If we were to create a token that was uncorrelated from the crypto market, how would it be done? #XIOfeedback

Although it can be debated, Bitcoin has many times been described as an “uncorrelated asset” to the traditional financial markets.

However, in crypto, the market at times feels directly tied to the success of Bitcoin/Ethereum.

When Bitcoin tanks, so does the market.

We are challenging the XIO Token Studio community to help us design a token that is uncorrelated from the general crypto market. A token that can succeed (or fail) despite the industry being in a bear/bull market. An asset this is independent in value.

How would it be done?
What are the characteristics it would need?
Are there any examples or case studies we can build on?
What benefits would this give the industry?
Is this worth exploring?

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Are there any examples or case studies we can build on?

Well we know AMPL and similar coins aim to do that by increasing and decreasing their supply and pegging themselves to a specific price.
So one idea would be a token pegged to something that has nothing to do with crypto. Would it be possible to create a token that is pegged to a basket of precious metals? (Kinda like PAX gold but not just for gold)

What benefits would this give the industry?

Lots. The way it works now is that even if we diversify between coins, either everything goes up or down. Being able to invest into something that moves independently, would be a great hedge.

The concept of money is based on having the ability to store the value of intangibles (like WORK done) or tangible items (a house) or simply making an exchange (Selling a car). With that said, some underlying asset or idea must be the basis of the value system which will set the base for what equates to one (1). For the longest while precious metals were the base and then the USD was chosen to be that base based on their gold holdings and then that correlation was thrown away to just using paper.

Saying all that to say, value has to be correlated with something at its core and then that has to be agreed on by the majority. From the crypto standpoint that’s a mix of Bitcoin and USD but most will say Bitcoin.

It can be argued that the US Dollar is correlated to its GDP, Country Wide Asset Base, Human Capital and the use of the currency around the globe. If you could quantify that into a formula maybe you can justify the many Trillions in U.S. physical currency in circulation and DEBT.

Maybe if you can build a similar community where the value of each community owner (Assets, Human Capital, Token usage etc) builds the underlying value of the tokens then you can create some formula to say this is the value of 1 token and explain how it’s correlated to the community at large. Other than that it’s easier finding some precious Digital Asset to back the token (Whatever that could be other than Bitcoin and NFTs lol).

Well, the only thing that comes into mind is a token backed by physical goods: for example, a token that is backed by 30% real gold, 30% real silver, 30% real platinum and 10% real oil.

Something like that would have a value indipendant from other crypto assets

How about a token with adjustable supply like ampleforth, and you raise supply when the crypto market rises and lower it when crypto market drops?

Nice idea. What about a token that has its supply pegged to bitcoin or the entire market’s VOLATILITY? higher volatility? Smaller supply… Or viceversa… I don’t really know what to expect from such a coin, but it is a nice idea I guess

Zach, this is really pushing us to contemplate the unthinkable,

People have been dabbeling with money for quite a while now, and as Voltaire said "Money eventually returns to its instrinsic value: Zero. History also shows this.

The gold standard was great while it lasted, but out of nowhere came the federal reserve with all of it’s corruption and greed, then came Mr. Roosevelt and made gold illegal to own which lead to the mighty dollar becoming a fiat just like any other which leads me to beleive that no matter what materia you deem to peg it against it will not work.

What I’m trying to say is that the only thing a currency can be tied to for longterm success and being uncorrelated from any market, crypto or stock, is an idea.

“Nothing is more powerful than an idea whose time has come” - Victor Hugo.

How to do this - No idea. What. So. Ever.

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What about a token that is pegged/based off of the whole cryptocurrency market value instead of individual coins? If BTC is pumping and Alts are suffering would this be better and a bit more stable?

My first thought is that you’d need an all encompassing ecosystem, where people would have no reason to buy/sell based on any other price movement.

An example would BNKR, aka Bankroll Network. Their token was consistently doing + 30-40% daily while the rest of the market was bleeeeding. The way they have it set up makes it so that you’re heavily incentivized to reinvest and compound your yield. Like you mentioned, it isn’t paired to btc or eth, as its on Tron. They also have native swap functions for their token against TRX.

Celsius have a similar platform, since you get the best rates if your biggest holding is CEL. Celsius also seemed to have a low correlation to the markets this year.

How this could translate towards a new token without copy pasting the two I posted above, im not so sure. Will brainstorm and edit later. Cheers

If this were the only goal with the token, you could design the tokenomics to be inversely correlated with crypto metrics. In other words, when volatility increases, or price decreases, then supply is burned, and then if price goes up, supply is released. I’m not sure how this would effect the value long term though, and if no one was buying it it wouldn’t matter anyway.

You could also peg the value to other assets. Having tokens for real estate comes to mind. If that was actually used, it should follow the real estate market not the crypto market. The problem is, crypto is so speculative that all coins get caught up in the wave, so I feel like you would have to design something, similar as a stable coin, to counter act this.

So in conclusion, a stable coin pegged to physical assets should do it… which is what the mainstream is trying to create with Libra coin and tokens like that.

Seems people here are looking for various solutions.

A token which is stable.
That is the purpose of AMPL, that many (and Dash) mentioned previously.
But AMPL’s objective is aiming the 1$ value.
So it’s basically finding a new way to create a stable coin, after Dai, sUSD, etc.
Not sure it’s what we want.
We don’t want a token that is stable, we want a token that is independant.

A token that is backed by others assets than crypto.
It’s actually a similar way of thinking the stable coin, except that instead of choosing the $ as a reference we choose another one (gold, bag of currencies, etc).
When you create a token backed by the gold, it’s actually a stable gold token (where DAI is a stable dollar token).
That does not make the token uncorrelated from that/these assets, but it can indeed make it independant from the crypto market.

Circles is building something interesting.
It’s a “personal” cryptocurrency.
That means that, when in circles, everyone mints it’s own money, which is backed by… you!
So Bob has it’s Bob tokens, while Lisa has it’s Lisa tokens.
If people trust you and accept your money, it will grow in value. And maybe tomorrow Lisa tokens will be very rare and accepted at a high rate.
As the tokens are personals, they can’t really be pu on an exchange (there would be millions of different Circle tokens: Bob ones, Lisa ones… which are not fungible).

Will try to think later about new ways or projects that try to get uncorrelated.

One name idea, I just let there:

  • North start: the only star that do not move with the others.
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So Bob has it’s Bob tokens, while Lisa has it’s Lisa tokens.
If people trust you and accept your money, it will grow in value. And maybe tomorrow Lisa tokens will be very rare and accepted at a high rate.
As the tokens are personals, they can’t really be pu on an exchange (there would be millions of different Circle tokens: Bob ones, Lisa ones… which are not fungible).

What if all Bob’s tokens were represented by one NFT. People could buy fractional portions of that NFT. So if people trust Bob his NFT would be more valuable.
In order to make a new NFT you would have to pay the North Star token and portion of any created NFT would belong to the North Star treasury, giving the North Star token some basic value.

I’m searching for some thing like this for so long. I want to have something that keeps my buy power with non currency backed. I read something about TERRA (LUNA) who are creating a stable based on some commodities prices like timber, gold, silver. I think that it is better than a currency basket but it also has too many governments influence. I was thinking in 2 ways:

1-) To have one token pegged to some kind of service that will have great impact over life quality, like (energy, internet, streaming, education, cloud storage like $OPQ, travelling…).The idea was to have an algo that uses an oracle to determine the value for this basket of services and levelling the token supply to adjust price on random dates base.

2-) The complex one is to pegged it to a basket of the most important things to keep your daily comfort.
this will maybe need a mix of services and commodities and maybe it should be an NFT so people can at some point customise it according with their importance for every item. Or you can just add the average percentage that you spend wit things like house, food, gas, energy, water, education, etc… and the reference price for each (it must be on public sources) and the oracle will keep the value that you stake for a long period equivalent lets say as 6 months of those spends…
One variation is to create the “sets” of NFT each one represents one kind of spends and the people can compose the set they want for periods like 3, 6, 12, 24 months.

Unless you do a stable coin pegged to some FIAT it’s hard to do something of real crypto market independent.
It could be used by some industries as a way to sell and authenticate their products with the proof of origin, simply generating a transaction with some data like the buyer, the goods s.n. etc and giving the transcation id to the buyer. Then sell the goods and exchange the token to FIAT and pay the TAX.
Since the token is pegged to FIAT the buyers and sellers are sure about the value of the transactions.

What about pegging the price to something that doesn’t need an oracle, but is the most valuable asset ever… TIME.

Although, perhaps an oracle is needed to know the time? so, what about basing on the block# / transaction#?

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I did some research over the stable coins options and found this article that may inspire some options.

Best winds!

I have a few ideas in mind that could allow a token to be uncorrelated to crypto market but shall mention the one I feel could be most powerful to get more people involved in crypto for now.

  1. Non crypto paired liquidity; Majority of its liquidity paired with stable coins or real world assets.

  2. Accessable; allow purchases via paypal, debit card, credit card or giftcards.

  3. Can be earned; This is in addition to being bought. Earned via user actions/activities.

  4. Ease of use; Make it simple to get on board or take part in network so even your gran could get involved!

Unique token distribution model; Allow token minting to only occur as a result of user actions.

Network sustainability; Let the foundation to earn a % of every token minted.

Ease of use & accessibility; Create a phone app where everything can be done from. I.e. use the app to allow users to take part in network, store tokens on a custodial wallet but allow users to send tokens out to a non custodial wallet of their own if they desire, redeem rewards for gift card or cash out to debit card for fiat, allow users to interact with uniswap stable coin pool without leaving the app. From there they can swap their stable coin for BTC, ETH or XIO so they can still get other crypto just by going through a stable coin 1st to uncorrelated the token from crypto.

Sweatcoin:

A few years ago I came across sweatcoin.

The basics of it is you earn sweatcoins based on your step count and can redeem these for real world products through partners.

I intended to participate with sweatcoin long term but within a month or two I completely stop participating. Their idea and vision was great but their implementation in my opinion is extremely poor.

The positives of their implementation:

  • You could earn sweatcoins.

  • The concept incentivised you to be more active.

The negatives of their implementation:

  • The coins had no real inherent value; you could only earn sweatcoins and not buy or sell only redeem for things that partners were basically giving away for free, this i believe acted as a form of payment to sweatcoin for basically advertising their company.

  • Did not count all step; they stated to overcome cheating that steps are only counted outdoors. This meant running on a treadmill indoors would earn you none.

  • Inaccuracies; I found that if I was walking outdoors on a path next to buildings about 70% of the time my steps weren’t tracked.

  • Easily disincentivised people from taking part; Worked out it would take nearly 10 years for me to earn a decent reward which may not be even offered in 10 years time.

  • Drained alot of phone battery; Worked off GPS and had to leave the app running for it to track steps.

It would connect people who may not have otherwise got involved in crypto with crypto, this would aid crypto mass adoption.

I believe there are so many improvements that can be made on sweatcoin as at present sweatcoin is actually crypto as you can’t buy or sell it.

If there was a coin could be minted based on physical activity such as step count alone it could be big!

It would need to be able to not drain phone battery so much; To achieve this data could be stored on a watch and then uploaded to the app when you go on the app. No need for GPS or app to stay on.

It would need to prevent cheating; i.e it needs to know if someone has stuck their fitness tracker on their dog or kid which makes the step count is not genuine!

It needs to be tradable; It would need to allow people to buy the coin which will give it actual market value.

For sustainability and project development; Creators of the token earn a % of all minted tokens.

I think you are on to something. However, to completely uncorrelate an asset from crypto dynamics, the community itself would be the asset. As much as we can create economic pressure to move price (changing pegs, rebases, supply), it is difficult to manifest the price of an assest beyond free market dynamics and other uncontrollable factors. A community token, where the assest is being a part of the community itself, and limiting the purchase to one per user, could be an interesting experiment. The larger the community, the more value (would need to develop mechanisms for the community to provide value…advice for example or an audience/eyes/ears). Limiting it to a single token per user, would limit the need to actively trade it.

What if a crypto was built as a hedge against speculation? If the goal is to produce a token that is uncorrelated to the emotion of markets, we could simply peg it to a stable asset. Yet, those assests, even usd, is speculative. So how can we work against those tendencies?

  1. Limit each user to 1 coin. This limits trading and creates a 1 for 1 value proposition…you are either in or not.

  2. The token would be essentially a forum for government. That would be the mechanism the community uses to define how value is produced and sustained.

  3. There would have to be a strong initial governance proposal and an initial value proposition ( Advice, expertise, and feedback like XIO Social for example could be a starting point).