Basis, A Year-Old Startup Is Building A Price-Stable Cryptocurrency- Part 2
The post is a continuation of the previous one explaining more about Basecoins. Read along for the details on Basis.
Continuing From The Earlier Post
In its white paper, Basis much more specific plans to use a three token system that handles expansion and contraction. These are defined as follows:
It is known as coins for short where these are the core tokens of the system which are pegged to the USD intending to be used as a medium of exchange where their supply is expanded and contracted to maintain the peg.
For short they are called bonds which are token auctioned off by blockchain as it needs to contract Basecoins supply with bonds not pegged to anything but each bond promising that the holder has exactly 1 Basecoin to hold at some point in the future even under certain conditions. You can expect to earn a competitive premium or yield for the bond purchase as the newly issued bonds are sold on open auction for prices less than 1 Basecoin. Below are the conditions under which a bond is redeemed:
- Creating and distributing Basecoin by the blockchain i.e. it is determined that an expansion of Basecoin supply is necessary
- While this bond has not expired, i.e. it has been fewer than 5 years as the bond was issued
- Base Bonds that were issued before this bond have been redeemed or expired.
For short they are called shares as the tokens with supply fixed at the genesis of the blockchain which is not pegged to anything as the value stems from dividend policy with demand for Basecoins goes up as the blockchain creates new Basecoins pro-rata so long as all outstanding base bonds have been redeemed.
It Works As Follows, When It Comes To Expansion, According To Basis’s White Paper:
Firstly to state blockchain tallies any outstanding Base Bonds as well as orders them according to when they were issued along with the oldest first. Calling this ordered sequence of bonds the Bond Queue, blockchain also tallies all outstanding Base Shares. This is then the blockchain creates N new Basecoins tokens distributing them as follows:
Firstly paid are the bondholders and in first-in-first-out order where there are any outstanding Base Bonds with the blockchain beginning to convert bonds into coins one-for-one according to their order in the bond queue. As an example, in case there is a need to create 100 Basecoins, we can convert the 100 oldest outstanding bonds into 100 new coins. In this, the FIFO queue incentivizes people to buy bonds sooner than later as the bonds are bought sooner paying out bonds bought later.
After bondholders, the shareholders are paid with no more outstanding Base Bonds where the system issues any remaining new coins to shareholders pro-rata as a dividend. An example of this is in case there is a need to create1million Basecoins, as there are 0 outstanding bonds and 10 million outstanding shares, then each share receives 01.1 Basecoins.
With too low price, the protocol auctions Base Bonds at a discounted price with an attempt to reduce the supply of Basecoins. This is where the base bonds promise to repay 1basecoin at some point in the future in contrast to when the price is too high as the protocol distributes Basecoins paying back the holders of base bonds. In case all the base bondholders are paid out but the prices still too high the protocol distributes Basecoins to Base shareholders under the impression of selling them in the open market until price decreases back to the target price.
Before Signing Off
As it is not only a company working to develop a stable cryptocurrency for individuals and institutions, Basis is looking to use digital currency as easily as they do fiat currencies with a growing number of companies seeing the opportunity that basis has in its sights. Even then Al-Naji views Basis as playing a winner-takes-all game as also the investor Deshpande as well as presumably the company’s other backers see as a multi-billion opportunity.
Al Naji says that they do believe that one winner is sure to capture most of the mind share and create products as well as an ecosystem using its cryptocurrency. Thinking once that foothold is in place, he suggests its game over for other competitors. The kind of backing it has landed looks to help toward that end and so certainly stay tuned. This implies the system is robust with worthy competitors who are vying for the top spot. Make sure you don’t miss them and get to hold more than anyone else.