Introducing The Synthchain
An Overview of The Decentralised Asset Management Model
1.0 Asset Families
There are a total of 14 digital assets grouped into four different asset families. The different asset families characterise the different personalities of each group of assets. Digital coins are Blockchain-mined digital assets. Utility tokens are Blockchain assets made on a second layer of the Blockchain. Value Miners are utility tokens with mining facilities embedded within the code whereby the contents of the token’s smart contract can be mined. Digital notes are utility tokens wherein the token itself by virtue of its code can be exchanged and re-exchanged with the underlying unit of purchase that is involved in its creation. Both of these assets, Digital Notes and Value Miners, are Synthchain assets.
1.1 Blockchain Assets
The Zur Family / ZUR, ZURS / Class: Digital Coins
These are coins that have their own “coin” utility applied and they are not categorical in nature — in the case of each coin the applied utility is sufficiently differentiated enough to warrant the asset being considered a coin.
The DMH Family / DMHCO, PRE, MNY / Class: Utility Tokens
These tokens are pure tokens without additional functionality.
1.2 Synthchain Assets
The Thitinun Family / NUN, TUK, ZURD, SN / Class: Value Miners
These tokens are synthetic mining tokens only.
The Futereum Family / FUTR, FUTX, QUTR, QUTX, COE / Class: Notes
These are digital notes that are either purchasable with a digital coin or a digital note or that swap back for the coin/note that purchases them or both.
1.2.1 Overview of Synthchain Assets
In each case it is important to distinguish between the different assets since their utilities (supply) and values (purchase ability) are fundamentally different.
Digital coins have the broadest possible purchase ability and hence the most limited supply, which is restricted to a mining algorithm — even without the existence of Zurbank their purchase ability as assets is still extremely open by design.
Utility tokens are restricted to a particular network (in this case ERC20) and limited by use case to a particular purchase function, hence their supply is slightly higher in quantity.
For value miners, supply is very high since the tokens are able to perform more than just purchases of assets but also act as cashiers cheques.
Finally, digital notes are unlimited in supply and hence are always backed by value in the form of the first or second kind of asset — digital coins and/or utility tokens.
2. The Synthchain
To build our new extension of the Blockchain that could better harness the value properties of standard Blockchain assets we created a hypothetical layer around the Blockchain that we called a synthetic Blockchain layer. To this layer we ascribed all the activity that is fundamentally value-oriented versus purely utility-oriented. What is important to note is this layer is not present where just pure use-case functionality is ascribed; the character of the Synthchain asset in order to qualify as a Synthchain asset is determined by the software code of the asset. For example, a standard utility token that is ascribed the purpose of receiving dividends to the same wallet in which the token is held by the process of such dividends being distributed by a centralised mechanism is not Synthchain asset, it is a Blockchain asset being ascribed a securitised personality.
A Synthchain asset is fundamentally by virtue of its existence, irrespective of its use case, value-enhanced over and above a Blockchain asset. In this way, it is not a security token or a security, since there is no pre-ascribed use-case that is assigned to the asset. The asset could be fundamentally value-enhanced by virtue of the process of decentralised organisation of its utility; it need not have any specific value use-case ascribed to it. In the case of Value Miners, the tokens are able to mine the contents of their smart contracts. These contents could easily be airdropped by projects looking for free marketing for their tokens; such distributions and receipts are not evidential of securitised asset status.
Similarly, Digital Notes reward the holder with a refund at some future date in time and by a margin that is not ordinarily equal to the amount of value input. This margin varies by a multitude of factors ranging from the value of the underlying asset to the number of players involved in the purchase of the Digital Note, to the point in time when the asset is exchanged with its purchase unit, to the number of players beforehand who have undertaken similar re-exchanges of their Digital Notes. The combined effect of these aspects of differentiation is enough to effectively decentralise the resultant gain or loss in financial terms of the sum of the original investment in such assets, thus pertaining to their pre-eminent status as utility-dominant value multipliers and not just value-ascribed tokens.
2.1 Introducing Two New Token Types
In creating this system, we found it necessary to design from scratch two new digital asset types. These two asset types are not part of a Blockchain assembly so much as they are part of what we call the synthetic layer of the Blockchain (Synthchain) as described above. The Synthchain is the smart layer of the Blockchain reorganised to specifically enhance the value proposition of the utility inherent in token creation.
The two Synthchain assets that we designed are as follows: Value Miners and Digital Notes. Value Miners are utility tokens with a specific programming that allows the holder of them to mine the contents of the token’s smart contract into the wallet where that smart contract’s utility token is presently held. Once the token mines a proportionate share of the contents of the smart contract into the token holder’s wallet the token remembers this to prevent double mining of the contract (similar to how double spending is not permitted on Blockchains). Such tokens have tremendous utility in establishing the core value-utility proposition of the Synthchain.
The second type of Synthchain asset we created we call a Digital Note. Digital Notes are unlike digital coins or digital tokens in that they are always backed by virtue of their software code with the unit of value that made their initial purchase, or a fraction of it thereof. This value enhancement of the standard utility token once again serves to reinforce and multiply the value-utility proposition of the Synthchain immensely.
3.0 Purpose of Zurbank
Zurbank is designed to be a decentralised asset management system. Since there is a process of asset management involved in it the process is not itself completely decentralised, but rather, the assets within the process are issued according to decentralised guidelines and rules. As time goes on, we may decide to decentralise all aspects of the AM system, but this is simply not practical to begin with. Still, if the process does not follow a decentralised process, there will be no players, so the incentive is high enough we feel to keep the system decentralised long-term.
What do we mean by the term decentralised asset management system (DAMS)? Essentially, this is a system whereby the money invested and the return rewarded is not a result of the investment skills of a single manager, but rather the process by which and the extent to which the manager and other investors collectively determine the game’s outcome. In this way, Zurbank is decentralised in that it peruses a cooperative advantage versus a competitive advantage which is typical of centralised organisations and arrangements.
There is no direct competitive threat or benefit over beating a competing system in terms of absolute returns that Zurbank has over a competitor but rather a cooperative benefit from the manager and the investors working collaboratively in the favour of the best possible distributed outcome.
3.1 Decentralised Asset Management Structure
Zurbank is specifically designed with the separation of the asset management and the asset custody functions in mind. The commingling of these two aspects of asset ing with respect to Blockchain assets has been the single most detrimental aspect of the evolution of Blockchain as an industry so far. Specifically, where centralised exchanges have had no separation of their systems in place to ensure that what they claim to hold, they actually hold, has single-handedly caused the market to overbuy to the tune of about 5–10 times in late 2017 and to collapse around 95% the following year.
Clearly, there must always be a distinction between the investment management function and the investment custody function. If not, there is a direct conflict of interest between the two functions in that the investment manager (or exchange owner) is directly incentivised to manipulate holdings (or supposed holdings) according to his preference.
Another approach of course is to completely decentralise all processes of investment management and have no functions at all performed by any human being, only by computer software. The issue with this is that it only works in markets of software-purity. That is to say, if exchanges are manipulating the values of digital assets according to preference (which they are) then fixing a model according to rigid selection of assets is foolish: the exchange will merely serve to manipulate that decentralised asset management structure according to its own advantage, most frequently if not always to the detriment of the investors participating in the model. Long-term this merely serves to undermine the strength of the model itself.
It is not necessary here to list the possible bad actors in the Blockchain asset space since most exchanges (where by far the majority of assets are stored and transacted daily) are centralised, and it is literally all centralised exchanges that pose a viable threat to any sort of decentralised asset management model, in the same way that they pose a viable — and real — threat to purely decentralised currencies.
Any decentralised asset management model must be coherently decentralised to the extent that the currencies, the technology serving it and the structural arrangement of the model is concerned, while retaining sufficiently centralised approaches to response to market manipulations beyond the control of the investors or the managers that might adversely impact the model’s net performance.
4.0 Synthchain Asset Functions
As we observed above, the Synthchain is a hypothetical layer that surrounds the Blockchain.
Note that unlike a smart Blockchain application such as Ethereum there is no fixed point of reference such a technology has in relation to the Blockchain: in other words, it does not lie on top of or below it, conceptually or practically speaking.
The way in which Synthchain assets are coded is less definitive in terms of their applied roles while being very distinctive in terms of their overall technological composition although at all stages within a Synthchain ecosystem is a Blockchain asset connected — either directly or indirectly — to the Blockchain asset. Any Blockchain asset not connected to a Synthchain asset in such a way is external to the Synthchain — it is as simple as that.
For example, a mining token that mines the contents of its smart contract is immediately recognisable: where on the Blockchain exactly such a token sits is less definable. In one sense it is a token that lies on top of the Blockchain as a smart layer; in another however it might be synthetically underpinning the chain by interacting with its core digital network coin constantly.
The artifice of Synthchain assets is such that they appear to be floating around the Blockchain, variously ascribing value orientation to Blockchain assets in different directions. In the chart to the left, Synthchain assets are defined as those with shaded composition.
4.1 Individual Unique Roles of Assets
FUTR/X are Synthchain notes that are used to mine MNY. MNY is a token used to stake by means of being sent to TUK for extra points that yield increased supplies of NUN. Instead of MNY a player can use COE, another digital note. This will create a relative increase in the number of MNY that is counted according to the equation:
MNY*(CMCI/1B) / Days remaining
QUTR/X can also be used to make occasional purchases of ZUR and other offered assets along a similar equation:
QTUM*(Avg. QTUM yield) / Months Remaining
While MNY and COE are used to increase investor purchases, DMHCO are used by affiliates to boost their own points. PRE tokens are employed where there is a consecutive increase for two weeks’ running in the growth of total monies received for NUN purchases. If this is the case, then the growth of the growth percentile is what is offered in exchange for PRE tokens as a premine the following week. If there is no growth in net contributions or a reduction in contributions either of the present or previous week then the Synthnode is simple mined back into the SN contract, creating a self-perpetuating loop.
SN can be purchased at any time individually without the requirement for players to participate via NUN purchases and in such cases they will be compelled to make the purchases in QTUM, QTUR and/or QTUR at the average premined cost (to SN holders) of all the accepted coins combined. Thus, purchasing SN via NUN will usually be most cost-efficient way of doing so.
Overall the game is designed on the Synthchain to enhance returns to all holdersin the most distributed maximum share achievable. TUK is the contract to which DMH, MNY, COE and PRE are sent at various times. TUK however can only be produced by virtue of a holder of ZURS cashing in ZURS for TUK at the administrative gateway.
The chart shows the directional status of each asset by making a pincer in the direction of the way in which the assets are flowing. For example, DMH, COE, MNY and PRE are all clearly sent (“staked”) to TUK and not the other way round; similarly, DMH and COE are sent to ZURD upon issuance, and not the other way round despite flowing in opposing directions. What the chart is supposed to highlight is not the directional flow of assets but rather the balance in directional flow of utilities that consequently combine to form synthetic utilities expressed alternately as value enhancements of the digital ledger on which such assets and their Blockchain counterparts are manufactured and around who individual networks such assets are ascribed.
4.2.0 Profiting From Zurbank Token Purchases
Because we are not in violation of any securities regulation we can freely speak about profiting from such games to do with synthetic utility without falling foul of the regulatory guidelines. How, then, does one effectively use the Synthchain to profit from Blockchain asset purchases?
The first observation is that Zurbank, the Synthchain’s Synthnode, is an essential holding of the investor. This is the token that is backed by all the currency sent to it and to which all excess tokens in the form of additional Synthnodes is sent.
The model is nothing less than a recurrent cryptographically-ascribed income generation software.
When anyone purchases a Synthnode, a portion of that Synthndoe is mined back into the smart contract while the purchaser receives the balance (in the same way as COE is mined into ZUR-D, effectively).
Holding Synthnodes early on is incredibly lucrative. Meanwhile, all the underlying value is stored as collateral for the Synthnode. This is the case irrespective of whether a purchaser is entering through the QTUM Blockchain or via the Ethereum Blockchain via either ETH or a dozen other ERC20 tokens.
The new Synthnodes that are purchased in the event of NUN purchases being the purchaser are delivered instead of to an individual party to the NUN smart contract.
4.2.1 Purchasing Synthnodes — Weekly Mechanism
4.2.2 Purchasing Synthnodes — Monthly Mechanism
4.2.3. The Thitinun (NUN) Advantage
A natural question at this stage might be: why would the purchaser adopt a monthly mechanism purchase procedure when a weekly one incurs no AM fee?
The answer is simple: although the monthly purchase mechanism of Synthnodes is such that it is diluted in terms of underlying value by the interposition of an asset management fee, the fee is attributed backward in the additional supply of NUN tokens that deliver continuous supplies of Synthnodes purchased in this way every single month.
Further, for every Synthnode purchased in this way there is in fact a knock-on benefit in that the additional Synthnodes afforded via the additional NUN purchases as are all continuously subject to continual self-mining programs as described above.
5.0 Summary: A Holistic Network Integration
In supply chain economies, vertical integration is a form of manufacturer and retailer consolidation by a single entity. In vertically-integrated supply chains, both the manufacturer and the retailer are owned by the same entity or cooperative.
In Blockchain economies, there is little consideration given to integrated management structures as almost all the attention is focused on the technological integration of the systems. Blockchains are value coevals: this means they are a simultaneous value chains, value shops and value networks. Thus, integrating such supplier-retailer entities is a more complex process.
To vertically-integrate Blockchain processes, we must start with the observation that the value coeval compels us to consider what sort of vertical we are attempting to integrate. In one sense it may be a decentralised cryptocurrency or cryptocurrency application. But that is only the product-part of the vertical integration exercise: the reality is, there is a community and an engineering and a virtual interface that all need configuration along the vertically-integrated pathway.
How does this pathway look and what do we call it?
First, assume the Blockchain is a digital network. We use the word Blockchain here generally, and not specifically to any one Blockchain, as it is ordinarily used. As a result of the introduction of the Blockchain there is a reconfiguration of value: a fact I first pointed out in a series of presentations I gave in late 2014 and early 2015. This reconfigured value has more dimensions of value than one in an ordinary economy. Specifically, it has the fourth dimension of value, which is Value/Utility and the fifth dimension of value, which is Value*Utility. Ordinary frameworks within economies of all scales are resigned to utility, in the first dimension — what we refer to as commodification — value, in the second dimension — a process we often call monetisation — and Utility/Value — a process we frequently refer to as securitisation. The fourth dimension of value is what we here call cryptography while the fifth dimension of value we refer to as meta. All five dimensions are in a sense states of being of a given asset — it starts out as a commodity, proceeds on to become a form of monetary use (to collateralise a loan for example), to become a securitised unit traded on an international derivatives or stock exchange (e.g. a REIT), to then becoming in a temporary form a type of alternately cryptographically represented unit of value, as energy spent (which is what a crypto is) and ultimately to become spent energy multiplying the form of value we have to trade. This process is one that few still even remotely understand, but it would behove a regulator or two to pick up my literature on the subject some day. They might find they learn a great deal that helps them with their everyday job.
Because of this post-3D value artifice, we must necessarily distinguish between pre-3D and post-3D economies; thus we say, physical and digital economies. Digital economies that utilise 4D value dimensions as a model are hardly very efficient however — at least as far as value creation on them is concerned they are not. For unlike with physical economies, digital ones that run on Blockchain networks fractionalise value creation exponentially. Even if you limit supply or such of digital assets, their mechanism is one predisposed to fractionalisation of value. This means that they distribute all the value created on them out across the network by mere existence of the network itself. Thus it becomes highly deflationary as an economic purchase environment. Therefore, in order to operate retail businesses on Blockchain we must progress this digital network onto one that looks more like a virtual network. In one sense, this is what exchanges have begun to do with the fractional reserve holdings of cryptocurrency they hold against that which is represented on their volume statistics: they have found that otherwise, cryptocurrencies rise to hard against one another, limiting the influx of new players.
The Synthchain is a type of network specifically designed to integrate the Blockchain’s heavily-deflationary / value-reductive qualities into one where value is congruous and exponential. It multiplies the value across the network over time as opposed to reducing it as the weight of utility becomes more significant a growth factor. By employing a synthchain things such as vertical integration can take shape. Suddenly, it is entirely possible, for example, for a supplier to own a transparent manufacturer of cryptocurrencies and a separately-aligned retail trading platform, via the interposition of decentralised asset management (in the current Blockchain-only economy exchanges manufacturing cryptos in the form of virtual currency units are not approved of or value-additive in any sense of that term).
So, to summarise then: Synthchains allow for the value reductive aspect of virtual economies run on Blockchain networks to become value exponential. It’s really that simple.