June 6 Meditation Recap
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The Value of a Crypto Asset
Regarding the impact of recent Solana outages
Outages should not affect the value of ANA from the protocol’s POV. When there is a Solana network outage, Nirvana essentially goes into hibernation. All assets are protected because all the liquidity is locked up in the protocol.
Where does the value come from for a crypto asset?
Often it’s simply because someone wants to buy a particular asset. And conversely, if no one wants to buy it, the value then goes down.
Nirvana has a subtle reversal of this.
The value of the ANA token is not from someone wanting to buy it. The value of ANA comes from the absence of people selling it. You may feel like that’s too subtle of a distinction..But let’s dive in deeper here.
Recently we’ve been discussing a concept we’ve dubbed the Market Driven Mint.
What we mean by that is that Nirvana’s AMM is BOTH the Market and the Mint, and the two are interconnected.When someone buys an ANA token, an ANA token is minted. When someone sells an ANA token, an ANA token is burned.
There’s no fixed supply of ANA. There was no pre-allocation of tokens set aside and given out to bootstrap the market. Instead, Nirvana’s market made itself on the fly. And it continues to make itself at pace with actual demand for the token.
Typically, for a project you must first mint a large quantity of your tokens. And also allocate a correlated large amount of cash so you can make a market. First minting tokens, and then establishing the market by which to sell them. However, that’s not so with Nirvana: the market and the token are made at the same time.
This significant difference is one of the hallmarks of what we’re calling DeFi 3.0.
It brings us back to our earlier point: the value of an ANA token does not come from a human deciding to buy it. It comes from the absence of humans believing they should sell it.
One of the ways that we illustrate this point is to emphasize that counterparty to every trade with ANA is not another human — instead it’s the protocol. The counterparty of every purchase of ANA is the protocol. And the counterparty of every sale of ANA is the protocol.
A Clean Entry & Exit.
We believe that the ability to “cleanly exit” is a crucial feature of any sustainable investment asset. In addition, a clean entry into ownership is also very important. The lack of a clean entry or exit mechanism is often what causes these assets to boom and then bust.
But in Nirvana’s case it’s a one sided affair.
Because you can always see the price and you know exactly how low it can go. And you also know the action that other people could take and how that would affect the price of your entry point or your exit point.
You know precisely how many tokens would need to be bought or sold off in order to hit a certain price at all times. You have perfect information.
Recently there’s been a lot of discussion about the price movement of these currencies.
For example, when buying SOL tokens there’s really no way to know when the best time to buy would be. The only answer to that question is what your neighbor thinks. And what his neighbor thinks. And what his neighbor thinks.
So what’s the best entry point for the ANA token?
It’s incontrovertibly the floor.
ANA inherently indicates when the best time to purchase is because you know that it can’t go any lower after that point.
There’s also something about ANA that tells you when a bad time to buy would be: If the market price is far away from the floor, the risk of the asset is tangibly and visibly increasing. In addition, you have a very real yardstick by which to measure that risk and decide whether you want to take it on.
This is one of the dimensions that reinforces ANA as an entirely new and different kind of investment.
Unlike ETH, or SOL, or BTC, the intrinsic value of ANA is not based on miners and the cost of electricity. It’s not based on policies having to do with the chain where you use x token to pay for fees. Instead, it’s based on something old-fashioned and very simple: The United States dollar.
Perfect Knowledge.
Games are categorized as having either perfect or imperfect knowledge. Poker is a game with imperfect knowledge because you don’t know the cards that your other competitors have in their hand. Chess, on the other hand, is a game with perfect knowledge where you know the rules of the game and you can see everything that everyone else can see. You’re all looking at the same board with the same information available.
Nirvana’s AMM is like Chess.
You know the price impact at all times. You know the rules and it’s the same rules that everyone follows and nobody can pull a fast one on you.
Traditional AMMs are more like Poker. You might buy an asset one day and then the next day all of the liquidity providers for the AMM decide they’ve had enough.The bribes aren’t good anymore, the book dries up and you can’t exit your position.
