
If underwriters decline to reclaim their encumbered tokens, that breach is resolved by selling the encumbered tokens, plus additional freshly minted tokens as needed, in an auction open to current DAO participants and to outsiders wishing to join. 2019
A breach occurs only when the underwriters concerned believe that the value of their encumbered tokens is less than the payment they would have to make in order to reclaim those tokens. 2019
Unlike prior token research, the purpose of issuing tokens here is not only to raise capital but also to give owners the opportunity and incentive to develop the DAO's business. 2019
The value of a token is not uniform across tokens: it depends on whether the token is currently encumbered and, for encumbered tokens, the sooner the token is expected to be released from encumbrance the greater its value. 2019
The DAO design requires that the value of the tokens staked on a set of policies be large enough to cover the maximum possible liability on those policies, which in turn imposes a minimum condition on the premium charged. 2019
Because the total supply of tokens grows at a constant rate each period, the value of individual tokens depreciates over time. 2019
The DAO is insolvent when the present value of expected cash flows from new policies falls below the expected cash outflow on currently outstanding policies, and in that state the value of a token is negative. 2019
From the viewpoint of consumers and regulators, encumbered tokens, whose value derives from the DAO's future cash flows, serve as a substitute for regulatory capital. 2019
Barring highly adverse market conditions, the DAO's ability to mint and sell tokens on demand functions as capital on tap and protects the DAO from default and bankruptcy. 2019
Even where the underwriters of a policy breach the contract, the auction of the encumbered tokens together with the sale of additional tokens as needed ensures the policy holder's claim is fully met. 2019
The design's innovative features stem from tokens serving several purposes at once: as reward for risk taking and as a substitute for both reputation and capital. 2019
The governance rules of the DAO can be set up so as to ensure that minority token holders are appropriately protected. 2019
Assuming all agents are active underwriters, the DAO's rules can be designed so that the proportion of policies an agent writes in the long run is commensurate with that agent's proportion of token holdings. 2019
The proposed DAO design is likely to lower barriers to entry in insurance, since non traditional firms and even individual investors can buy tokens at auction and then either underwrite with them or hold them passively. 2019
The unfettered discretion of fiat monetary policy makers can lead to arbitrary outcomes, because the overall value and stability of any fiat currency is contingent on the fluctuations and successes of a country's economy rather than on any fixed valuation basis. 2019
Monetary policy making for fiat currencies largely lacks transparency, and that opacity prevents markets from taking anticipatory action on policy indicators. 2019
Tether's growth in market capitalization, its stability around one dollar, and investors' use of it as a temporary safe haven provide some empirical support for the proposition that stable cryptocurrencies can create market stability. 2019
Every stable cryptocurrency project, Tether included, remains afflicted with significant design challenges; no existing design has solved the stability problem. 2019
JPM Coin's closed structure, restricting the token to existing J.P. Morgan clients, is an anachronism, because closed ecosystems are unsustainable in emerging decentralized commerce. 2019
Both collateralization strategies carry significant downsides: fiat collateralized pegs bear the brunt of expensive capital requirements, while cryptocurrency pegs face heavy volatility pressures and swings. 2019
A fiat backed stable cryptocurrency that is not fully collateralized is exposed to arbitrage trade attacks of the kind George Soros used against the pound sterling; full collateralization is therefore a necessary defense. 2019
Fiat currency collateralization is expensive and inefficient because the entire backing value must be held liquid; anything less opens arbitrage opportunities of the Soros type. 2019
The minimum price of a fiat backed stable cryptocurrency is the interest rate of the fiat currency it is pegged to, because the collateral must sit liquid rather than earn a return. 2019
Cryptocurrency backed tokens are more expensive than fiat backed tokens because stability is sourced from far more volatile assets, so such tokens must be backed by substantially more than 100 percent of the collateral's current value to survive a drop in the collateral basket. 2019
No uncollateralized algorithmic stable cryptocurrency, such as Basis or NuBits, had produced a provably stable mechanism for its tokens as of the time of writing. 2019
Trading a token directly against a well established stable cryptocurrency removes several layers of conversion fees and eliminates the risk that the bridge currency depreciates during the sequence of trades. 2019
A well established stable cryptocurrency and a universal exchange form a positive feedback loop: the exchange's liquidity is enhanced by the stable cryptocurrency, and the stable currency's stability and adoption are enhanced by the exchange. 2019
Because cryptocurrency transactions are possible without a banking relationship, stable cryptocurrencies can remedy the disproportionate burden that cash economies impose on the poor and the unbanked by equalizing access to the payment system. 2019
The cryptocurrency market structure is fundamentally convoluted because each project requires its own volatile token, which is equivalent to forcing grocery shoppers to buy a different currency for every store and every product. 2019
Capping token supply, the dominant design choice in early cryptocurrency projects, is self defeating: fixing supply removes the core policy tool, minting additional tokens, that would otherwise address overvaluation, excessive speculation, market frenzy, and irrational exuberance. 2019
Central bank price stability is elusive for two structural reasons: central banks are constantly lobbied to move money supply away from equilibrium, and even absent lobbying they face information asymmetries that prevent them from determining the optimal supply at any given moment. 2019
Stable cryptocurrencies escape part of the lobbying problem by hardcoding their policy rationales and outcomes into the protocol, which limits the amount of lobbying that can influence policy decisions. 2019
Because hardcoded cryptocurrency policy is transparent and therefore predictable, market participants can anticipate policy and adjust behavior in advance, and such anticipatory reactions could over time make actual policy making the exception rather than the rule. 2019
Full hardcoding is impossible: no stable cryptocurrency can encode all required policies and policy actions with full transparency, because future policy needs cannot be anticipated ex ante. 2019
Monetary policy for stable cryptocurrencies should combine hardcoded transparent rules with protocols enabling decentralized autonomous organizations, with decentralized but fully transparent policy DAOs functioning as the policy makers for what cannot be hardcoded. 2019
The authors qualify their own case: stable cryptocurrencies can experiment with monetary policy on an unprecedented scale only because they are insulated from real world complexities and political positioning, and that advantage shrinks once real world market factors actually apply to them. 2019
Currency stability should be used as the consumer facing proxy for interoperability, because teaching the public to value stability is easier than educating it about the blockchain technology that produces technical interoperability. 2019
Because stable cryptocurrencies are free of the real world pressures that constrain emerging market currencies, they may be able to experiment with solutions that overcome the currency trilemma, attaining a fixed exchange rate, free capital movement, and an independent monetary policy at once. 2019
Mass adoption fails at the user level: the average user will not identify, research, and purchase diverse sets of tokens even where those tokens would create value, because the existing cryptocurrency market structure is simply too cumbersome. 2019
Non speculator lay people will not use cryptocurrencies for daily consumption, groceries, or banking transactions unless the value of the currency is stable; stability is a precondition of ordinary consumer use, not merely a convenience. 2019
Near instant settlement with stable cryptocurrencies removes counterparty risk, and the resulting reduction in counterparty risk boosts consumer confidence and increases transactional certainty relative to systems like Visa that take five to seven business days to pay merchants. 2019
The authors adopt Schilling and Uhlig's result that official money and cryptocurrencies can co-exist in a manner consistent with stability, rejecting the framing that private currency and central bank money are necessarily mutually exclusive. 2019
The minimum cost of a fiat-backed token equals the interest rate of the pegged fiat currency, because the backing capital must sit idle and liquid. 2019
Cryptocurrency-backed tokens must be overcollateralized well beyond 100 percent of current value because the backing basket can fall, which makes them even more expensive than fiat-backed tokens. 2019
As of the time of writing, no uncollateralized algorithmic stable cryptocurrency project had produced a provably stable mechanism for its tokens. 2019
Bonds are the appropriate burning mechanism for a temporary drop in currency price caused by larger economic instability such as an act of God or war, since bonds can be redeemed above their sale price once the economy rebounds. 2019
Stable cryptocurrency bonds should be minted with a fixed expiration, following the practice of historical central banks, because fixed expiration makes price discovery more efficient. 2019
Misestimating the hot money ratio fails in both directions: overestimation makes the currency more costly to use, and underestimation leaves it insecure, so efficiency and security are in direct tension. 2019
In a blockchain cryptocurrency, transaction taxes should be set to match the cost of running the network, meaning the cost of incentivizing enough nodes for the desired level of decentralization plus the cost of maintaining the coin's stability. 2019
Holding taxes are the implicit result of inflation borne by coin holders, and they should be set to account for the inefficiencies of the economy rather than the inefficiencies of maintaining the currency. 2019
Blockchain users are likely to demand zero transaction fees while failing to notice holding fees below about 3 percent annually, which a USD peg institutes implicitly through a comparable inflation target. 2019
The day-to-day stability mechanism can be fully automated by algorithm, but monetary and fiscal policy choices cannot be: the algorithm's parameters must be chosen by hand and adjusted regularly to balance security against efficiency. 2019
Parameter and policy choices for a stable cryptocurrency should be made by a decentralized autonomous organization, the Stability DAO or SDAO, which functions as a transparent, decentralized, open analog of the US Federal Reserve. 2019
Transparency is not an unqualified good for monetary policy: a currency only partially backed by reserves can be arbitraged by a Soros-style shorting strategy much more easily when the quantity of reserves is public. 2019
Personal assets such as data, preferences, and opinions can only be commercialized to a limited extent in centralized structures, whereas decentralized structures allow those same assets to be tokenized, valued, and mobilized. 2020
Regulatory concerns and lack of market confidence were the cited reasons for postponing the token sale of GiftCoin, a charitable donation tracking project that launched in 2017 and shut down in June 2018. 2020
A distributed ledger of food origin and production methods would benefit not only consumers tracing food origin but would also help ensure the fair and sustainable treatment of food producers around the globe. 2020
Complete supply chain tracking is particularly difficult in the mineral industry because of the prevalence of smelting during processing, which is why supply chain mapping for conflict mineral due diligence is costly, time intensive, and not entirely effective. 2020
A DAO focus on the value enhancement of fungible tokens can produce short termism and lead the organization to ignore ethical and governance issues. 2020
The one token one vote designs popular in the early 2020s produced suboptimal voting outcomes because they allocate more power to holders of a large share of total token supply, leaving majority holders more powerful than all remaining holders combined. 2020
The article stipulates a broad definition of digital assets covering all virtual and electronic assets regardless of how regulators name or categorize them, including cryptocurrencies, security tokens, utility tokens, virtual collectibles, stablecoins, and altcoins. 2020
The IEO reinserts an intermediary into token offerings: the exchange screens the offering and the issuer no longer interacts with investors directly, reversing the direct issuer to investor structure of the ICO. 2020
Bitcoin functions as a medium of exchange for a number of businesses but arguably fails as a store of value and as a unit of account, because of its volatility and its lack of intrinsic value. 2020
Token design must be treated as an iterative process in which data collection and flexibility in core design parameters are essential, because prior crypto economic assumptions routinely turn out to be suboptimal once the network grows and user preferences change. 2020
The evolution of the DeFi market and its new monetary system depends on the stability of DeFi products and digital assets, and both stability and adoption of DeFi are undermined by the instability of most cryptocurrencies. 2020
Conducting monetary policy through a central bank digital currency imposes a requirement on the technology layer: the underlying network protocol must enable the central bank to adjust the money supply at will and to act as lender of last resort with access to unlimited supply. 2020
Although the public realm of coins could not exist without prior private experimentation, it is possible that the public realm will impact or even pre empt private coin development, for example if central banks attempt to censor the use of digital currencies they did not issue. 2020
The focus on value enhancement of fungible tokens can drive short termism in DAOs and cause ethical and governance issues to be ignored. 2021
When fungible assets are the dominant incentive design in the governance of a DAO with identifiable actors, rational and opportunistic internal and external participants will typically attempt to corrupt that governance design for their own gain. 2021
Suboptimal voting outcomes in existing decentralized protocols trace to one token one vote mechanisms, which allocate more power to holders of a significant share of total token supply. 2021
In the bifurcated DAO of DAOs token design, non fungible reputation tokens give members voting rights while fungible reputation salary tokens let members earn a salary in proportion to their non fungible reputation holdings. 2021
Paying members indirectly, through a fungible stable salary proportional to non fungible reputation, removes corruptive elements and makes the governance design more attack resistant and more stable over the long run. 2021
Member reputation is inflationary by design, so non staking of reputation tokens or non voting leads to value depreciation, which incentivizes action and makes liveness faults less likely. 2021
A Code is Law assumption remains necessary for machine-scale commerce, because the multiplicity of options in a dynamically changing market demands instantaneous legal enforcement without waiting for a centralized human response. 2021