Mission: Nexty Stabilization, Ignite !

Part I: A sight for sore eyes

Special thanks to Zergity for his insight on the subject

Where it all started…

Since the ICO, Nexty Platform has announced a solution for the future of payment. While fulfilling the latter features of an much-anticipated payment method, which are zero transaction fee and 2-second transfer time, Nexty hasn’t achieved the core feature of a payment solution. Initially, Smart Staking was a primitive mean of Price Stabilization System, however, its capability was subjectively limited by NTY locking mechanism. After the staking period is due, the percentage of promised return will flow into circulation, causing inflation. As Quantity Theory of Money suggested, if NTY supply increase rate outpaces the demand increase rate, it subsequently lowers the price. Therefore, there has to be an alternative solution for price stabilization: stablecoin. Until now, users and blockchain enthusiasts alike are familiar with quite a handful of stablecoins on the market: Fiat collateral, decentralized collateral, and non-collateral.

Definitely not Rocket Science !

Collateralized stablecoins was invented to be a solution for cryptocurrency mass adoption. Essentially, stablecoins are pegged to a fiat value, usually $1.00, with the purpose of mitigating fluctuation in cryptocurrency investments. Collateralization with a fiat currency or cryptocurrency will maintain the pegged value around its place. While it has one leg in the decentralized arena, the other leg is still buried in the centralized bank. Fiat backed stablecoins like Tether (USDT) has raised some serious trust issues, because of the concern that it doesn’t have enough fiat currency in reserve to keep its 1:1 peg.

Crypto collateral, on the other hand, doesn’t have issues with transparency. However, it requires users to over-collateralize to compensate for the volatile market, for the stablecoin issuer to feel safe with their loan. In the case of MakerDAO (DAI), for every $3.00 worth of ETH, you can borrow only $2.00 worth of DAI. If you want your ETH back, you need to pay back the DAI you have borrowed, enforced by smart contracts.

We Use Rocket, but It Flies Differently..

Some of earlier elastic supply stablecoin attempted to bring centralized banking model to the cryptocurrency (like NuBits, Basis or even NTY Smart Staking to some extent). But the critical failure come from the fact that centralized banking rely on the growing economic, so they don’t have to permanently deflate a fiat supply, they can just borrow money from the future (using bonds), and expect the economy will grow, along with the new demand. In cryptocurrency, especially in the early adoption state, demand can be decreased to zero, and there’s nothing wrong with that. An elastic supply stablecoin needs to deal with that case as well as the best case.

Every solution tries to be an improvement to the previous solution. Acknowledged this, Nexty creates a system that has no loan, debt, nor trust issues; an elastic supply stablecoin which applied the idea of Seigniorage Shares (Sams, 2014): NewSD. When Seigniorage Shares was proposed by Robert Sams, it is destined to bring about the necessary changes for stablecoins, which is moving towards decentralization. In order to achieve this, the network needs to attract a certain number of people to join.

Instead of rewarding people for joining the network, Nexty incentivizes them to stay. Our Stabilization Mission consists of 2 token types: NTY and NewSD. NTY holders represent the contribution to Nexty ecosystem by transactions confirmation, capital investment or providing service to the network. They are rewarded with capital gains when the network grows. NewSD holders represent the customer interacting with Nexty services, given prioritized protection by the network.

When the absorption mechanism is triggered by any fluctuation from the market, NTY holders are responsible for ingesting the fluctuated price by converting between NTY and NewSD. Market order issued by the consensus will automatically fill enough buying/selling NewSD orders from the highest bidders or lowest askers . An x% rate expansion will convert NTY to at most %x of NewSD supply. A c% rate contraction will convert at most %c of NewSD supply to NTY. Exchange rate is determined by the market itself, via system exchange orders. This means any changes in the price of NewSD would be absorbed by pushing the fluctuation onto the supply of NTY.

When the network grows, meaning that demand for NewSD will increase. The system will activate absorption phase to convert NTY to NewSD, which increases the price of NTY. Additionally, market orders will match from the highest bidder downwards, until the absorption amount is filled. All NTY holders have the responsibility to stabilize the network, and greatly benefit from it.

What if the demand for NewSD decline?

As you can guess it by now, decentralization comes with a cost, that every NTY holder will bear the risk of losing capital. The whole market cap of NewSD is collateralized by the total market cap of NTY. When the demand declines, NewSD will be converted to NTY to the last token if necessary.

How does the system know the true price of NewSD?

Another problem of decentralized trustless stablecoin is it can’t rely on a centralized model to figure out the price of its coin. The price has to be objectively fed directly from the market. It’s a difficult mechanism to implement on a distributed network, but nevertheless one of many features of Nexty.

Thanks for reading! We’ll dive into price evaluation and absorption condition in the next part of this series…

Resources

• Edurio — An Elastic Supply Stablecoin for Everyday Transactions
• Stablecoins: Collateralization Types
• Stablecoins: Strengths & Weaknesses
• A Note on Cryptocurrency Stabilisation: Seigniorage Shares

Contact Us

• Homepage: nexty.io
• Email: support@nexty.io
• Telegram: Nexty.io-Community
• Reddit: /r/Nextyplatform
• Facebook: Nexty Platform
• Twitter: Nexty