Work notes on EMP, sKOIN and mBonds
This is basically a summary of my previous two articles as well as some rough ideas based on the initial feedback I received.
Key points from the Emporia and mana bond articles:
1.Different tokens are needed with different time horizons. Similar to the people spreading their value (‘money’) across cash (+checking account) vs savings account vs investment portfolio. Having one token for the combination cash + savings account causes instability and uncertainty. The goal of the Emporia article was to design a ‘cash’ token, a pure medium of exchange. In essence a (dollar-)pegged stablecoin that can’t lose or accrue nominal value. However, the holder loses purchasing power in the long run (this is the opportunity cost of holding cash).
2.EMP leverages roughly 3 new concepts.
Because of it’s friction-less nature, Mana can be a double-edged sword. In the Emporia article I try to use it as a shock absorber, which is the first innovation of EMP. Instead of relying on the open market to mint and burn additional tokens when demand for the token changes, the shock is absorbed by spending a tiny amount of mana. Every time the demand changes, the ‘balance sheet’ of the stablecoin changes:
circulating tokens*price (=demand) vs supply
The mana is used to gradually expand or contract the supply. This is done by a gradual rebase.
The second new concept I proposed is ‘hiding’ the aforementioned ‘balance sheet and taking away arbitrage opportunities. EMP tokens should be fungible and are worth 1 dollar each while the balance sheet is stored separately. It remains visible as a proof that the token is in fact stable.
The third new concept is tearing up the balance sheet in different pieces and store them separately. To rebase the currency, you only need to modify one piece of the balance sheet. What matters in the end is not the individual pieces, but the total sum of all pieces (= the total supply). That should be equal to (tokens in circulation)*price. (= the total demand)
Distributing the balance sheet is not really necessary but I think it provides an additional layer of assurance to token holders. The balance sheet can be divided in as much pieces as need be. It can be stored at the level of the liquidity pool, the token holder or (in theory) the token itself. In the Emporia article I proposed the 3rd option, but it seems this isn’t technically feasible.
However, I believe it could be stored at the level of the token holder. This means that every person holding EMP would also hold an NFT, which would be his piece of the balance sheet. When transferring EMP tokens to another holder the data in the NFTs of both parties is updated. The data store in the NFT doesn’t need to match the amount of tokens he is holding. You can hold 500 EMP but the balance sheet might account for 510. This only means that around the time your EMP tokens were issued the protocol calculated it had to bring more tokens into circulation to match demand.
3.The price of mana provides a possibility to assess the fair value of the KOIN token. I see mana bonds as a standardized way to trade or delegate mana. Based on economic principles we can use the prices of mBonds with different maturity dates to approximate the ‘fair value’ of the KOIN token. This metric can serve as an indicator to determine how much of the KOIN price is speculative value.
In the article I propose to use this metric as a the target price for a more stable version of the KOIN token, sKOIN. However, as mentioned by Kui there are some drawbacks to using this metric. Mainly the fact that the demand for mBonds will be quite low and the dat will be skewed. I’m still trying to fit it in somehow but for the moment sKOIN2 seems more promising. More on sKOIN2 below.
This doesn’t nullify the concept of mana bonds, it’s still useful to construct a metric to approximate the fair value of KOIN because of the price signals it sends to the market.
4.A stablecoin reflecting the growth of KOIN is needed to redirect speculators, offering them similar yield. This way they can release their KOIN tokens at reasonable prices to developers and still get their Lambo. sKOIN and sKOIN2 are two possible avenues.
Additional incentive programs are also useful to encourage the transfer of KOIN to developers. Maybe something like a community ‘vault’ where speculative KOIN holders’ and developers’ interests meet. The first group commits to releasing their tokens over a certain period of time or at a certain price. The developers on the other hand offer special perks in exchange. Maybe something similar to Kickstarter or a community VC fund. Offering some special status with NFTs?