Introducing Global Stability Unit (GSU)
A new type of balanced exchange rate that serves everyone equally with stability. A fair exchange rate for all.
Tl;dr
- Reducing the Web3 ecosystem dependency on $USD.
- Underlining the importance of protecting purchasing power.
- Providing for stable cross-border activities and international payments.
- Countering long-lasting consequences of volatility. The risk of a currency-peg controlled by a central bank.
In 2015, MakerDAO protocol set the tone for the DeFi space by providing an ecosystem with a novel solution to tackle the problem with crypto market volatility. By issuing a crypto collateralized stablecoin (DAI), that is soft-pegged to the US dollar, it equipped many with a hedge against the volatility, whilst sustaining an unbiased and decentralised currency that can be accessed and used by anyone, anywhere, anytime.
Since then, the space has seen explosive growth in innovative and experimental projects addressing the same issue. Many projects entering the ecosystem fork open source protocols and peg to the US dollar. Whilst this provides the tokens with a degree of stability, it also creates a dependency on one single national currency.
Today, more and more people realise that providing stability on a global scale and creating an equal basis of stability without a single point of value determination is important. On Ethereum substrate and other distributed ledgers there is plenty of experimentation and building taking place with the aim to move towards a more equitable financial ecosystem.
Fair Exchange Rate
After many years of rigorous research, verified by University of Copenhagen Department of Mathematical Sciences, we are excited to contribute to this growing community. Here’s how:
Imagine an improved exchange rate system from those used in pricing of stable coins today, which are simply referring to US dollar. The price-formation mechanism of this new rate is based on the plurality of actual underlying data and not only a single-factor pricing model operating directly between two parties. It is based on bi-lateral trade volume and capital flows between countries.
First, we identify the point-of-balance (POB) for any given country which provides the optimal stability for that given country/currency. Below you can see illustrations of POB for United Kingdom:
National Equilibrium (UK)
and Bangladesh, respectively:
National Equilibrium (BD)
We used this method to assess the POB of the largest nations individually to identify what we call the global centre of exchange rate gravity (G). The result of this study - GSU, the world’s most stable exchange rate.
Global Point of Balance
Our calculations are based on the analysis of volatility measurements of 80%+ of global trade volume across 30+ largest nations and their ∼35 largest trading partners with fluctuations on monetary value between their national currencies; which corresponds to ∼1000 most important trade relations in the world, generated and updated continuously to calculate the price as the function of the unit in real time.
Calculations include:
- Import and export volume of goods and services
- Remittances
- Foreign Direct Investment (FDI)
- Other capital flows
We call it The Global Monetary X-Ray.
We assess the cost of risk through the Garman-Kohlhagen formula and we measure the weighted volatility instead of focusing on given rates. We want to find out how stable the unit is relative to others to understand the impact factor.
Continuously Updated
This exchange rate solution does not rely on only two parties agreeing to the price, nor on a central bank determining a certain price. Rather, it is based on a massive collection of relevant data and continuous processing and publishing of the rate in real time.
Since 2017, we have been calculating, operating and monitoring the GSU live rates to a number of fiat currencies. Results of the live rates of GSU to fiat and to crypto have been published since 2020 and 2021, respectively.
Have a look here:
These rates are widely available to the public. More importantly, the rates will be available as data-feeds via an oracle solution to any exchange, protocol or any individual who wants these rates fed directly into their system.
The GSU system continuously monitors changes to the worldwide centre of exchange rate gravity as capital flows between any two countries change and the value of their currencies fluctuate. It is updated on an ongoing basis, so that it maintains its stabilising function, simultaneously publishing the right rates in a progressively decentralised way. We like to think of decentralisation as a gradual process of development and coordination.
GSU is more stable because:
- It reflects actual underlying economic activities between countries and currencies
- It is not based on direct agreements between two banks, brokers or exchanges
- It is not a rigid currency-peg controlled by a central bank
Instead:
- It optimally reduces volatility and the risk for disorderly exchange-rate movement
The GSU is the world’s least-fluctuating unit of exchange, outperforming the US dollar and any other fiat or crypto currency today. Using the GSU soft-peg can reduce exchange-rate risk and associated costs by more than 50% globally. This has been empirically and academically documented.
So, why GSU?
- It offers a more stable alternative to traditional $USD pegging.
- It is the first exchange rate system outperforming the stability of any fiat currency.
- It suggests a proportional stability shared equally between everybody.
- It strengthens the crypto ecosystem and protect against inflation.
