Mission: Nexty Stabilization, Launch…
Part II: Approaching the Thermosphere
As an avid trader, you could have stumbled across thousands of price tags on various exchanges, but how do you know the price is trustworthy? In reality, most decentralized coins are traded on centralized exchanges, which are notoriously known for shady practices such as: fake volume, shorting bots and market markings. To minimize the risk of price manipulation, the price has to be objectively evaluated. Finding the market value of an asset requires people to buy and sell directly from the exchanges. Each buying/selling order filled using the real asset, will give the consensus a high level of certainty for the price of NewSD on the market.
Universal Oracle
Let’s say there is an Oracle to retrieve market price by performing trades using real money and assets. This concept of Oracle is purely Nexty’s proposal in decentralized price feeding, intends to solve price manipulation by centralized exchanges. Upon implementation, we entrust sealers would develop a much more elegant dApp from this concept. Initially, the Oracle retrieves the last selling price and the last buying price from exchange API are only used as references. In NewSD case — a stablecoin, if the target exchange has a fee of 0.2%, then the Oracle will not lose money by selling no less than $1.002, or buy no more than $0.998. The real market price is gauged by issuing orders and wait to see if it’s filled. For example, if the last selling price is less than $1.0, the Oracle will book a limited buy order of maximum buying price. Any orders that fit the Oracle’s criteria will be the correct selling price and stop the process.
Otherwise, the Oracle uses a price searching process to find the most correct market price between the minimum selling price ($1.0 + Exchange fee) and a specific value calculated by (LastSellingPrice — 1 PIP) * 2–1.0.
The correct price is higher if the order is filled within a configurable timeout (e.g. 10 mins), and lower if the order is not filled within that time. If no order can be filled, then the stablecoin does not have enough liquidity, and no price will be fed to the consensus.
In this sense, the retrieved price is objective, so the only thing sealers need to worry about is participating in price absorption. It is contingent to the absorption phase that both selling and buying price must be fed, whether it’s contraction or expansion. The median price in each week will be appointed by the price feeding mechanism. Additionally, having super majority (2/3) of the sealers agreed on the same price guarantees that it would be used for price absorption.
No NewSD is mint out of thin air. Market demand is the ultimate factor that decides the production of NewSD, and the stablecoin must be exchanged with its counterpart, NTY. If the market demand for NewSD changes, NTY will absorb the fluctuation of the market to keep NewSD stable.
The Source of Absorption
If there are any shifts in the price of NewSD, one of the following absorption: active, passive, or preemptive will be activated. The network triggers active condition if the demands for NewSD is disruptively changed in a short period of time, to quickly adapt to the fluctuation in NewSD price.
If the price keeps going in the same direction (up or down), the next Active Absorption Rate must be at least two times as large as the last one to trigger Active Condition. This not only allows the network to adjust to the sudden change of market demand, but also makes it exponentially expensive for adversaries to manipulate the price of NewSD.
On the other hand, if the price reverses its current direction (from up to down, or vice versa), the next Active Absorption Rate must be at least half as large as the last one. This change of direction allows the network to wind down the absorption in a stabilizing market.
The network triggers passive condition if there is no absorption between 7-day interval. It is the most defensive supply absorption condition, which ensures NewSD supply could adjust to the smallest changes of demand. When the network is stable, it will regularly activate Passive Condition to ensure the supply will be absorbed ideally when the market is mature and stabilized.
Wait! There’s more..
Preemptive is the most complicated condition of absorption, but provide the necessary flexibility. It adjusts the supply without waiting for a price to be deviated too far from an anchoring value — $1. Anyone can be the Initiator and initialize a Preemptive Absorption, but with a stake and a price.
To activate Preemptive Absorption, there has to be no other Preemptive Absorption triggered in the last week (The other 2 absorptions are allowed) An amount of NTY equal to X/2 NewSD has to be locked for 1 week for slashing condition, and X/2 of NewSD will be absorbed (just like active/passive absorption). For each order is filled above, one more order with the same value is filled for the Initiator.
The auction for Initiator starts when the first Initiator submits her proposal on chain. Proposal can only start after the last Preemptive Absorption finished, regardless of the other 2 absorptions. In one week of auction, more candidates can submit their proposals, and NTY holders will vote for them as soon as the proposal is submitted. Each vote can have the following values: Proposals ID and Vote (approved or rejected) After the auction ends, the proposal that has dominant approved vote with the highest approval rate among its competitors, wins the auction, and initiates a new Preemptive Absorption.
A failed absorption will cause the market to change direction, or in another word, it’s over-absorbed. Essentially, the initiator predicts the direction of the market, and get rewards with filled buying orders from network if it goes with the same direction of the market, or get punished if it goes against the direction of the market. The more damage it causes, the more amount of NTY will be burnt, up to the locked amount of X/2.
Epilogue
At the end of 2018, and until Q1 2019, NTY price tanks significantly, but hardship crafts strong wills. We always strive for the future of Nexty stabilization, so holders, initiators and traders together could form a decentralized circle of stabilization. This model allows each and everyone to profit themselves, while providing the necessary liquidity for NewSD as a service to the users of the network. Like every other decentralized solution, there are a lot of space left for improvement. That is why Nexty never stop trying to invent a better future of payment for everyone.
Let us hear what you think in our social channels.
Contact Us
- Homepage: nexty.io
- Email: support@nexty.io
- Telegram: Nexty.io-Community
- Reddit: /r/Nextyplatform
- Facebook: Nexty Platform
- Twitter: Nexty
