Why we designed the world’s first semi-stable token
Crypto speculators embrace volatility and sharp price movements. But mainstream adoption requires a different approach.
Enthusiasts dream about a world where cryptocurrencies replace the US Dollar, the Euro, and the Venezuelan Bolivar. We might see it happen, eventually. But today, shops in most countries only accept the local fiat currency. When you ask why they don’t accept Bitcoin, the answer is unanimous: it’s just too volatile.
Volatility hinders the adoption of cryptocurrencies for international remittances, too. A crypto transfer is nearly instantaneous, and costs are very low, but it doesn’t matter if you are a business paying an overseas supplier or a Venezuelan migrant worker sending money home — “I’ve sent you $1000, which might worth $890 or $1043 by the time you convert it to cash” is simply not good enough.
Mainstream adoption requires price stability.
There are limited ways to design a stable token (or stablecoin, as they are often called).
Tether is the most famous example of a fiat-collateralized token, where 1 USDT equals 1 USD in the company’s bank account. While this sounds great in theory, it raises serious questions. How do you know the collateral exists? How is it audited? What happens if the company disappears? How easy it is to “cash out”? How long will governments tolerate a private company printing fiat-equivalent tokens? This approach doesn’t solve the problem of centralization either. We believe this is not the right way to solve the issue of volatility. There are new players in town trying to win over Tether by assuring the reserves such as TrueUsd or Circle.
There are a few crypto-collateralized stablecoins on the market, MakerDAO’s Ether-backed DAI being the most promising. The problem with this type of stablecoin is obvious: the collateral is volatile, so in order to maintain the price peg, you need to heavily over collateralize the token — and your position can still be liquidated in case of a flash crash.
The Send Token (SDT) is a non-collateralized semi-stable token, the first of its kind.
Non-collateralized means the value of SDT is not backed by any fiat or cryptocurrency. Instead, the price is calculated using a transparent liquidity formula that measures network transaction volume and sustained during fixed periods of time via a consensus mechanism (users and applications who recognize the reference price). SDT is stable because the participants in the network all agree on the USD price equivalent at a given moment.
This idea might sound strange at first, but it’s not unprecedented, neither brand new. All the fiat currencies in the world are non-collateralized — people and organizations simply agree that they represent value. In 1974, Friedrich Hayek already demonstrated the viability of a non-collateralized, price-stable currency issued by a private actor, operating independently from any government.
It is possible to design a stable token building on Hayek’s idea, where the issuer dynamically manages the money supply. Basis is such a stablecoin, trying to replace Tether.
But Send SDT is not a stablecoin; it’s a semi-stable token, a new category in crypto. After initial price formation, SDT will maintain a stable rate in USD during a calendar week. It is stable enough to be used as a medium of exchange, but dynamic enough to serve as a store of value, incentivizing users and liquidity providers. SDT can bootstrap entire economies by allowing them to use crypto without falling into the demise of volatility, but also giving assurance to the users since it could become a trusted medium for millions.
A new consensus period begins each Monday at 12 a.m. EST when a new reference price is calculated based on the transaction volume (measuring network liquidity) and the circulating supply. The cryptoeconomics of SDT are discussed in great detail in our Whitepaper and Token Economics, which can be found at www.sendprotocol.com.
Price stability, in practice, means the value of a transaction stays the same from start to finish. If you send $1000 in SDT, the recipient will be able to convert the SDT back to exactly $1000 in whatever local currency. It also means crypto traders and speculators can use SDT as a hedge in turbulent times.
Ultimately, the value of the Send Token rises at a predictable rate according to the price consensus formula as the network grows. It’s not speculation driving the price but adoption. We believe this is the right way to design a token for real-world use.
Our whitelist is open with only 2,000 available slots. The public presale price of 1 SDT is $0.14, representing a 30% discount over the $0.20 starting distribution price.
You can find further information about the Send Protocol on our website www.sendprotocol.com.
