Universal Inverse Token Protocol (INVS)

Name of Project

Inverse protocol

Ticker for Token

$INVS

1) In one sentences or less, describe your token. This isn’t the time to get wordy, just to the point!

It’s a Universal Inverse Token Protocol.

2) Do you have a video to introduce yourself or explain the token? Upload it here and share the link here. (Not required)

Not at the moment sorry.

3) Do you have a logo for your token? If so, upload it here. (Not required)

4) How does your token work? Be as detailed as possible

Overview


The main purpose behind the Inverse protocol is to allow any network to create an inverse version of their own standard token. The main focus for the protocol to begin would be to create a minimum viable product (MVP) which would just allow tokens to be created which have a daily return on investment (ROI) which is -1 x that of their network’s standard token. This is whilst being accepted to have the same utility within their network as their standard token. This would increase flexibility within a network.
As an example, if LINK token decided to create a -1xROI version of LINK through the Inverse protocol, then it would be called ILINK. If LINK went down by 20% in price, ILINK would to go up 20% in price by design.
Inverse tokens are created with just a click of a button through the Inverse protocol dapp. The starting supply of the inverse tokens, always match that of their standard counterparts. All inverse tokens belong to the inverse protocol upon creation. In order to redeem these inverse tokens, to utilise them within their own network, the network must swap their standard tokens for the inverse version that the Inverse protocol holds, at a ratio of 1:1. For the first redeem of an inverse token, there is a minimum swap quantity which equals 5% of the total supply of a networks own standard tokens; this minimum is set to help reduce the likely hood of there being too little liquidity to start which could make the inverse token versions hard to trade. The initial swap allows the contract address creator of new inverse token to place some starting liquidity on Uniswap and set its initial price at a price they desire. This price may be higher or lower than the price paid to purchase the initial ILINK off the Inverse protocol. The starting price that everyone pays is completely up to the contract address creator.
The Inverse protocol is much more than just a protocol creating negatively correlated token assets though. Inverse means opposite not just negative, this is a far broader term than just negative! As a result of this, the protocol could branch out into to so many things. Also the protocol is not just another AMPL. Inverse protocol only uses rebasing as a safety net, rather than its main mechanism. The main mechanism to force price correction of inverse tokens to their required target prices, is by utilising traders and bots by creating arbitrage opportunities through the Inverse protocol’s own dex. It operates in a similar fashion to ETFs with the advantages of rebasing on standby if required.
The dex enables Inverse tokens to have a ROI adjustment in real time, in a decentralised way, without completely relying on rebasing. Rebasing using mint and burn commands, would only be necessary as a coarse ROI adjustment, if 24 hours have passed where the dex had been unable to keep a specific inverse token’s ROI, within the range of -0.9 to -1.1 x ( -/+ 10% tolerance) that of its standard token’s ROI. These adjustments would be carried out automatically by the dex’s smart contract. Any required price adjustments of inverse tokens would not affect the value of the Inverse protocol’s own token INVS as it is a separate entity in its own right from the all the created inverse tokens through the protocol by other networks.
Examples of protocol enhancing modules the Inverse protocol could build on top of its own MVP, will be described in the further sections below. The protocol is modular in design, similar to how XIO is from the tokens that are produced out of its own token studio. It has been planned to be designed like this in order to speed up the development process so a MVP can be created as quick as possible in which further modules could be added on top of this at a later date.

Decentralised shorting of tokens


By default, the inverse tokens created through the Inverse protocol dapp allows for shorting of standard version tokens in a decentralised manner i.e traders can buy -1xROI tokens on a dex and store them in non-custodial wallet. Normally this would be done through a centralised exchange.

Hedging, loan collateral advantages, tax advantages


Holding various inverse versions of tokens would allow traders hedge their standard token versions in order to retain the $ value of their crypto holdings.
Some cryptocurrency banking platforms, require people to lock their crypto with them as collateral for a loan. An example of how one project works is; if the value of the collateral a person locks with the crypto bank drops below 150% of the loan they received in $, then their collateral is liquidated. If these platforms accepted inverse ROI tokens to the standard tokens, then people could hedge their collateral 50:50 with inverse versions of their tokens to reduce the likelihood of them ever being liquidated.
Holding inverse tokens in equal proportions to standard tokens could in effect lower any tax paid on assets. If for example someone buys $10,000 worth of INVS and $10,000 worth of IINVS at the same time as a hedge and INVS went up 50% in value that person would now hold $10,500 worth of INVS ($500 profit). As IINVS as a -1xROI to INVS token, IINVS token would have gone down by 50% would mean the persons IINVS would be worth only $500 ($500 loss). This would give a net profit of 0 and in theory no tax due. If the hedge was not 50:50 then tax may be due.

XIO holders receive % of Liquidity mining rewards by arbitrage & XIO’s white-label XLP system .


Inverse protocol would create an Inverse version of its own INVS token, this would be called IINVS. The ‘I’ in front of the ticker name would distinguish an inverse version of a token from a standard version. The only way to receive IINVS token at the start is by adding liquidity for the standard token INVS on Uniswap or Inverse protocol’s own dex. Adding liquidity on Uniswap would entitle a liquidity provider up to 20% per year the number of tokens they provided in INVS liquidity, paid out in IINVS tokens. It would be up to a rate of 50% per year if added to Inverse protocol’s own dex. If XIO white-labelled their XLP program, the liquidity incentive could be done through this, allowing XIO holders to reap a % of the rewards. Receiving IINVS as a liquidity reward acts as a hedge if INVS price was to drop as IINVS is designed to have a -1x ROI to INVS token. Once an address that provides INVS liquidity holds an equal amount of INVS to IINVS (i.e. once it is fully hedged) it could be given the option to receive further liquidity rewards in WBTC, WETH, DAI or USDC. If the address for INVS at any point is not fully hedged, it then loses this entitlement. These alternative rewards are obtained by the Inverse protocol by swapping IINVS tokens they hold for WBTC, WETH, DAI or USDC and allowing the liquidity provider to then claim them.
People and bots trading the arbitrage opportunities the Inverse protocol creates (between itself and other dexs), enables them to liquidity mine the Inverse protocol’s token INVS. The liquidity mined INVS and rewards through XIO white-labelled XLP incentive could be claimed by inverse protocol arbitragers and liquidity providers using XIO’s white-label claims dapp. This entitles XIO holders to a % of all INVS, IINVS, WBTC, WETH, DAI, USDC claimed through the claims dapp also.

Index fund


Inverse protocol could create its own total crypto market -1XROI index fund. This would be an index fund in its own right which anyone can trade. Other negative ROI version of this fund could be created for those willing to take on more risk for a much higher potential returns. These would likely become very popular during a believed or feared upcoming bear market. The inverse protocol would create a new token for each index fund. The -1xROI total crypto market index fund token ticker could be called ‘I1TCMI’ (Inverse -1xROI total crypto market index). The index fund would work in a very similar way to how a ETF works. If the net asset value of the Inverse protocol’s Inverse token holdings (for the I1TCMI fund), fall below that of the I1TCMI tokens in circulation (as a result of increasing demand for the index), then the inverse protocol could automatically mint new I1TCMI tokens and gets its smart contract to sell these on its own dex. This is so a selection of Inverse tokens, in the same proportion that the I1TCMI index fund holds could be purchased and sent back to the index funds holding address. This would allow its net asset value to go back in line with the net asset value of all the I1TCMI tokens in circulation.
The process would be the same in reverse. If the net asset value of index funds holdings increases above net asset value of all the I1TCMI tokens in circulation then the smart contract would sell equal proportions of its asset holdings on dexs, to buy a pre calculated amount of I1TCMI tokens which the Inverse protocol could burn in order to bring the net asset values back inline.
The process redeem/ redemption process described above (to keep the net asset values inline) could be improved upon so that traders and bots could get involved in the process also to make profits on the created arbitrage opportunities. This would also massively save the inverse protocol on transaction fees as the only time the protocol would need to do transactions themselves in order to bring the net asset values inline, would be for a coarse adjustment using the base level process through its smart contract. This would only be used though if the difference between the net asset values was great than +/10% for more than 24 hour period for example. This allows the traders and bots time to react to capitalise on the arbitrage opportunities.
An Inverse protocol’s own index fund redeem/redemption dapp could be created to allow traders to take part in a clear and simple way. 20% of the profits (in the form of an Inverse token basket) traders redeem through the dapp could be sent to a treasury fund which INVS holders could be entitled to.

The treasury fund


The Inverse protocols treasury fund idea came about from the XIO treasury fund idea. The basic principles are the same but it involves quite a twist which would be very beneficial to holders of the INVS token.
10% of the redeemed profits of arbitrages using the Inverse protocol’s index fund redeem/redemption dapp would bring a steady flow of inverse tokens to the treasury fund.
The % holding a person has of the total supply of INVS tokens is proportional to their ownership of the treasury fund which they can claim. To claim a person must burn an equal proportion of INVS tokens to their claim. The twist is that the claim can only become eligible during a clear bear market i.e when the price of the Inverse protocol’s own total crypto market -1XROI index fund token (I1TCMI) has dropped by 50% of its value from its all-time high. The benefit here is that a 50% decline in the total crypto market would mean the value of all the tokens within the treasury fund, would have increased by 50% on average. In effect this acts as a rainy day treasury fund so holders of INVS token can burn their INVS tokens to help claim back the lost $ value of any standard token version they hold during the bear market. This burning process of INVS tokens (which is incentivised during a bear market), should help the INVS token sustain its value much better than most tokens in the crypto industry during a bear market.

Time locked staking asset $ value insurance


The protocol enables time locked stakers (FLASH network is one example) to have cover of decentralised insurance so a staker can maintain their $ value of their staking asset in the event of it being worth less at the end of time lock staking period, than it was at the beginning. To be entitled to this cover, the staker must lock an amount of INVS token which is equal to, or greater than 20% the $ value of their staking asset about to be staked. The staker can re-use the INVS tokens they lock after the stake they were covering has expired, in order to cover other stakes. Each time a stake expires where INVS tokens are locked to cover it, a locked amount of INVS tokens which is equal to 2% of the $ value of their staking asset at the start of the stake duration, is burned automatically. The locking and burning of INVS tokens creates a double deflationary effect on the supply to counteract any inflation on the supply which is used to reward the Inverse protocol arbitragers who help the inverse tokens achieve their target of -1xROI to the standard token versions. If someone’s staking asset was worth 30% less at the end of their staking time lock period and they were eligible for the staking asset $ valuation price drop time lock cover then Inverse protocol would actual not lose any money to pay out in reality. Here’s an example to explain how I believe this is possible; a stakers, staked assets is in LINK and is worth $100 to start. The Inverse protocol assigns the $100 worth of the inverse version of this token, ILINK in order to cover the link assets at the beginning of the stake. Price of LINK becomes 30% less at the end of the stake so staked assets are then only worth $70, the holder requires a payout of $30 to recover their loss in asset value. As ILINK is designed to have a -1xROI to LINK, the 30% drop in link price create a 30% gain in ILINK price. The $100 worth of ILINK assigned to the cover is now worth 30% more so has gone from $100 to $130 worth of ILINK. The inverse protocol swaps $30 worth of ILINK for $30 worth of LINK on its own DEX as send that new LINK back to the staker as payout. The inverse protocol started with $100 worth of ILINK and after cover payout the Inverse protocol still has $100 worth of that ILINK. Inverse protocols cover should in theory make itself break even on any payout cover.

5) What problem is your token aiming to solve? How will this positively impact the crypto industry?

  • To make time locked staking even more attractive. The protocol would allow a staker to have cover of decentralised insurance so they could maintain $ value of their staking asset in the event their staking asset being worth less at the end of time lock staking period than it was at the beginning. This should make FLASH token even more attractive than it already is, if FLASH network utilises the Inverse protocol.

  • To help prevent loss of a networks $ valuation of development funds during a bear market, if they don’t hold their development funds in fiat. Reduces risk for investors in projects as it reduces chance of a projects funds drying up as a result of market conditions alone.

  • To allow any network token to have a hedge against itself whilst retaining token utility. Very useful in a bear market.

  • To allow decentralised shorting of any token. No need to do it from centralised exchange.

  • To help reduce the likelihood of people having their collateral liquidated through crypto banking platforms which becomes a common occurrence during bear markets.

6) What was the inspiration of this token? How did you think of it?

Inspiration:
In crypto there has been multiple bear market cycles and many people have lost thousands of $ during this period and been scared away for good. I’ve personally held tokens before the 2017 bull run all the way to the top and all the way back down to the bottom as I believed in the long term future of a project. It can be gut wrenching if you hold the entire bear cycle! If there was a true hedge for every token in the crypto industry in a form of an inverse version of each token, it would not be so gut wrenching during the next bear cycle (if there is another). A lot of tokens crash over 90% in value in the last bear cycle! Hedging with a reverse version of your token would greatly reduce any loss whilst allowing you to likely retain network utility with both tokens.
Another inspiration for this token idea is that in crypto, time locked staking such as FLASH have the risk of being worth less at the end of the time locked period than at the beginning, if the price of the token drops during this period. Some people may want to do longer stakes to get higher returns but may be cautious of doing so, due to risk of being unable to react if the price drops or a major bear market occurs during this period. If there was an insurance on staked asset value being less at the end of the staking period, then it makes time locked staking more attractive in my opinion and should cause less worry for time locked stakers.
XIO is a big inspiration for a lot of the systems wanted to be used within the Inverse protocol.

How I thought of it:
Been thinking about how AMPL token idea of rebasing wasn’t really solving a problem (in my mind) by the way they utilised it and thought their rebasing idea should allow much more possibilities in the crypto industry, than just the preservation of a person % holding out of total supply of AMPL. Preserving ones % holding of AMPL would still allow a person’s $ valuation of their holding to crash.
I think preservation of a person’s crypto $ valuation would be much more attractive as a $ is universal across the crypto industry and used in day to day life, whereas AMPL is not. Rebasing should allow all tokens to reap the benefits of rebasing than just AMPL network alone.
@johnvelasco who is now a member of the team mentioned an idea he had back in September. He mentioned a form of time travel on your staking investment, in the form of an insurance so that if your asset while staking went to $0 for example, you’d get some compensation back if you paid the insurance fee upfront before staking. XIO Blackpaper v3 | Looking for feedback #3XIOsocial - #84 by BGzetro
So I would like to thank John for planting the initial seed in my head which I could adapt on.

7) Are there any projects out there doing something similar?

Not that i’m aware of.

8) What phase is the token in? Explore vs. Build vs. Launch vs. Scale. (If there has been no coding yet, your token is in the explore phase)

Explore.

9) Will this token be inflationary, deflationary, fixed, or dynamic token supply?

Inverse token would have a dynamic token supply. It could be inflationary or deflationary, all depends on user’s actions, similar to FLASH in that sense.

10) How long do you think it would take to build a minimal viable token?

Once fully worked out I think about 4 months for a basic functioning version which can then be built upon further.
The protocol’s use cases could be built in a modular way on top of a minimal functioning protocol, should greatly speed up development in my opinion.
A MVP would be a dapp that allows the creation of the -1xROI tokens. The dex and insurance could come later on in development. The driver to get the inverse tokens to their target price to a -1xROI could be solely based on burning and minting functions to start.

11) What skills do you have that would help bring this token to reality? (ex: Marketing, Development, Branding, etc)

Work in electrical engineering so am technically minded. May be useful for helping with problem solving tasks as that is basically my day to day job role. Have worked on some electrical design projects, which involves development.
I can be quite creative, did well in art also, both may translate well for me to assist on branding.
Have some programming experience but no experience in a language that I feel would benefit the token. Wanting to learn new ones with spare time though.

12) Are there any inherent weaknesses or obstacles to building this token? Any items you still need to figure out?

The -1XROI mechanism needs further time exploring as what I described in the overview, only allows a standard token to increase by 100% in value from the point the first price of the inverse token was set on an exchange before it is worth 0. The workings behind the -1xROI needs to scale so that the standard token could increase by 10,000% or even any % where the inverse token still has value.
1st thing that comes to mind is a multi-tiered inverse token system. For example upon creation of the inverse token there would be 2 contract address. It switches between one being enabled and the other disabled. Every time a standard version token increases in price by 100% the starting price of the inverse token recycles in which the other contract address becomes the active one and the Inverse protocol would accept the active inverse token off the market at that price in return for the standard tokens. Anyone who holds one version of the inverse token is entitled to the other unactive one for free. As you can see this mechanism requires a lot more time to work out before moving forward.

If you want to share your Twitter/Telegram handle here for people to reach out and discuss this idea with you, post them below.

@BGzetro

This is where you can put anything you want that was not directly asked above! Anything and everything related to your token idea can go here. Any files, links, info, etc

Let’s say the inverse token is used on some token, let’s say ABC token. so IABC and ABC are both $100. if ABC goes up 70% then that would cause IABC to go down 70% too is my understanding? If so then that might work ok for collateral since that means ABC is now $170 and IABC is now $30… but what if ABC goes up 200%? IABC can’t go down 200% right? How would that work? Trying to wrap my head around that math of it. Thanks!

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I think one way to calculate it, is the same way we calculate it when we look at how far the coin is from ATH. If it’s 50% below ATH it needs to go up 100% to come back to it.
So if token ABC goes up 100%, IABC will go down 50% (then it needs to double to go back to original price)
If token ABC goes up 200% token IABC will go down 66% (200% move up to come back)
ABC 400%, IABC down 75% etc.
If we were to do it like this, then it would have to work the same way in inverse. So if ABC goes down 50% IABC goes up 100%. So I am not really sure if this fills the brief.

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That’s ok, You’re correct :). In question 12 for the ‘any items you need figuring out’ I’ve mentioned that the mechanism I described in the overview has a flaw, the flaw you described.
Using your ticker example, IABC token would be worth 0 if ABC token went up by just 100% in price from when the price IABC token was first set on an exchange. Value could go to 0 pretty quick like this for an inverse token which is not what I want exactly.

The initial vision is there but I still have that problem to solve.
I do have some ideas on this but they add extra complexity. Still need to think these through. I think there can be an improvement for a proper solution :slight_smile:

Thanks for the message for a possible solution.
I think what you mention is an improvement in terms of slowing down the rate in which IABC token goes to 0. Integrating the all time high point into the solution is a good idea.

Would need to look into calcs based on IABC token value being based upon last ATH price of ABC token. A multi level inverse token system may be possible. For every time the price goes up 100% from last ATH there could be another IABC token people can invest in which would cost more than the previous level IABC token as there would be more money to make on the way down. Each level IABC token would basically be like a separate crypto ETF.

I think there can be a solution just needs lots of thought on it :slight_smile:

iETH and iBTC used by Synthetix are something similar I believe?

I’ve know about synthetics for a while but never looked into them. Just looked and the do have something called iETH and iBTC :exploding_head:.

From what I’ve read they are inversely correlated to synthetics ETH and BTC and you buy in at an entry price and they freeze and cannot change in price after reaching an upper or lower limit.

The mechanism behind what I propose and wanted to create is different to this but the fact they already have an inversely correlated tokens is the same in that sense.

Thanks for letting me know. I’m going do more reading up on synthetics. Found a couple of good links so far :slight_smile:

https://docs.synthetix.io/tokens/

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Doesn’t Mirror Protocol (MIR) do this?

I’ve known about mirror since Eric Bal mentioned it last week in telegram as people could claim MIR tokens if they held uni on a specific date but not actually looked into how they work until now.
There are some similarities in terms of target price and tracking an asset but they have different purpose to what I’m aiming for it seems. Mirror finance aim is to bring real world assets to Blockchain. That was not my intention with this protocol although that should be able to be done. With inverse protocol the purpose is to create tokens which have inverse properties to another token. Also initially to track at a -1xROI.

So many thousands of tokens out there, hard to keep up with what others have already have done​:grinning_face_with_smiling_eyes: but good to see their is something already out their that can provide so similar properties :slight_smile:

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