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Seigniorage Shares and Stablecoin

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Presentation at Coinscrum, UCL London 23 February 2018

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Seigniorage Shares and Stablecoin

  1. 1. clearmαtics Seigniorage Shares and Stablecoin Coinscrum / UCL / London Robert Sams 23 February 2018 218fbe1fa72c2b590f0952a2971068ceddc83c46
  2. 2. Where we were a few years ago Bitshares • Dan Larimer Schellingcoin • Vitalik Buterin Seigniorage Shares • Robert Sams
  3. 3. Where we are today https://multicoin.capital/2018/01/17/an- overview-of-stablecoins/
  4. 4. Seigniorage Shares Paper
  5. 5. Seigniorage Shares in 5-minutes: Key ingredients 1. Two coins: • A stable coin (like fiat currency, call it ”mass” - m) • A volatile coin (like equity shares, call it ”energy” - E) 2. A stabilisation target ˆP 3. A purchasing power oracle Pi 4. A voluntary/market rule for converting m into E (and vice versa) based on 2 and 3.
  6. 6. Seigniorage Shares in 5-minutes: coin demand, fixed supply CD CD∗P Q P∗
  7. 7. Seigniorage Shares in 5-minutes: coin demand, elastic supply Every n blocks, change coin quantity Qi by Pi/ˆP. CD CD∗ Q P Q∗
  8. 8. Seigniorage Shares in 5-minutes: Conversion rule If Pi/ˆP > 1, auction new m supply for E (and burn the E). If Pi/ˆP < 1, auction new E supply for m (and burn the m). Key conclusion: valuation of E (”shares”) There is a simple dynamic portfolio argument showing that E is a perpetuity of cashflows equal to changes in demand for m. E can therefore NPV’d (hence the name ”Seigniorage Shares”.. it’s like having an equity stake in money printing)
  9. 9. What’s wrong with current stablecoin thinking? Stablecoin is more than an economic mechanism for changing coin supply, it’s also about changing coin demand.
  10. 10. What’s wrong with current stablecoin thinking? Stablecoin is more than an economic mechanism for changing coin supply, it’s also about changing coin demand. Goal is to steer speculative demand into E (shares)
  11. 11. What’s wrong with current stablecoin thinking? Stablecoin is more than an economic mechanism for changing coin supply, it’s also about changing coin demand. Goal is to steer speculative demand into E (shares) .. and transactional demand into m (coin).
  12. 12. What’s wrong with current stablecoin thinking? Stablecoin is more than an economic mechanism for changing coin supply, it’s also about changing coin demand. Goal is to steer speculative demand into E (shares) .. and transactional demand into m (coin). But most appetite today for a stablecoin comes from speculators looking for a way to de-risk the asset class without creating a tax event.
  13. 13. What’s wrong with current stablecoin thinking? Stablecoin is more than an economic mechanism for changing coin supply, it’s also about changing coin demand. Goal is to steer speculative demand into E (shares) .. and transactional demand into m (coin). But most appetite today for a stablecoin comes from speculators looking for a way to de-risk the asset class without creating a tax event. Transactional demand still lacking, paucity of useful Dapps.. chicken-and-egg problem?
  14. 14. Some thoughts on stablecoin research Don’t peg anything!
  15. 15. Some thoughts on stablecoin research Don’t peg anything! Make ˆP a measure of some endogenous scarcity
  16. 16. Some thoughts on stablecoin research Don’t peg anything! Make ˆP a measure of some endogenous scarcity • e.g., block scarcity.. target a constant gas price?
  17. 17. Some thoughts on stablecoin research Don’t peg anything! Make ˆP a measure of some endogenous scarcity • e.g., block scarcity.. target a constant gas price? Let m be inflationary, it’s supposed to be a medium-of-exchange not a long-term store-of-value.
  18. 18. Some thoughts on stablecoin research Don’t peg anything! Make ˆP a measure of some endogenous scarcity • e.g., block scarcity.. target a constant gas price? Let m be inflationary, it’s supposed to be a medium-of-exchange not a long-term store-of-value. Go deeper into protocol research.. in cryptoeconomic mechanism desgin, everything is connected.
  19. 19. Some thoughts on stablecoin research Don’t peg anything! Make ˆP a measure of some endogenous scarcity • e.g., block scarcity.. target a constant gas price? Let m be inflationary, it’s supposed to be a medium-of-exchange not a long-term store-of-value. Go deeper into protocol research.. in cryptoeconomic mechanism desgin, everything is connected. Consider questioning the whole premise of protocol-defined ”digital scarcity”, coin supply logic.
  20. 20. Some thoughts on stablecoin research Don’t peg anything! Make ˆP a measure of some endogenous scarcity • e.g., block scarcity.. target a constant gas price? Let m be inflationary, it’s supposed to be a medium-of-exchange not a long-term store-of-value. Go deeper into protocol research.. in cryptoeconomic mechanism desgin, everything is connected. Consider questioning the whole premise of protocol-defined ”digital scarcity”, coin supply logic. • Maybe proof-of-work difficulty is the only real digital scarcity discovered so far
  21. 21. Some thoughts on stablecoin research Don’t peg anything! Make ˆP a measure of some endogenous scarcity • e.g., block scarcity.. target a constant gas price? Let m be inflationary, it’s supposed to be a medium-of-exchange not a long-term store-of-value. Go deeper into protocol research.. in cryptoeconomic mechanism desgin, everything is connected. Consider questioning the whole premise of protocol-defined ”digital scarcity”, coin supply logic. • Maybe proof-of-work difficulty is the only real digital scarcity discovered so far • If so, back to Szabo’s ”Digial Gold”?
  22. 22. Some thoughts on stablecoin research Don’t peg anything! Make ˆP a measure of some endogenous scarcity • e.g., block scarcity.. target a constant gas price? Let m be inflationary, it’s supposed to be a medium-of-exchange not a long-term store-of-value. Go deeper into protocol research.. in cryptoeconomic mechanism desgin, everything is connected. Consider questioning the whole premise of protocol-defined ”digital scarcity”, coin supply logic. • Maybe proof-of-work difficulty is the only real digital scarcity discovered so far • If so, back to Szabo’s ”Digial Gold”? • Unit-of-account is the difficulty of the puzzle?
  23. 23. Thank you! Questions More information https://github.com/rmsams/stablecoins rs@clearmatics.com

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