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XST: A Platform for Synthetic Assets on SORA

As Proposed at the 2nd Annual SORA Economic Forum


  • The following points are a proposal for community discussion, and carrying out these specific changes will have to be voted on by the community to upgrade the SORA network runtime executable code
  • Synthetic assets on the SORA network will get their own platform based around a new token: XST
  • XSTUSD will no longer be convertible directly to XOR, but to the new token, XST, instead
  • Additionally, XOR will no longer be mintable via governance for any reason, so the XOR supply will now be managed 100% by the token bonding curve
  • To fund productive economic growth, the new token, XST, will be used for project funding, to expand the SORA economy
XST: A Platform for Synthetic Assets on SORA

XST: A Platform for Synthetic Assets on SORA

Synthetic assets are assets pegged to an index using only on-chain collateral. XSTUSD (SORA Synthetic USD) is a great example of a synthetic asset, as it is pegged to the value of the USD, but currently backed by redeemability to XOR, meaning that you can get the face value of XSTUSD given to you in newly minted XOR (so long as XOR is at least $3 in price).

Synthetic assets matter because assets that are fully collateralized on-chain, but are linked to off-chain indices, are incredibly powerful. Whether the index is a fiat currency like the USD, a commodity like XAU, or a security like TSLA, having completely on-chain assets to represent these values allows a multitude of composable DeFi operations while being impossible to censor. The possible uses are truly endless, and are limited only by developers’ imaginations and reliable oracle data!

Over the last few weeks, SORA has been in talks with an oracle data provider to incorporate their data into the SORA network, for dApps to make use of it. The implication of this is suddenly many new synthetic assets, similar to XSTUSD, could be created, if the community wants to build them. To power this exciting new platform, rather than using XOR as the collateral for synthetic assets in the SORA ecosystem, it is proposed to create a specialized token for this use case: XST.

According to the proposal, the XST token would have the following properties:

  • XST would be mintable by governance via on-chain referendums or by burning XST-assets (e.g., XSTUSD) to mint XST
  • New synthetic assets can be linked to an oracle’s price feed via on-chain governance to create new synthetic assets (e.g., XSTXAU for a synthetic gold asset would be technically possible)
  • XST would be bought back and burned using 10% of VAL and 10% of the PSWAP remint (which currently goes to fund dev, so this is just redirected, without changing the tokenomics of VAL or PSWAP)
  • Potentially, fees from funded projects could be used to buy back and burn XST, at the purview of the projects that receive grants in XST via governance (hard to enforce this without an army, so it is best to keep this optional)
  • XOR-XST LP on Polkaswap gives double rewards for the PSWAP strategic bonus
  • XST will be a reserve currency of the TBC, joining ETH, DAI, VAL, and PSWAP
  • When XST is minted via governance for funding productive activities, additional XST is minted and given to XOR-XST LPs that stake their LP on Demeter Farm as well, such that LPs that stake on Demeter will not be diluted, but will actually get a slightly larger share of the token supply to overcompensate because 1% of new mintage will be over minted and given to XOR-XST LPs proportionally

Taken together, these unique properties of XST will make it a bold and exciting new way to manage synthetic assets on a blockchain. The new segregation between XOR as the token to power the new world economic order and XST, the token to power synthetic assets for the blockchain universe, also makes the XOR tokenomics easier to understand and more robust in the chaotic times in which we live.

Making XOR Safer for a World in Chaos

The world is in chaos. We are in a period of sharp transition between competing mainstream monetary systems and this is driving high inflation and redistribution of wealth. It is already apparent to many that the old system is dying, but it is not yet clear what will replace it. SORA’s core thesis is that from the chaos of the current financial system, SORA will arise as a new world (and someday multiplanetary) economic system, built around the XOR token.

By removing uncertainty as to when XOR supply increases could occur, by no longer allowing to mint XOR via governance or in exchange for XSTUSD, the proposed changes will make XOR more predictable and easier to use to power real economic transactions, because it will have the backing of the SORA token bonding curve, which targets XOR at a given price level, helping it to fulfill the unit of account and store-of-value properties of money. The medium-of-exchange property is already fulfilled by having XOR on a blockchain that allows uninhibited and uncensorable trade.


Funding Productive Output in the SORA Economy

The whole point of the SORA economic system is to fund the production of new goods and services. As explained in The Case for XOR, to increase the output of new goods or services in an economy, the money supply needs to be expanded to both fund the creation of and purchase of those goods at the same price level.

After the proposed changes, there will be two ways in which the SORA economy can be expanded by funding the creation of new goods and services: 1) 9% of buys into the token bonding curve (this is unchanged from before; the distribution of buys into the token bonding curve is shown below), and 2) XST or XST-based synthetic assets can be created by governance to fund projects. Thus even after the proposal, funding of production to expand the SORA economy can continue, but without inflating the XOR token supply without token bonding curve reserves.

How buys into the token bonding curve are distributed.

Distribution and XST Market Creation

Because new tokens have risks and opportunities, it is important to understand clearly how XST can be brought to the market. This is especially true for XST because XOR-XST LPs that stake on Demeter Farm are overcompensated for any dilution that occurs, meaning that XOR-XST LPs are the Lord Rothschilds of the XST token, essentially collecting seignorage with every XST token supply increase via governance.

  1. The community holds a referendum to mint 1,337 XST to be farmable on Demeter Farm for users that provide liquidity to XOR-DAI and XOR-ETH during October
  2. Invoices will be paid to all external parties from now on in XST or in XST-backed synthetic assets
  3. From invoices paid from November onwards, XOR-XST LPs will be overcompensated so that their ownership of the XST tokens at the time of a mint stays the same proportion + 1% of the new mintage will be distributed proportionally across all LPs

From the above, it can be seen that XST is a fair launch token with no sales, no airdrops, and no investors. Everyone who wants newly created XST has to earn it, either by farming or building stuff and getting grants for it. Because XST will power the SORA synthetics platform if this proposal passes, it has intrinsic utility.

Future Expansion to On-Chain, Sovereign Wealth Funds

The XST token model is just one example of how to fund productive activities in a sustainable way that does not hurt the XOR economy but rather complements it. As countries adopt XOR as a legal tender currency, they will need to fund the creation of new goods, services, and GDP-contributing foundational infrastructure projects. Minting XST via governance is just one of many ways that countries can seek funding in the SORA economy.

The SORA token bonding curve elastically manages the XOR token supply to match the existing demand for money in an economy, but to fund new initiatives, countries can mint a deflationary token that acts as a sovereign wealth fund for future generations, and which is burnt by taking a portion of tax revenues from the development of the natural resources of a country (e.g., gold or diamond mining) and buying back and burning their sovereign wealth fund token.

A sovereign wealth fund token can tie into the greater XOR economy by becoming a reserve asset of the token bonding curve. This is a win-win for the country and for the SORA economy because the country can get guarantees of XOR liquidity for their sovereign wealth fund when XOR is at the token bonding curve price level, and it is a win for the SORA economy because the SORA protocol will own a part of the sovereign wealth fund of a country as protocol-owned liquidity via the token bonding curve. Additionally, scaling this up across multiple countries can average out cyclical economic trends, accumulating value to XOR from all the countries that use XOR as a legal tender currency.

Any country can create a sovereign wealth fund for future generations on SORA through the following steps:

  1. Create a new token with a fixed supply
  2. (Optional, but recommended) lock a part of the new token in the CERES liquidity locker at different unlock periods (e.g., 1% per year for 100 years)
  3. Provide nominal liquidity on Polkaswap with XOR-their new token
  4. Pass a referendum to add the new token to the XOR token bonding curve as a reserve asset
  5. Use a portion of tax revenues from an asset of the country (e.g., oil sales or gold mining) to buy back and burn their new token, thus reducing the supply

The above structure has the advantage that countries will be able to receive value from capital markets via public trading of their new token. This is just one example of the numerous possibilities that exist using the SORA economic system — an economic system designed to advance humanity and move us beyond the stars! AD ASTRA

About SORA, Polkaswap, and Fearless Wallet

SORA is a new economic system aimed at creating a supranational multiverse economic system with built-in tools for decentralized finance (DeFi). The SORA network implements a new way of parachain architecture on Polkadot and Kusama network, with the capability to bridge external blockchains (like Ethereum) to the Polkadot ecosystem.

One of the DeFi applications that will run on the SORA network is Polkaswap, a noncustodial liquidity aggregating, cross-chain AMM DEX designed uniquely for the Polkadot ecosystem with boundless liquidity through its one-of-a-kind Aggregate Liquidity Technology (ALT).

Fearless Wallet is a bespoke mobile wallet designed for the decentralized future on the Polkadot and Kusama ecosystem, with native support for iOS and Android platforms. A premium user experience, fast performance, and secure storage for your accounts. Fearless Wallet will integrate Polkaswap for easy, decentralized swaps of assets.

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SORA is working to become a decentralized world economic system, under the democratic supervision of the SORA Parliament. One World. One Economy. SORA.