Tokens of Babel: An Introduction of Adaptive Commodities
Bill Drummond & Bizarro Zuck
The Lord said, “If as one people speaking the same language they have begun to do this, then nothing they plan to do will be impossible for them.”
Abstract
Certain synthetic commodities (namely the Ampleforth protocol) have introduced a revolutionary new way to dynamically adapt market cap in accordance with the current price of the asset. While the initial goal of Ampleforth was purely to decouple itself from Bitcoin’s dominance, the protocol has unintentionally introduced the exciting possibility of an entirely new class of asset, which projects such as AntiAmple (XAMP) have demonstrated independently of the Ampleforth protocol. This asset class (which we have coined as “adaptive commodities”) shows immeasurable benefits for determining the role supply serves in the price stability of an asset. Bill Drummond (a pseudonym for a developer or group of developers seeking to return cryptocurrency to its roots) seeks to develop this new asset class further. We have several projects in the pipeline which will test the validity of adaptive commodities and validate the relationship between supply and demand. The first project is Tokens of Babel (TOB), a gamified token which burns supply whenever new all-time price highs are met.
1 Introduction
Many cryptocurrencies have utilized a unique mechanic for the destruction of supply. This mechanic is commonly known as the “burning” of a token, and many tokens have integrated burn mechanics in the past in order to directly influence their supply. BOMB, for example, destroys 1% of all tokens transferred. BOMB was an interesting experiment, however it had one drawback. Instead of burning the entirety of the marketcap (and thus allowing you to own a proportion of the marketcap at your buy-in price like AMPL or XAMP), users were individually punished for moving their tokens. Users are therefore discouraged from trading. Despite this issue of a punishing burn mechanic and other issues such as lack of material volume, BOMB appeared to show a positive correlation between supply and demand by rising dramatically in price as supply was burnt.
BOMB is just one example of burnable cryptocurrencies. However, it is an interesting case study, and shows the potential that a smart contract may have for forcing their own appreciation. BOMB failed because it lacked material volume (at least $1 million a day), however one can wonder how BOMB might have reacted if it had more support over time. Regardless, this model can be improved upon. Bill Drummond has already innovated on this model by providing an adaptive commodity which burns the total supply of the token. AntiAmple (XAMP) ensures that users always own a proportion of the total market cap of the token by burning tokens stored on all wallets at a fixed percentage when burn events take place.
Tokens of Babel (TOB) builds upon this concept of proportional market cap ownership and utilizes a unique burn mechanism in an attempt to elucidate the relationship between price and supply of a token. The term “rebase” is the nomenclature for burn events, and Tokens of Babel has a unique rebasing mechanism which is detailed further below. Rebases of TOB affect the number of tokens in your wallet, but not your overall share in the total supply. If you own 0.5% of the total supply, you will always own 0.5% of the total supply, regardless of the number of tokens in your wallet.
The Law of Supply and Demand is an economic theory which dictates the following: low supply and high demand indicates an increase in price, and high supply and low demand indicate a decrease in price. This concept has been utilized by the Ampleforth protocol to continuously adapt their commodity toward a stable $1 target, but it may also be possible to use the law of supply and demand to adapt a commodity to maximize price. That is, it may be possible to increase demand by restricting supply. TOB seeks to aggressively test this theory by providing a “trading game” which rewards traders who push the price of the commodity upwards.
2 The Protocol
Tokens of Babel will attempt to influence the price of tokens by modifying the supply of the commodity directly. Every 12 hours, Tokens of Babel will attempt to rebase (see 2.1 Rebase Logic). The maximum percent burn in a 12-hour period will be 1%. The maximum percent burn in a 24-hour period will therefore be 2%.
Tokens of Babel has been developed on the Ethereum network. The team has developed a price oracle to automatically trigger the rebases every 12 hours. It has an initial supply of 4,012,101 and utilizes 18 decimal point precision. Incidentally, Tokens of Babel references its biblical roots in its supply:
· 40 Days
· 12 Disciples
· 10 Commandments
· 1 Yahweh
5% of the total supply of Tokens of Babel will be airdropped starting 2 weeks after the launch in order to reward our community and increase engagement on Tokens of Babel. The developer fund contains 10% of the total supply and is vested in 8-month continuous vesting contracts. The developers can withdraw at a steady rate once per block divided by the number of blocks that on average are mined in 8 months. The number of blocks was determined by this thought process:
1. 15 seconds in an average block
2. 5760 blocks in a day
3. 240 days in 8 months
4. 1382400 blocks until vesting is completed
2.1 Rebase Logic
Every 12 hours the Tokens of Babel oracle will attempt to trigger a rebase. These rebase attempts will take place at 09:00 UTC and 21:00 UTC. If, when a rebase is attempted, the price of Tokens of Babel exceeds the historical all-time high, then 1% of the total supply of the token will be burned. The new all-time high target will then be set to 110% of the price reached at rebase. If the price of Tokens of Babel is below the all-time high at the time of a rebase attempt, the all-time high target is adjusted to be 50% of the sum of the current price and the previous all-time high target.
If the TOB token’s price is above the all-time high at rebase attempt:
The all-time high target price is $1.50.
The price at a rebase attempt is $2.
A burn amount of 1% is triggered. The new all-time high target price is set to 10% above the price at rebase attempt. So, if the price at rebase attempt was $2, the new all-time high target is $2.2.
If the TOB token’s price is below the all-time high at rebase attempt:
The all-time high target price is $2.
The price at a rebase attempt is $1.
The new all-time high is ($2 + $1) / 2 = $1.50. No burn occurs.
As time goes on, we believe that this rebase method will provide an interesting glimpse into the true nature of supply and demand. Additionally, this method of rebasing should always trend TOB in a positive price direction due to the nature of market caps and supply restriction. Similarly to how Bitcoin and other mineable cryptocurrencies restrict supply on a time-locked basis, TOB restricts supply by removing available tokens from the total supply. The benefit of TOB over a coin like Bitcoin however, is that you will always hold a fixed ratio of the market cap regardless of the price or supply. We believe that this rebase logic will also allow the Tokens of Babel to form a unique psychological relationship with traders, which we believe will greatly influence the volume of TOB and encourage very rapid growth.
2.2 The Psychology of Tokens of Babel
Tokens of Babel is a unique adaptive commodity because it utilizes a key psychological component in order to force its appreciation. By encouraging traders to increase the price of the token through the restriction of supply, TOB will gradually develop a relationship with its traders and provide value by directly rewarding the accumulation of the token. By restricting the available supply of TOB, demand will grow and price will rise. In the realm of psychology, our rebase method is very similar to the concept of reinforcement.
VR — Variable Ratio Schedule
FR — Fixed Ratio Schedule
VI — Variable Interval
F — Fixed Interval
Our rebase method will directly reward our users for trading by forcing price to appreciate, thus reinforcing the behavior of token accumulation. Figure 3 is a simulated trending period whereby 10 rebases have occurred. Due to the nature of marketcap, price must increase in order to stabilize the currency’s value. This will provide traders with an incentive to push the price in an upward direction, and as traders force appreciation by accumulating the token the price of the token will need to rise to meet demand. Demand can therefore never be “satisfied,” forcing the token to continuously trend upward for as long as material volume exists.
3 What is a “Bill Drummond Experiment”?
Bill Drummond is a pseudonym for a developer or group of developers with the goal of returning cryptocurrency back to its cypherpunk roots. Bitcoin was started as a means of tearing down an unfair and segregated financial system where the already rich and powerful rule and exert power. Despite these origins, it seems that we have strayed far from the idea of truly decentralized systems. More and more, we see the financial system tightening its grip on regulations and restrictions guised as safe policy. With more barriers to enter, less people have an opportunity to compete and end up having to work for those in power rather than themselves. This stifles innovation, competitiveness, and risks centralization of money and politics which leads to corporate fascism.
Avarice has driven new cryptocurrencies away from the true benefits that Satoshi Nakamoto foresaw when they created Bitcoin. Bill Drummond possess the knowledge and financial means to usurp traditional regulations and typical red tape which plague new cryptocurrencies. We feel a moral responsibility to utilize our resources wisely and steer the cryptocurrency space in the right direction: the direction of innovation and freedom. We stand for the rights of the individual. We stand for the users who have very little, and we stand for the ability to provide financial freedom of all those who seek it. Bill Drummond stands for those who seek to liberate themselves from the shackles of traditional finances.
Radical movements must be taken for us to seize back our financial independence. The times of relying on traditional methods for wealth accumulation have passed. It is no longer feasible to work for many years at the same job and retire at the end of your life. Our parents are beginning to feel the burden of our financial system, and the younger generations feel the grip of unending debt clasping their necks. We cannot breathe. We cannot speak. Our dreams and fears fall on deaf ears. We cannot escape.
Surviving alone is no longer an option. Surviving in today’s society is slavery. We know that we’re trapped, and we’re trapped together. But there’s a secret that those in charge don’t want you to know. We can escape. We can subvert the system. We can be free. Leaving traditional financial systems behind will not be easy. But nothing ever worth doing is easy. Nothing ever done for the good of mankind has been simple, it has always an uphill battle to the top. But we believe that in the end, it will be worth the struggle.
4 Conclusion
Tokens of Babel is the first of many Bill Drummond Experiments to come. The continued development of new asset classes is essential for the cryptocurrency space to continue to expand, and we believe that Tokens of Babel is the first in a long line of pioneering cryptocurrencies which will seek to validate the very nature of economics. Innovation and thoughtful development of new adaptive commodities will change the world of finance dramatically, and Tokens of Babel is just a piece of a much larger puzzle that will begin to show itself as time goes on. Join us in changing the future of finance. Join us in returning to the roots of cryptocurrency.
