Dude, Where’s My Coin?
AUSCM [pronounced ˈôsəm or “awesome”] is supposed to disappear from your wallet, so don’t freak out. The guys at Auric Finance have created an elastic coin that adjusts supply according to demand. If real demand for the coin falls, so too does the coin supply. It’s an equilibrium thing. Let’s think about what will happen when AUSCM rebases later this week.
The advent of programmable money is going to change the world. For decades, central banks have been implementing discretionary monetary policy. Some argue that the outcome of the discretion exercised by the banking system leaves too many wanting. [1]
This encourages cryptocurrency communities to experiment with monetary policy. AUSCM is a synthetic commodity money that only has enough discretion to implement policy when prices move ±5% away from the price of gold (chemical symbol Au).
Elastic Supply
Central banks are in the business of expanding and shrinking the supply of money. That’s their job. They actually rebase all the time. It’s imperceptible to the general population. Jane Public, for example, sees the same quantity of money in her wallet (or under the mattress) before and after the rebase.
Don’t be fooled by that though. It’s central bank voodoo. Central banks, like the US Federal Reserve (or “the Fed”), are actively tracking commodity prices and other variables to determine what the supply of US dollars should be in order to:
- Stabilize prices (optimizing inflation is the primary goal of the Fed).
- Optimize employment (politically listed first on their website). [2]
In response to COVID-19, the Fed increased the supply of US dollars by several trillion. That’s a massive (but imperceptible) rebase.
Vanishing Coin
When AUSCM does its first rebase, it will be similarly massive. The differences are twofold:
- You won’t be diluted.
- You will actually witness a change in your AUSCM holdings.
When the Fed rebases the US dollar, which is the world’s reserve currency, most people holding it are diluted. That means that the dollars in their bank accounts (or wallets) are worth less than they were before the rebase.
Occasionally, plebeians benefit from a rebase directly. For example, those US persons receiving stimulus checks this year actually witness their holdings of US dollars increase. In cases where demand dictates an increase in supply, this is exactly what would happen to AUSCM holders in a rebase, except that AUSCM could care less about US dollars.
AUSCM is pegged to the price of 10 milligrams of gold. 1 gram of gold is $61.20 right now. That means AUSCM should be around 61 cents. This is the target price.
Presently, AUSCM is trading on Uniswap for under 3 cents. This is significantly less than the target price.
That means when the rebase occurs the supply of AUSCM will decrease as the coin goes about its mandate of trying to keep the peg at the price of 10 mg of gold.
It will be hard not to freak out when you see your precious AUSCM dwindle before your very eyes. However, if AUSCM does what it is supposed to do (and an audit of the rebase code is presently being conducted by Quantstamp to make sure it does), everyone holding the coin will see their holdings reduce. Eventually, the price should readjust upwards to 61 cents.
This all transpires without diluting your AUSCM wealth with respect to the coin’s total supply. At least that’s the theory.
The rollercoaster ride is about to begin. Strap on your seatbelts!
UPDATE 2020/10/29: The team at Auric Finance decided to set the price peg to 1mg of gold so that token holders don’t experience too painful a rebase. What do you think about this? Leave a message below or join me on Discord!
Disclaimer: Please please please know that this is not investment advice. I am just along for the ride and want to share my thoughts. This article is entirely informational.
[1] I seriously doubt that AUSCM will be “the” central bank killer. I think of it as one more step in the direction away from central banking, which is something I encourage even though I personally know and like central bankers and the economists that support them.
The problem is that there is just too much evidence that central banks help redistribute wealth in a manner that increases global suffering. Please check out Dr Hanna Szymborska’s research.
Finally, it is impossible that a central bank killer won’t be created through programming: If computers can be programmed to thrash a chess grandmasters, they can be programmed to do the same to central bankers.
[2] They provide other services too, but the money supply is constantly changing thanks to their efforts to fulfill these two mandates.
