Nov 13, 2021
SUPERALGOS TOKEN
Superalgos (SA) Token Demand Drivers
Demand for the token originates in positive feedback loops built-in the project, as well as in the utility of the token.
The article lays out my personal analysis of the emergent dynamics that may result from Superalgos’ design of incentives. I may be right, or not. It would be great if more people started exploring the implications of how the project is set up. This is not financial advice.
The Superalgos Project is unique in many ways, one of which is the design of incentives. Several iterations down the line from the original idea, we stumbled upon a few key positive feedback loops that ended up becoming core elements of the design of the collaboration and the incentives that tie everything together.
The Market Cap Game
In terms of game theory, Superalgos is playing the Market Cap Game, like every other crypto project.
The rules of the game are simple:
- Build a project.
- Launch a token.
- Show the market why your project is valuable.
- If the market believes in your project, your token will rise.
- Whoever rises higher, wins.
The game is a matter of perception. The projects that are perceived to be more valuable tend to rise to the top. When the market perceives that a project is undervalued, it operates to correct the inefficiency.
Projects rise through the market cap rankings up to the point where the market perceives to be the fair value of the project compared to other projects in the vicinity of the ranking.
In blockchain projects — that is, most cryptocurrencies and blockchain platforms — miners get rewards for securing the network. In other words, most if not all of the emission goes to finance network security. This is true both for proof of work and proof of stake consensus mechanisms.
In Superalgos, miners get token rewards for improving the project. The project issues tokens only if and when the project has advanced and become stronger.
Let’s unpack the above statement and identify the positive feedback loop entailed in the design of the token distribution mechanism.
- The project issues tokens to reward contributions of code, trading intelligence, business development, marketing, and so on.
- The project pays rewards for work that has already been done, that is, for the value that has already been added to the project.
- The project does not sell tokens. Entities that earn tokens for their contributions may choose to sell tokens in the market.
- In a way, token buyers are buying the value of contributions directly from the entities that produced that value. Every single token in circulation is therefore backed by value added to the project.
- The circulating supply grows with the value added to the project. If no value is added, no tokens go into circulation.
All of the above shows how 100% of the incentivization power of the project goes to improving the project.
This can only result in an ever-improving perception by the market and an ever-improving position in the market cap rankings.
Roadmap as a Demand Driver
Transitioning From a Niche Market to the Mass Market
Superalgos has an ambitious roadmap that will mark the transition from a niche-market project to a mass-market project during 2023.
The Superalgos Platform — as a standalone application — is a product for a niche market: algo traders looking for robust and flexible market research and trading automation tools. However, in the context of the 2023 roadmap, the Superalgos Platform becomes a tool for producing trading signals for the mass market.
The current valuation of the project reflects the value of a niche-market product. As we advance with the 2023 roadmap, each milestone that puts us closer to a mass-market product should impact the valuation of the project accordingly.
Governance Utility as a Demand Driver
Superalgos is designed to become the dominant trading intelligence network. In a mature phase, the network will channel a substantial fraction of the world’s trading volume.
Superalgos will become a dominant network because — at the level of the business model — we are at the end of the disruption curve thanks to the open-source, community-owned, user-centric, free-for-all nature of the project. With a defensible business model, friction reduced to zero, and a powerful consumer brand, there’s nothing left to disrupt.
Superalgos will become the Google of trading.
In a mature phase in which the network channels billions of dollars in trading volume, having a strong position in the governance of the network will be crucial for all sorts of entities in the space.
One example is enough to clarify the above statement:
Exchanges compete for trading volume; they will certainly compete to have a strong position in the governance of the dominant trading intelligence network too.
Demand for Premium Products and Services
The first case of a premium service is accessing the predictions of the collective AI models trained by the community.
Training AI models is virtually out of reach for most solo traders. Not only is Machine Learning a complex technical challenge, but training models is extremely demanding in terms of computation. Hundreds of thousands of test cases involving extensive data processing must be solved continuously for the algorithm to learn. It’s a never ending task particularly well suited for a collaborative approach.
In a time when algorithms dominate electronic markets, having access to a tried and tested prediction engine is crucial for performance, and for developing an edge.
The Superalgos project builds free and open-source software to attract the brain power that contributes to develop superior forms of trading intelligence. Many products and services emerging from the collaboration of top minds in the community are only available to token holders.
Priority Utility as a Demand Driver
Everything that requires ordering within any of the Superalgos apps will be ordered by token balance and reputation.
For instance, a list of exchanges will show first the exchange that holds the most reputation and tokens.
Exchanges will want to be the first in the drop-down menu that 200 million crypto users will click on to decide on which exchange to trade.
In the case of crypto users, those holding the most reputation and tokens will get signals first.
Notice that priority on getting signals has nothing to do with latency in terms of time. It has to do with the state of the order book at the moment your order is placed. If millions of orders are placed before your order, you will certainly not get the best possible price when entering or exiting positions.
In a mature phase, the most successful algo traders may amass millions of followers. Think of the game theory that kicks in under such a scenario.
If a crypto user is following a top algo trader, he or she will be competing with a million other crypto users to get the signal and their orders first in the order book. If they have zero tokens, they will be last. Be if they have one token, they will beat everyone else that has zero tokens. That is a great incentive to have at least one token.
Now keep iterating on the same logic upwards and you’ve got a race to the top scenario. Crypto users will certainly compete to get signals first because they are pursuing self-interest goals.
The sole reason for participating in the network is to make money. It is only reasonable that if crypto users get everything for free, they will have the means and will to buy tokens to compete to get the best possible outcome, particularly in the light of the next driver…
No Spending Requirements Favor Scarcity
Did you notice that none of the use cases require spending the token? Instead, the utility materializes by holding the token. In fact, the more tokens entities hold, the more powerful their holdings become.
This is another crucial feature of the token economy.
Network participants will acquire tokens to serve their self-interest — be it priority access or governance — and will accumulate as many tokens as possible without ever spending them.
The Trading Intelligence Game as a Demand Driver
In a mature phase of the network, tens of thousands of algo traders will compete to produce and broadcast the best trading signals. They will earn tokens in proportion to the number of followers they have in the Superalgos Network.
The competition among algo traders triggers another crucial feedback loop:
- To gain more followers, algo traders need to produce better signals.
- Better signals allow crypto users to have better performance in the market.
- The better the performance, the more users the network attracts.
- The more users, the more demand for tokens to get the priority utility.
- The more demand, the higher the price of the token in the market.
- The higher the price, the bigger the incentivization power of the project.
- Bigger incentivization power attracts more algo traders.
- More algo traders increase the competition for followers resulting in better signals.
The positive feedback loop goes on and on, fostering an ecosystem that evolves trading intelligence as a consequence of the design of incentives.
I’d love to hear your thoughts on the arguments laid out in this article. Your feedback may help to further enhance the design of incentives, and improve the odds of success of the project.
Join the Superalgos Token Telegram Group to continue the conversation!
