MultiToken has developed a protocol to create multitoken with auto-rebalancing features. It helps investors to put multiple subtokens into a multitoken by using smart contracts. Due to the rebalancing feature, investments can grow faster and drop slower than the market.
The Genesis of MultiToken Project
Our team started by grouping many subtokens into one multitoken that is quantifiable. Then we allowed users to release this token. The multitoken was designed in such a way that it can be easily burned and the subtokens retrieved.
Rebalancing the Tokens Using Arbitrageurs
The next step was to develop the process of rebalancing proportions. Arbitrageur play an important role in this process. Their participation makes the whole rebalancing process automatic. Arbitrageurs buy cheaper tokens and try to sell them for a higher price. Their main motivation is to make profit. Their active participation keeps the crypto prices in check.
It’s a lot like the crypto-exchanges. In the exchanges the price deviation of cryptocurrencies is only 0.5%. The location of exchange might have a little bit of influence. But due to the continuous activities of the Arbitrageurs, the price of cryptocurrencies stay stable throughout the world. Also, high competition among Arbitrageurs leads to minimal exchange commissions. The multitoken depends on similar arbitrage activities and keeps the proportions balanced in the multitokens.
How does rebalancing Work
Smart contracts are used for rebalancing. In the smart contract, the values of all tokens (the number of tokens multiplied by their prices) are set in a specified proportion. The smart contract also allows any user to replace one token with other one. A user can offer a smart contract token A and request to get token B in return. The smart contract determines the amount of B tokens to offer according to the subtoken ratios. The user has the right to accept or reject the offer.
The smart contract is unaware of the price changes of the subtokens. Anyone can add cheap tokens and get more expensive ones in return. As mentioned, arbitrageurs can run these operations to make a profit. They will end up setting the right prices in the smart contract.
Using The Competitor
One of our competitors is Bancor. It can handle smart contracts for two tokens, which rebalances in a 1-to-1 ratio. It uses proprietary BNT tokens to exchange one token to another. Users can create their own tokens using the Bancor protocol. One of the problems is that it can result in 100s of contracts and tokens, thus, due to complicated formulas, the commission fees can be large.
From Bancor’s operation it is evident when there is enough liquidity and the multitokens can be used for exchanging other tokens. The MultiToken team can create an exchange itself. However, instead of an official exchange, token exchanges can be made by arbitrageurs and ordinary users. For example, if someone wants to exchange ethers he can use his ethers to buy subtokens in the right proportion and create a multitoken himself. He can then trade the multitoken as a regular token with another user. On the other side of the trade, the person who wants to get the ethers can burn the multitoken, get the subtokens, and then change all the subtokens to ethers.
MultiToken Project’s Long-Term Plan
We plan to initially drive all exchange operations through the Bancor exchange. When we have a significant amount of funds (liquidity of tens or hundreds of thousands), we will start running the exchanges through own system. People who keep money in the multitokens will receive a commission for all the exchanges.
On the Bancor exchange, when investors buy a multitoken made of two tokens, one of the subtokens is basically a BNT (Bancor’s own token). But in the MultiToken project, there will be various types of multitokens available with various proportions of subtokens. People can buy any multitoken they want and keep money in it. On top of it, investors will receive 0.2% commission from all exchanges that will take place through using the multitoken. Thus, multitokens’ portfolio will automatically earn money for the investors.
More Investment Opportunities
Besides multitokens with constant proportions, we also allow funds to create FundToken. The proportions in these fund-based multitokens can independently change. The objective is that these funds will implement their own unique strategy as a separate multitoken and everyone can invest in these unique multitokens.
Users can go to the MultiToken website and check the funds that have interesting histories. They can invest in the ones they like. Index funds have complicated limits, rules and regulations for investing. Here there are no rigid limits. Thus, users who are looking for alternatives to index funds, these fund- based multitokens provide an additional avenue for investing.