Connecting crypto value to real value
Charm’s vision for a sustainable future
Summary
Over the last 16 months, Charm has created a new industry for Decentralized Liquidity Management (DLM). DLM connect crypto value to real value by creating liquid markets for new products and services.
Alpha Vaults was the first to use DLM - it helped Uniswap V3 create more liquid markets for ETH and BTC. Alpha Pro will be the first to use DLM to help protocols launch tokens on Uniswap V3 - it will be the first time DLM is used to create new markets. This article explains why it’s important to create real value, why crypto is best suited for this purpose, and Charm’s plans to help anyone create real value.
Introduction
Innovation and inventiveness are the most powerful determinants of human progress. The best innovations, such as the telephone, steam engine, computer, and the internet, have created real value, and increased the quality of life for billions of people around the world.
The financial economy (which includes the crypto economy) allocate resources within the real economy, so that innovation can get the funding it needs to grow. If this isn’t done efficiently, the real economy will stagnate, and the financial economy will collapse with devastating consequences.
The crypto economy is no different to other parts of the financial economy, except that value within the crypto economy (ie crypto value) can be easily transferred due to the lack of centralized intermediaries. A mechanism that connects crypto value to real value will be of tremendous benefit to society, because it can easily transfer value to the most productive parts of the real economy.
This article will begin by explaining the importance of real value, and end with Charm’s plans to help anyone create real value.
What is Real Value
Real value is the inflation adjusted market value of all the products and services in the real economy (ie the GDP).
Innovation are new ways to create real value. They are the most powerful determinants of human progress, due to their influence on the goods or services that can be purchased. The importance of innovation is shown in the chart below:
What is money
Money is commonly defined as a storehold of wealth, but it is actually credits created by centralized or decentralized entities. Holders of money (eg USD, Bitcoin, Ethereum) are entitled to future payments from the credit’s creators.
The money can be used to generate more money (eg by purchasing investments, lending); but eventually, all money must be exchanged for products and service in the real economy, because money in itself has no value.
After their creation, money can be lent to debtors to create debts, and debtors can use the money to create new financial assets (eg stocks, tokens, bonds, options, tokens), buy financial assets, or create even more debt. The creation and trading of financial assets creates the financial economy, of which a small subset is the crypto economy.
What is crypto value
Crypto value is the market value of digital assets within the crypto economy.
The crypto economy is an extension of the financial economy, where money and financial assets are created using real value as collateral. When trading takes place, the monies are allocated to parts of the real economy that can increase real value in the future.
By removing the intermediaries in financial economies, the crypto economy offers a cheaper, more efficient and fairer way to allocate capital, and therefore a better way to grow the real economy.
When things go wrong
Things go wrong because the financial economy have a tendency to create debts, and if the debts cannot be repaid using real value, the financial economy shrinks to match the size of the real economy.
When this happens, there will be heavy losses for debt holders (ie purchasers of financial assets), leading to recessions, bankruptcies, unemployment, and loss of livelihoods.
To avoid these catastrophes, the real economy must keep growing, in order to support the financial economy built on top of it. It is the only way to create a positive outcome for all.
How to grow the real economy
Connecting crypto value to real value is a good way to grow the real economy, because the crypto economy is fundamentally a grass-root movement where money, credit, debts, and assets are created by individuals within the real economy, rather than by centralized intermediaries.
The Charm community has been working on ways to connect crypto value to real value since its founding 16 months ago, and its efforts led to the creation of a new industry for Decentralized Liquidity Management (DLM).
DLM can grow the real economy by creating liquid markets for new products and services. The following is a roadmap to describe Charm’s plans to grow the industry for DLM.
Charm’s roadmap
Phase 1 of Charm’s roadmap was to experiment different ways to connect Crypto Value to Real Value. This was a year long effort that led to the launch of Alpha Vaults, and the creation of a new industry for DLM.
Phase 2.1 is to grow the industry for DLM, starting with the launch of Alpha Pro.
Phase 2.2 is to create markets for all assets that can be tokenized, either using Alpha Pro, or by building new DLM platforms.
Phase 3 is to help anyone create new ideas, products, and services; and then use DLM to bring their contributions to market.
The progress along the 3 phases are uncertain, and lots of things can happen, which is why there is a feedback loop from any phase to an earlier phase, so that Charm can pivot to a different strategy if required. However, the goal of helping anyone create new ideas, products, and services; and to connect crypto value to real value, will not change.
Conclusion
The financial economy allocates capital to the most innovative parts of the real economy. Things go wrong when innovations fail to materialise, leading to recessions as the financial economy shrinks to match the size of the real economy.
This is why it’s important to connect financial value with real value, so that the real economy will have sufficient liquidity to grow. This can be achieved using Decentralized Liquidity Management (DLM).
Charm was the first to use DLM to increase the liquidity of newly created markets, and will soon be the first to use DLM to create new markets. In the future, Charm will work on new solutions to help anyone create markets for ideas, products, and services, in order to bring out innovations that will otherwise go un-noticed.
Therefore, if you believe in innovation, decentralization, and creating Real Value, don’t hesitate to get in touch with Charm — we would love to work with you to build a sustainable future for all!
See you soon : )
