SORA: The New Economic Order

Sora XOR
Sora XOR
Jul 31, 2020 · 14 min read


  • Reserves held by the token bonding curve will provide liquidity for XOR.
  • A new, staking reward token, tentatively called VAL is proposed.
  • ERC-20 XOR trading on Ethereum is the initial supply of v2 XOR (SORA substrate network). ERC-20 XOR holders will also receive airdropped VAL.
  • Supply of XOR is capped at 350,000 until the v2 launch (update: SORA v2 substrate network launched on April 2021). After SORA v2 network launch XOR supply is elastically managed by a token bonding curve smart contract with buy and sell price functions.
  • SORA XOR tokenomic model is proposed that uses a token bonding curve with an increasing price function. This means that as the token supply increases, the price also increases.


On October 17, 2019, the SORA v1 Network launched. In March of 2020, approximately 350,000 XOR were moved from the SORA v1 Network to the Ethereum Network and trading was started on Uniswap. The goal of the initial launch on Uniswap was to perform preliminary price discovery and build the Sora community by incorporating users of the Ethereum network. However, our technology has improved, giving us the possibility to shape a new and more ambitious type of crypto ecosystem. Whereas our medium-term goal remains generating value for our community, our analysis of the SORA economy has led us to embrace the long-term goal of realizing a supranational world economic system.

To realize this system, we are proposing SORA: The New Economic Order. This is a profound and significant upgrade to the SORA Network and the SORA tokenomics. The upgrade was voted on and ratified by the SORA community. We feel that this is a system that can add value to humanity and we strongly support its adoption.


The key thesis of the SORA economic system is that for cryptoeconomic systems to be able to compete with contemporary, centralized economic systems, there needs to be a rational economic model. To create a rational economic model, we did a survey of various economic theories, starting our journey in 2017. Over the course of this time we also employed an economist (Yokei Yamaguchi) to work with us in 2018, and he helped us with several key parts of the model.

The conclusions were that there is a large amount of empirical evidence that suggests that it is the change in the allocation of money in an economy that is a necessary and sufficient determinant of growth. This was shown by Richard Werner in his disaggregated quantity theory of money, where he disaggregated Fisher’s equation of exchange(MV = PY; a good way to think about this is also that MV equals nominal GDP viewed from the perspective of buyers, whereas PY equates to nominal GDP viewed from the perspective of producers/sellers) into real (R) and financial (F) transactions:


V := velocity of money

M := quantity of money

P := price index

Y := output of goods/services

Q := quantity demanded

It is helpful to think of the above equations as a dynamical system, such that if the quantity of money, M, changes on the left-hand side of the equation, there must be some change on the right-hand side to balance out this change (this is because V is typically fairly stable in large economies). For transactions in the real economy, this means that new money put into circulation is balanced out by new goods and services that consume this new purchasing power. However, for financial transactions, there are no new goods or services being created with the new money put into circulation, so this causes a rise in asset prices to compensate (which is not what you want in your economic system). Additionally, it is also important to understand the importance of expanding M for the production of new goods and services. As Shimomura wrote about extensively and Kurihara distilled to a simple, linear programming model, expanding the quantity of money for new goods and services expands the economic output because latent resources (especially human resources) are mobilized, and existing resources are upgraded by the creation of new capital for production.

What all this means is that for SORA to become a successful decentralized economy, we must create new tokens explicitly for creating new goods (like wine) or services (like a really awesome DEX). While this has always been our goal, in v1 of the SORA economy there was the problem with liquidity, so that bootstrapping the economic system was slow and a new model was needed in order to have guarantees (or forward guidance) about the liquidity and price of XOR so that projects could use the token successfully.

This is where the research of our economist Yamaguchi paid off again, as back in 2018, he suggested that we use a token bonding curve to autonomously manage the issuance and de-issuance of XOR in the economy. In other words, we found a way to manage the supply of tokens in a rational way, without involvement of humans, which will create a system that avoids the boom-bust problems of traditional economies and the deflationary economics of many cryptocurrencies.

Token Bondage

A token bonding curve is a smart contract that takes as input some token and outputs a new token. There are a plethora of possible variations and this is an exciting area of research, but in SORA we use a simple model where there are two linear functions: a buy-price function and a sell-price function.

XOR supply in the SORA mainnet will be backed by acceptable liquid cryptocurrencies, and each network transaction of XOR will require the burning of a small fee, the rate decided by the community (e.g., 0.01–0.10 USD equivalent). To buy XOR on the token bonding curve, one of the acceptable currencies must be used. After launch, we plan to include these tokens that you can use to buy XOR from the token bonding curve:

  • DOT
  • KSM
  • BTC
  • ETH
  • USDT
  • USDC
  • TUSD
  • DAI
  • VAL

The token bonding curve will be built directly into Polkaswap such that if the secondary market price of XOR is exceeded for one of the above trading pairs, the token bonding curve will automatically be executed so that new XOR will be put into circulation, 20% of the buying currency will be put into a pool to buy back and burn XOR, and 80% of the buying currency will go to reserves, held by the token bonding curve. As reserves are in multiple currencies, future releases of the system should provide for ways to balance between the currency reserves to provide liquidity in a variety of tokens. The close integration of the SORA economic model with Polkaswap will allow this process to be automated at some point in the future.

The buy-price function will start at a higher price than the Uniswap XOR price at launch. The buy-price function uses the exchange rate of XOR to DAI to find out the current price that XOR is w.r.t. USD. The sell-price function will, in turn, be 20% less than the buy-price function. The 20% spread between the buy and sell functions will have different uses, that will be explained in detail in a future article. A new SORA Parliament (multi-body sortition governance system), will provide a methodology for rationally allocating these XOR to create new goods and services in the SORA ecosystem, in accordance with the SORA economic model. All XOR that are created are given for free to the SORA Parliament, which then manages the token supply using the token bonding curve; specifically, the Financial Markets Authority, a standing body of the SORA Parliament will be the entity that buys and sells XOR via the primary market maker.

Because the token bonding curve is essentially an infinitely liquid, decentralized central bank, the price cannot go above or below the buy and sell functions, respectively. This is especially true because the SORA primary market maker will be built into Polkaswap and executed automatically when within range. Furthermore, because the token bonding curve’s pricing functions slope upwards, the price increases with the token supply. This gives the following properties:

  • Autonomous Management of Token Supply to Match Demand (Elastic Supply) — The token bonding curve introduces and removes XOR from circulation to meet the demand of the market. This ensures sustainable economic growth and price stability of the token economy, as the system can adapt to the changing needs.
  • Deterministic Price Calculation — The buy and sell prices of tokens in the primary market increase and decrease with changes in the supply of token. It is therefore NOT a fixed exchange rate system. The buy-price function starting price will be determined closer to the v2 launch and increase by $0.01 for each 5000 XOR sold, even if this is not final and may change before launch.
  • Continuous Price Dynamics — Given that the price of token N is inferior to token N+1 and superior to token N-1, calculating the number of tokens minted for a given amount of buy or sell orders requires integral calculus.
  • Deep and Immediate Liquidity — The bonding curve contract is the counterpart of the transaction and always holds enough buyback reserves (if investors want to sell tokens back at the current sell-price).

Features specific to the SORA token bonding curve-based economic design:

  • Separation of primary & secondary markets: Primary market — issuance/withdrawal, Secondary market — exchange rates, arbitrage trading.
  • Mitigate influences of pump-and-dump/market-manipulation attacks while the token is in its nascency and its economy constitutes only a fraction of the world nominal GDP (US $88 Trillion as of 2019).
  • The token bonding curve naturally rewards early buyers of XOR, encouraging word of mouth marketing.
  • The decentralized monetary policy of XOR offers protection from abuse by authorities and full transparency for users.
  • Primary market buy-back reserve puts a limit on ability of governments or short-sellers to manipulate the market.
  • The overall incentive mechanism works to align interests of all stakeholders, and help to sustain continuous development of the Sora Ecosystem as a global decentralized autonomous economic organization.
  • The SORA v2 monetary system is neither debt-based nor debt-driven, and new tokens are always allocated under democratic supervision, which works to eliminate the unsustainable boom-bust cycles in contemporary economic systems.

Bid/ask prices in the secondary market are bounded in a dynamic price range imposed by the token bonding curve. Therefore, the current buy/sell-prices offered by the token bonding curve provide support & resistance levels, or the confidence range of XOR in the market, with forward guidance.

Price uncertainty has been a major cause of low cryptocurrency adoption for payments. However, with real-time token supply data available on a public blockchain and a globally known token bonding curve, all users can observe current trends related to the token price and make informed expectations on the future levels. As illustrated below, buy/sell-prices offered by the token bonding curve and bid/ask prices in the secondary market change continuously since buy/sell-orders continuously change. Observability of the XOR supply together with the properties of the token bonding curve thus act as a built-in forward guidance on the XOR exchange rate, reducing uncertainty and enhancing its store-of-value property while the token is in its nascency. Once the self-circulating economy based on XOR matures, the token bonding curve mechanism can be eased out or disengaged, but this is likely to be several decades into the future.

While the SORA economy is in its infant phase, the token bonding curve plays a crucial role in maintaining the store-of-value property of XOR. The ability to set confidence ranges of token price movements lowers the psychological boundary in accepting XOR for payments. Since its price changes continuously, the token bonding curve is NOT a fixed exchange rate mechanism, though its policy rationale shares similarity with that of FX market intervention by central banks, especially in developing economies.

In addition to XOR, there is a new token, called VAL, that plays a role in incentivizing validators on the SORA v2 Network.

A New Token: VAL 𒋾 波流

As XOR is becoming a token that has forward price guidance, a new token will be added to the ecosystem that captures value related to the growth and use of the ecosystem. This token is tentatively called VAL and is a staking reward token, that incentivizes validators to join the SORA v2 Network. Economically, this also adds the ability to determine long and short sentiments as the market, as price trends for VAL can reveal the preferences of market participants.

VAL tokens are given to validators and nominators as a reward for staking. VAL is a complex model in and of itself and will be fully explained in a future article, along with the initial rules and parameters for staking and validation on the SORA v2 Network.

V1→V2 Migration Plan: The Basics

The SORA v2 Network is a profound change, both technologically and economically. Whereas the v1 network uses Hyperledger Iroha v1, SORA v2 will use Substrate and will become a parachain for the Kusama and Polkadot networks. This will allow XOR, VAL, and other tokens of the SORA network to move to other blockchains in the Polkadot ecosystem, as well as to Ethereum, using bridging contracts.

The SORA Network parachain and Polkaswap.

In addition to the compelling technological vision, v2 requires that we completely change the economic model of a running network. As explained above, all v2 XOR should be backed by reserves of the token bonding curve. Because many v1 XOR currently exist, this poses a difficultly to transition them directly to the v2 network. Instead, v1 XOR will be replaced with a new token, VAL.

In summary, the key parts of the migration plan are:

  • SORA v1 Network XOR tokens will be transformed into VAL, based on a specific ratio that will be explained in a future article. An important implication of this proposal, however, is that no SORA v1 Network XOR tokens will dilute the v2 network, while at the same time v1 Network XOR token holders will receive value and self-deterministic governance.
  • All ERC-20 XOR becomes v2 XOR automatically. This initial supply will be capped at 350,000 XOR. Because they will not be backed by reserves of the primary market maker at launch, the token bonding curve will prioritize building up reserves at the beginning.
  • All ERC-20 XOR token holders will be airdropped VAL at v2 launch, proportionally for each XOR they hold at a snapshot event (will be defined later, but most likely the instant of v2 launch). So the ERC-20 XOR holders will have VAL and v2 XOR (1 ERC-20 XOR is equal to 1 v2 XOR). To be clear, ERC-20 XOR will not change in any way.

Towards a New Tomorrow

One of the reasons decentralized P2P economic systems haven’t been more widely adopted and lack sophistication is not having access to an elastic supply of capital via a central bank or mutual savings bank. By decentralizing the concept of a central bank, blockchain networks can finally create and allocate capital to fund worthwhile producers as well as needed infrastructure and public goods. With its interoperable technology, SORA can become the decentralized central bank for the world of blockchains, financing the creation of new and exciting applications.

The SORA: New Economic Order proposal will be summarized to be ratified by referendum at a later date by the community using the SORA App. Vox populi, vox Dei.

Tentative Timelines

We would like to launch SORA v2 testnet later this year and then the main network in early 2021.


  • I have SORA v1 Network XOR, what will happen to my v1 XOR?
  • We propose that all v1 XOR will be converted in VAL, a new token. The conversion ratio and the specific of this conversion will be explained in detail in a future article. V1 XOR won’t affect the v2 XOR token supply or network, but v1 Network XOR token holders will receive value and self-deterministic governance. A good way to think of the relationship is as similar to Kusama and Polkadot, whereby one group of users is more experimental and dynamic than the other (however in this case, we foresee both groups using the same physical network).
  • I have some tokens in my SORA app wallet. Do I need to hold it?
  • Yes, you should keep your SORA app wallet safe and do not lose your passphrase! These tokens will be converted into VAL
  • How are SORA v2 Network XOR created?
  • Within the mainnet, the creation of XOR will require a corresponding backing in the value of mainnet XOR at the time of creation using acceptable “hard currencies.” Currently it is expected that suitable hard currencies will be: BTC, ETH, USDT, USDC, TUSD, DOT, KSM, DAI. Additionally, the 350k ERC-20 XOR tokens will be the initial supply of SORA v2 Network XOR.
  • How can community members signal their acceptance of this proposal for SORA v2?
  • Members wishing to support the summarized proposal will be able to do so in the SORA app, in the coming weeks, via a Yes or No referendum using the SORA votes. More information, including a Constitution for the SORA v2 Network will be released later.
  • Will projects in SORA v1 that were voted in receive XOR? Will voters who voted on the projects receive XOR?
  • Some projects have commitments for distributing v1 XOR, so they will receive some limited distribution. When the distribution takes place, users who voted on the projects will receive a random distribution totaling 1% of the distributed amount.
  • How can I propose a project for SORA? When can I do it? What’s the process?
  • The process will be explained after the SORA v2 Network launch.
  • What is PSWAP, and how will it impact SORA?
  • Polkaswap is a liquidity aggregator cross chain AMM (Automated Market Making) DEX built on the Sora Network. Polkaswap will have it’s own token, PSWAP, to incentivize liquidity providers. Gas fees on Polkaswap will be paid in XOR and like ETH in Uniswap, liquidity will also be provided in XOR. XOR is a useful token for liquidity provision on Polkaswap because it is not affected by rapid price changes (minimizing impermanent loss), highly liquid (because of the token bonding curve market maker), and neutral between other Polkadot ecosystem projects, but uses DOT and KSM as reserves.
  • Will other projects be built on SORA Network?
  • The SORA Network will work to be an efficient, effective and permissionless network for a myriad of applications. Initially many of these projects will likely be Decentralized Finance “DeFi” oriented, but over time we expect many other projects to emerge, both physical and digital.
  • Can I run a SORA node? How many XOR do I need? When can I run?
  • Yes, you can run a validator on the SORA v2 Network. It will be a system similar to nominated proof-of-stake where validators must stake an amount of XOR and then be nominated by others. The specific numbers and whether this will be fixed-rate or auction-based are still being decided and will be explained in-depth in a future article.


Sora: The Decentralized Autonomous Economy


SORA is working to become the decentralized central bank for the world, financing the creation of new and exciting applications, under the democratic supervision of the SORA Parliament.

Sora XOR

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Sora XOR


SORA is working to become the decentralized central bank for the world, financing the creation of new and exciting applications, under the democratic supervision of the SORA Parliament.