Cogito’s Path to Dominating the Global Financial System
Tracercoins are an entirely new asset class — AI-Powered, Fiat Independent…and have the potential to become the dominant form of exchange and value storage mechanism on the planet.
Join us on April 18th at 17:00 UTC for a special Twitter Space, “The Future of the Global Financial System”
With Ben Goertzel, CEO of SingularityNET, and Cloris Chen, CEO of Cogito Protocol
The initial concept behind Cogito Protocol was a very simple one: For cryptocurrency to be really useful as an alternative medium of exchange and value storage, it needs to be fast and cheap, it needs to be relatively independent of the actions of governments and corporations, and it needs to be reasonably stable in value.
The importance of being relatively non-volatile in value cannot be overstated. For most practical purposes — pretty much every use-case besides short-term trading or long-term investment — a cryptocurrency whose price is constantly subject to highly volatile fluctuations is not much use. So far, the best route the crypto world has found to combat price volatility is to create “stablecoins” with values pinned to fiat (thus failing the requirement of being relatively independent of governments and corporations). However, it turns out there are lots of ways to make liquid crypto tokens whose prices aren’t insanely volatile, other than pinning price to some fiat currency, traditional financial instrument, or basket thereof.
The core idea underlying Cogito is that, by pinning the value of a token to some synthetic index (formed as a weighted, smoothed average of publicly available, periodically issued index components), one can potentially achieve even better stability than one gets by pinning a token to fiat. And one can make such tokens radically fast and cheap by integrating them with technologies such as HyperCycle.
Advantages of Tracercoins
Why would this sort of “tracercoin” (that approximatively traces the value of some synthetic index) be better than ordinary fiat money like the US dollar?
One reason is that fiat currencies are themselves not so stable as compared to the prices of actual goods due to manipulation by central banks and their friends.
Another reason is that a token pinned to an index that is not itself significantly liquid is going to be much less susceptible to the sort of psychodynamics that cause a small deviation in a fiat-pinned stablecoin’s exchange rate to lead to market panic and ensuing manipulative and speculative activity and potentially escalatingly larger deviation.
Total reserve-based backing and stabilization are not feasible when what you’re tracking is a synthetic index — however, risk-weighted reserve-based stabilization can work, one just needs to maintain a pool of assets whose appropriately weighted average price will approximate the token one is trying to trace.
But if you’re going to do risk-weighted reserve-based stabilization, you might as well endeavor to decrease the amount of reserve needed to achieve a given amount of stabilization — and lo and behold, when you get into it a little bit, you find that AI is the best way to do this. If AI can predict the market-driven fluctuations in a token’s price, it can be leveraged to enable proactive “before the fact” minting and burning of tokens, meaning that a certain amount of stabilizing force can be achieved with fewer tokens than would be needed in the absence of algorithmic stabilization.
A Fundamentally New Asset Class
While creating this sort of “tracercoin” that roughly pegs a synthetic index is conceptually straightforward, practical implementation quickly leads to a variety of technical difficulties. These turn out to be surmountable, however, and the ultimate result is a class of cryptographic tokens with unique properties — a fundamentally novel asset class.
“The ultimate result is a class of cryptographic tokens with unique properties — a fundamentally novel asset class”
Indeed it is surprising the crypto space has not led to a greater number of fundamentally novel asset classes up to this point. The beauty of smart contracts is that you can use them to code essentially anything you can imagine in a secure and decentralized way. This has the technical potential to lead to a great variety of new financial mechanisms, along with a broad spectrum of non-financial products, but instead, this potential has mainly so far been squandered on close imitation of products from the traditional finance world.
Within the scope of tracercoins, a wide variety of different assets can be created via choosing different synthetic indices. Cogito has chosen to start with the GreenCoin or GCOIN, which traces a synthetic index of environmental progress. A product called XCOIN, which tracks an index of technological and scientific progress, has also been investigated and tested thoroughly and is slated for likely later launch.
GCOIN has been designed for the property of extreme stability, feeding off the fact that progress on cleaning up the environment is relatively slow but steady on a global scale. XCOIN would, by its nature, be less extremely stable but stronger in terms of value appreciation — i.e., trying to trace something that increases exponentially or hyper-exponentially will inevitably involve more error than trying to trace something with a basically linear trajectory but will also involve greater return. Based on these properties, GCOIN is ideal for the role of a payment token or a hedge against fluctuations in more speculative investments; whereas XCOIN would seem a likely good choice for a long-term investment if one is OK with some short-term ups and downs (most likely not on the scale of the ups and downs of BTC or other “traditional” crypto assets, however).
The scope of possibilities is essentially endless — one can look at Cogito’s framework as a “tracercoin as a service” facility, enabling anyone who has any ongoingly updated index that they care about to create a token using risk-weighted reserve-based algorithmic stabilization to approximately peg that index. No matter what the index in question, the same smart contracts and the same AI-based stabilization methods running on the SingularityNET Platform can do the trick of powering an associated tracercoin.
The Path to Broad Utilization
Ultimately, the Cogito tracercoin framework has the potential to become the dominant form of exchange and value storage mechanism on the planet. Tracercoins start out with a critical combination of properties shared by nothing else out there: They are not volatile like ordinary cryptos, and not manipulated by centralized entities with their own self-serving agendas like fiat currencies (and the stablecoins that mimic them). What they need to find mass usage is “merely” a low-cost, high-speed, high security infrastructure, and a positive-feedback cycle of increasing adoption.
Ultimately, the Cogito tracercoin framework has the potential to become the dominant form of exchange and value storage mechanism on the planet.
Cogito’s infrastructure is designed to be multi-chain, so it can take advantage of the best blockchain technologies as they emerge. Cardano provides relatively high efficiency and low cost at the present time, and the Cardano community’s enthusiasm for breakthrough technologies will be a springboard for growing initial adoption. The new HyperCycle ledgerless blockchain, once it rolls out in a mature form, will have a number of strong advantages for Cogito tokens as well, potentially providing dramatic decreases in transaction cost and increases in transaction speed.
Utilization of the GCOIN will be seeded and then bolstered by a “green to earn” campaign, in which partners in the environmental space will work with Cogito to distribute GCOIN tokens as rewards to individuals who act in ways that benefit the environment.
The decentralized nature of Cogito’s implementation is paired with a democratic governance structure, including voting on key issues by holders of the CGV token. CGV will shortly be made available to the public via token sales on a number of launchpads and after that, available on an array of DEXs. A staking mechanism will incentivize the stability of ownership of CGV.
First Crypto and Environmental Enthusiasts…Then the Global Economy
The initial user base of GCOIN is expected to be a combination of crypto enthusiasts and recipients of green-to-earn rewards. However, as GCOIN grows and then XCOIN and other tracercoins are launched, we see a strong possibility for Cogito tokens to emerge into a significant role in the global economy.
We have seen El Salvador adopt Bitcoin as a legal currency. An increasing number of developing nations will likely become interested, in coming years, in a decentralized currency that has a more stable value and is robustly immune from manipulation by the great powers.
There remains no viable global payment solution — PayPal and similar services charge hefty fees, they don’t work in numerous nations, and they annoy many developing governments who don’t like the way their fees serve to transfer money from the poor to the rich (e.g., PayPal’s shareholders). A low-cost implementation of GCOIN and other tracercoins is an ideal technology to play a key role here. Cogito coins can easily be supplied with mechanisms for fraud detection, chargebacks, and other familiar retail payment mechanics.
Finally, in line with the SingularityNET ecosystem’s mission to develop advanced AI for broad human benefit, a portion of any fees charged on Cogito transactions will be donated to beneficial causes. GCOIN will donate to environmental causes, whereas XCOIN will donate to a fund dedicated to providing Univeral Basic Income to the developing world and smoothing the path to the Singularity. Imagine that — forms of currency genuinely oriented to do good for the human species rather than to aggrandize one group of people over another!
There is a long way to go to realize these grand visions for the Cogito Protocol, and certainly many hidden rocks will be encountered along the way, together with the more obvious obstacles. But we are extremely excited to have brought the vision to the point it is today when we are about to mint the first Cogito governance tokens and offer them to the community. Global financial system, here we come!
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