@jl777 - thanks for your answer!
I'm really curious about this tech, so if you don't mind, I have couple more questions:
1. How does PAX know current KMD/USD rate?
2. If I convert some KMD to USD now, on PAX1, will that USD be "reachable/valid" after you release PAX2 with dynamic supply?
3. Scenario: User converts 100 KMD at rate 1 USD/KMD, so he gets 100 PAX USD. In the meantime, KMD price falls to 0.5 USD/KMD. Now he converts 100 PAX USD to KMD and gets 200 KMD. From where does that 100 KMD comes from? Also, where does initially converted KMD "go"?
Thanks! This is really interesting, very cool.
1. Notary nodes are putting price feed into the blocks they mine. From this data a process similar to what Augur uses calculates a determistic price by all nodes that requires a 51% attack to change the price to a fake price. Each node has a paxprice cli call that you can see what the price is for that block.I'm really curious about this tech, so if you don't mind, I have couple more questions:
The above will convert 1 USD worth of KMD into pax USD.
1. How does PAX know current KMD/USD rate?
2. If I convert some KMD to USD now, on PAX1, will that USD be "reachable/valid" after you release PAX2 with dynamic supply?
3. Scenario: User converts 100 KMD at rate 1 USD/KMD, so he gets 100 PAX USD. In the meantime, KMD price falls to 0.5 USD/KMD. Now he converts 100 PAX USD to KMD and gets 200 KMD. From where does that 100 KMD comes from? Also, where does initially converted KMD "go"?
Thanks! This is really interesting, very cool.
2. PAX2 will of course honor all PAX1 positions, it will likely be a gradual transition process as more and more of PAX2 features are added to PAX1, until one day it is PAX2
3. The conversion process burns the KMD by using an OP_RETURN. Assuming a stable price, over time the deposits and withdraws will cancel out any gains/losses. However as a worst case meltdown scenario, we have set aside enough KMD to absorb conversions that use up the KMD. This is why PAX2 is needed before we remove the volume caps on issuable amounts so that the risk is always limited to absorbable levels.
To handle a BTC and/or KMD meltdown scenario, there is a floor price of 2500 sats that the conversion wont go below. Since this is approx the BTC reserves I felt it a reasonable floor price. Given a floor price, the max exposure can be calculated.
However due to the limited amount issuable with PAX1, I dont think redeems will be an issue and that all the issued PAX currencies will simply circulate around in the ecosystem. Since KMD is burned to issue the PAX, as long as BTC and KMD are long term increasing, PAX usage will actually create more KMD.
Regarding point 3. I am understanding that kmd is burned when issueing pax. When converting pax back to kmd, I am a little confused. [I assumed the kmd was locked (not burned) and unusable when converted to pax until unlocked when converted back from pax, and the pax burned. ]
Based on your reply, do I understand right that there is a pool of kmd set aside by the developers that gets dipped into when converting pax back to kmd? And because you don't think redeems will be an issue this pool will never go dry?
Burn/Recreate
these are really the same effect.
So the reserve is only for net shortfall, ie. if it will need more KMD to recreate the USD value than was burned.
But the practical conversion is pax -> BTC, so to convert to KMD and then to BTC will be an extra step and the conversion to KMD is not fast. By directly being able t DEX from pax -> BTC, it will be faster and also avoids the issue. Since the supply is strictly limited, I dont forsee any large demand to redeem.
Of course if there is, we will allow such redeems.
I think I see where you are going with this, most pax coins will just trade for btc so no need to "unwind" (unlock)(recreate) them back to kmd.
Are there any quotes from the pax white paper that describe this in more detail, specifically this extra pool of kmd that will be used in case of a net shortfall, you can share?
Also, and this has got me thinking, what happens to the supply of kmd when the pax conversions start? Ie: How many kmd do you guesstimate will be locked/burned and unavailable once pax 1 starts? Pax2?
And say in a scenario where a small country decides to use pax and all of a sudden issues a few billion pax of the local currency, what does this do to kmd supply?
Thanks jl777
