Money flows into the abyss — on the significance of Bancor

The all digital currency first day from the birth in the fight against a terrible enemy, it is also a curse of death. Imagine, many years later, bitcoin to the center of the declaration or has become a laughingstock. When the world wealth by the early bitcoin miners control, their first mover advantage has never used to smooth, people will not abandon this digital currency king, re shuffle? The threat of mobility has been lingering in all digital currency game player in the brain, because it is relative to the center of the center and always, people first need to recognize its value. From bitcoin was first used to exchange two pizza, it is a dying thing, geeks and global preachers brought him back to the human world, and diligently propaganda, let it become stronger gradually. In addition to all other digital currency bitcoin, it will always live in the next week, the demise of the fear, this is not alarmist, the annual CoinMarketCap top one hundred market value of money never repeated, a few years ago bitcoin investment people look back and see is soaring, but is also optimistic about any other currency, etc. the value is zero, No one shows any interest in. Block chain is a great technological revolution, but also the future direction of digital currency economy, but many projects are likely to die early, even if the project is not going to lie to a founding team listed on the retreat, capital will drain in each new project theme and story, after the harvest, investors fly away, leaving a dry well mouth forever No one shows any interest in the. Is there no way to curb the rampant speculation, real reduction project, project financing, project results – scale growth, the best route? This paper will try to answer this question, and to explore the possible change Bancor.

[super sovereign will]

Don’t listen to their own, will be ordered to others. Nietzsche: “Chhatra J said”

A super sovereign currency of the concept of the word Bancor source is presented in 1940 by Keynes and Schumacher -1942. The plan put forward by Keynes, Bancor can be used as a unit of account for international trade, the value of gold. The members of the available gold for Bancor, but you can not use Bancor for gold. To Bancor the price of foreign currencies.

In the words of Benn Steil, Bancor is not an international currency, but through international clearing union tracking international assets and liabilities flow unit of account scale. The individual cannot hold or exchange bancor. All of the international trade will be paid attention to and become clear. The rest of the country have excess assets bonded and burden of deficit countries will provide symmetric incentives to take action to restore the balance of trade.

Keynes (John Maynard Keynes) proposed an explanation, he believes that monetary policy cannot fundamentally curb depression because of depression more rooted in non monetary. Keynes believes that in the period of high unemployment rate, monetary policy cannot lower interest rates, the ability to transfer capital between countries to seek out the highest interest rate policy easily frustrated Keynes. By the government to more closely control the international trade and capital flows, Keynes’s policy will more effectively stimulate the individual economy.

In this system, each project member of exports will add Bancors in their ICB account, and each project will import it minus Bancors. A country through overseas sales of products in some countries limit the amount of free trade more than the purchase of products, and through the purchase of more than sales may increase the amount of security. This can prevent countries built a great surplus or deficit, each country will limit its share in world trade is proportional to. Once the initial violation of restrictions, the deficit countries will be allowed to depreciate, the surplus countries will be allowed to accept after the devaluation of the currency. This will enable the deficit countries of goods cheaper, while the rest goods more expensive, the purpose is to promote trade balance. Further Bancor debit or credit default would trigger mandatory action. For a long time the debtor, this will include the devaluation of the currency, the ICB reserve fund interest payments increased, gold sales force and capital export restrictions. For long-term creditors, it will include currency appreciation and interest to pay at least 5% of the excess credit, for more excess credit, can pay the reserve fund of 10% to ICB. In this theory, Keynes never believe that creditors will actually pay a fine, on the contrary, he believes that they will take the necessary action to avoid them. Such an ideal global monetary system will likely lead the global economic recession cycle escape.

However, due to the strength of the United States after World War II thriving, Keynes on behalf of the British program has not been adopted in the Bretton Woods conference. Return to the Bancor protocol, Bancor protocol is proposed by Bancor Network project application, aims to set up a digital asset between the exchange price by formula. This is Bancor Bancor, both of which are on the surface of currency pricing, but the principle is not completely inheritance.

[demand] double coincidence

All goods are temporary money, money is a permanent commodity. Marx “Das Kapital”

If there is no money, then one would like to use rice to eat meat for the people, he must find a want to buy rice and just want to eat meat, that is to satisfy the double coincidence of demand; at the same time also must be in the same time, both to meet the double coincidence of time, in addition to the m people are unlikely to have rice to eat meat people, thus the possibility of successful trading in the big crowd is very small, even if the transaction can be carried out, the transaction cost will be very expensive. The currency as a general equivalent, its existence can be said that in order to reduce the transaction cost of barter and opportunity cost.

“Double coincidence” this statement by Jevons (Jevons) is proposed for the first time in 1875. “The primary problem of barter is happened to find two people, they have their own items just need each other. There will be a lot of people have needs, and many people have to meet the needs of the goods, but the mechanism through barter finish on both sides of the exchange of goods, must be required to achieve the double coincidence, in fact it is difficult to occur.”

We live in such a world: anyone can easily publish articles, songs or video; anyone can create a communication group, can also operate an online mall; we even began to witness the “custom of money” was born. For hundreds of years, the value of different types of reserves (hereinafter referred to as the “currency”) has been with money, bonds, stocks, gift cards, business integration and community and other forms of currency issuance and circulation. Next, the first to the center of the digital currency, bitcoin. The new digital encryption currency wave followed. Recently, we have witnessed a new contract, the use of smart technology, raised by the public (ICO) issued by the asset class, “tokens” rise. However, although these currencies essentially has formed “the value of the Internet”, “Internet” was not as generally smooth connected. When the Internet node (IXs) switches to connect the Internet information network, the monetary value of “switch” role in the exchange of active traders play.

The current currency exchange mode has a serious obstacle, which requires a certain amount of transactions to achieve market liquidity. This makes the small money, such as community currency, business integration and various custom tokens, almost impossible to find a reasonable price through market exchange and exchange with the mainstream currency.

The Bancor protocol introduces a technical solution to solve this problem by using block chain based intelligent contract and reserve currency. This protocol can let all people create tokens, such tokens to the preset ratio to hold one or several other tokens as their reserves. These tokens can be reserve money, digital assets (such as gold) or other encryption currency (such as coins, coins or other Ethernet). By using these reserves, the newly created tokens directly obtain value, no matter what is the amount of transaction. It also obtained directly between itself and reserve currency tokens, so no matter what the time it can be converted back to its reserve tokens, whether or not the buyer.

The essence of “transaction token” using a simple mathematical formula, there is a constant in the formula, it is defined to create their new currency issuers in the constant proportion of reserves, or CRR.

CRR provides a part of the token (0% to 100%) will be held as reserves, in order to create new tokens for endorsement. If CRR is set to 0%, which means that the newly created tokens without any reserve tokens (as currently endorsed all newly created encryption currency case).

If CRR is set to 100%, which means that this newly created just a token token reserve “OEM” tokens, like digital dollars, ETF or casino chips, if this ratio is set at 0% to 100%, which means that a part of the newly created token is endorsed by the reserve token – this there is a “credit expansion”, means that the new currency was created (part of today’s reserve system as the same).

The formula for the calculation of reserves and create a relationship between the new token token to establish a price for the new token. This is the way to find a new transaction price, it does not depend on the participation of the second party, nor on the third party as a broker for the transaction. Instead, it uses transparent intelligent mathematical formula of the contract. This will generate liquidity in a timely manner, no matter how many transactions.

Money flows into the abyss []

Now concentrated in the center of the digital encryption currency exchange currency exchange transactions, high mobility, high popularity of the currency can play the advantages of scale, let the game player to participate in the investment scale. But this is the market value is low, is not active, the lack of liquidity of small currency is very negative, decentralized transaction to let them often or No one shows any interest in the city has no price. Both parties want to find yourself at any time in the market relative to the buyer and the seller, the traditional market is just need to have a counterparty to the transaction. Digital assets tide rise, the arrival of the era of Token has made the gap gradually huge flow.

For example, a Bob in the center of the exchange hang above a buy, intention to buy EOS, because the EOS disk flow of funds is huge, with a price and not exaggerated trading volume, can quickly achieve turnover in sufficient depth exchange above. But if Bob is to buy more loopholes, a small amount of currency in circulation? He hung a bill, probably for several days or even weeks to clinch a deal, because the supply and demand is not high enough, resulting in low liquidity to support the sale of not enough.

Because of the “long tail”, the top 10% holders accounted for 90% of the entire market and encryption currency trading volume 95%. In this case the “long tail”, because the transaction mechanism is convenient and effective, liquidity is extremely scarce. From the demand point of view, most of the demand will be concentrated in the head, which we can call the main body of the market, and in the tail of the distribution of transaction demand is personalized, fragmented small demand. This small part of the difference, the demand will be the formation of a long tail in the demand curve above, the so-called long tail effect lies in its quantity, if all non popular market accumulated will form a larger than the popular market.

Thus, the use of the Bancor protocol with sufficient reason. It is through the code to manage transactions, the algorithm automatically rate, let the market liquidity is maintained in a healthy state, so even if the liquidity is very poor, very small currency trading depth can also maintain circulation. In simple terms, Bancor is a kind of asynchronous price mechanism, through the relationship between supply and demand to adjust the price. In this model, there are reserve pool of R (or connector, balance connector pool) leverage (or CW connector or weight connector ratio) and intelligent token supply s (supply or transfer tokens) three important parameters. According to the p*s*CW=r formula, can determine the price of smart tokens (price P). In addition, the mathematical relationship between the incremental reserves and intelligent token there is a corresponding increment.

EKT plans to solve the problem of exchange between multi Token chains using Bancor protocol. Through the Bancor algorithm, with a basket of other types of Token in the reserve pool, using EKT as a connection to issue its own tokens, which can achieve similar to the trading currency exchange effect. As the EKT connector, through Bancor protocol conversion of all token in the chain of tokens, more importantly, developers need to get through the EKT required to run DAPP gas. In line with DAPP, gas by the developer to recharge the DAPP contract address, each DAPP call will deduct gas coins, after deduction of gas currency will return to the reserve pool, when the node dug the mine, the client node to the corresponding gas, thus forming a closed loop.

Focuses on the development of the traditional resources industry investment, so as to bring people, wealth, investment, the emergence of various problems which inevitably. With the development of information technology, the enterprise operating costs and transaction costs sharply. As for the new economy, we pay more attention to people’s creativity as well as the driving force of the focus on technology. So under the new economic era, any one sub categories may one day suddenly broke out, but if enterprises can not very well in this time node to seize the opportunity, and not dare to rush or follow up a victory with hot pursuit will be quickly, left behind.

The emergence of the mobile Internet, which makes people left the job after contact with others the ability to reach the strongest in the history (break geographical restrictions), and others. The history of the lowest cost to achieve (cheap network costs), and others linked to the world, the highest efficiency (instant message). The characteristics of these mobile communication will inevitably lead to people can more easily create groups, set up group, organization people working in life outside the entertainment did not need to rely on the traditional (schools, units, community…) With the help of the Internet, people tend to quickly find interested organizations or projects, and produce social and investment relations. At present, the block chain ecological development, management and trading to the center of the application and application of assets in the platform should be designed to the early version of the project developers and users in the industry demand as the starting point. Many projects after the concept of packaging, to really achieve landing, has changed dramatically. It is very easy to get behind the project quickly slide into the abyss of tokens.

We believe that the Bancor protocol will become the future mainstream Token issued, low flow Token, using Bancor protocol, can immediately produce price, and real-time transaction. The project is based on the Bancor algorithm to issue tokens, announced the Bancor algorithm in the paper, the token exchange price will reveal to the public, the price depends on the user token prospects for the project, more and more to buy, the price will rise, if you are selling, the price will fall, at the same time, selling projects will cause prices fell sharply this will eliminate a lot of credibility, low project, a complete ecological chain to EKT. Now we can see the main technology is also based on this starting point, for the target service.

You can think of a product version is minimized need to include what functions, then you can in the above derivative of other new features and new gameplay, even can change the mechanism is fair. The benign operation of Multi Chain Structure and cross chain value exchange and can keep the whole ecosystem. In the formation of multiple tokens in the frame of main chain will maintain the balance and use of all tokens, making all the tokens can be normal operation, to promote the harmonious development of the ecological chain.

The above is my thinking on some of the Bancor, consider the underlying construction of Multi Chain and some in the design of EKT Multi Chain consensus. Welcome to join the EKT community, to discuss the future of the ecological chain bancor.

Reference reading:

George Monbiot.The Age of Consent:Flamingo, 2003

The E. F. Schumacher. “Multilateral Clearing”. Economica, 1943

“EKT whitepaper”

“Bancor whitepaper”

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