Topic: Implementing an asset backed digital currency as tool for traders on distributed (Read 3949 times)
March 14, 2014, 02:52:11 AM
XRP is the only thing inside Ripple that does NOT do what you want to do. Everything else you describe either exists already or is easily implemented (or can be done in a better way, no need for convincing exchanges to adopt your "stock coin").
March 13, 2014, 09:49:15 PM
Yes, XRP and VEN ... but then I haven't seen either of them available on any of the sites that i would need them on. So, i'm just wondering what's up? Why hasn't this void been filled on some of these sites? Is there some way to tweak the XRP or VEN model to make that solution (a safe harbour coin for day-traders) more accessible to the masses?
March 13, 2014, 08:16:13 PM
You might want to take a good look at Ripple...
March 13, 2014, 08:07:27 PM
exchanges.
The purpose of this post is to release a business strategy / organization to public domain such that no one can patent it in the future. If this idea has already been conceived and/or patented, please consider the good to the world of releasing it. Most certainly all the bits and pieces for this already exist on this forum. This is simply my digestion of it all. Please do feel free to take credit for being the 1st to think of any of this.
This proposal is to create a digital token who's value can be backed by classical investment options (ex. physical gold) without central ownership of the digital currency itself, and using existing legal structures, technologies, and business partnership arrangements. Good for anyone to employ a lawyer for legal approval before attempting this business model however.
The need for this type of coin is seen when, for example, Bitcoin falls drastically in daily trading. Nearly all other coins fall with BTC. This leaves traders on sites with no fiat currency option at an extreme disadvantage. They must withdraw from one account, deposit to another site, and then wait for that deposit to show up. As we all know, on a busy day, the time involved for all of that to happen costs traders money.
A successfully implemented "asset-backed" virtual currency that is not centrally managed would solve this problem for traders. The purpose of this coin is to be a tool for short term traders and not as an investment in the backing assets -- there would, as yet, be no legal obligation that owners of the tokens would have on the backing assets.
Ingredients:
1. An asset managing partner corporation --- "Manager LLC"
2. An asset holding limited partnership company ---"Asset Partners LP"
3. Investors
4. Digital currency "only" exchange ... this process should work even on a distributed 'un-owned' exchange.
5. Commercial accounts and trading relationships on exchanges that are currently linked for trade in fiat currency.
6. Trade-bots to handle balancing accounts between exchanges
7. A target "asset-backed-token" which is designed to behave like cash when trading against bitcoins; but that is also freely spent 'off' exchange like any other digital currency.
Setup:
The investors buy shares of "Asset Partners LP". The money is used to form an investment fund which can derive its value from any investment like stocks, bonds, metals, futures, fiat currencies, or derivatives. The money must also be used to buy up a controlling share of a digital currency -- or use a pre-mined coin. ****This is the one step many will disagree with most. If anyone has ideas on how to avoid this, please do share.****
The investors have legal claim to the assets purchased with their money just the same as in any other limited partnership. There would be a prospectus in place to guide what percentage various assets shall be held. For example, the prospectus could read: Asset Partners LP shall maintain a value in copper futures which is between 80 and 90 percent of the total value of all assets.
"Manager LLC" shall have no stake in the "Asset Partners LP"; but shall be authorized to manage the assets for a fee and keep all assets within the ranges specified in the prospectus. This includes management of the corresponding target "asset-backed-token"(ABT). The tokens will be multi-encrypted such that no single party is authorized or capable of releasing coins outside the guidelines set in the prospectus.
A trade-bot, managed by "Manager LLC", will act as a market maker for the "asset-backed-token"(ABT)/BTC trade pair on any exchange where there is no fiat currency option.
Another trade-bot, managed by "Manager LLC", will counteract exposure to the daily volatility of USD/BTC by executing mirroring trades on a trading site that supports fiat exchange. Essentially, the trade-bots are providing instant pass through to fiat, while traders simply carry out an ABT/BTC trade on-site.
To support daily volume, large cash and BTC balances must be maintained on the trading sites that support fiat. As well, large balances of ABT and BTC shall be maintained on the non-fiat exchange.
Operation:
Trading will follow normal stock market schedule. At open, "Manager LLC" will asses the value of "Asset Partners LP" portfolio, the current bid and offer prices on the order book, and that day's market outlook. A price point will be set for the open and pegged to USD at an amount such that the entire balance of the ABT could be purchased with the assets held by "Asset Partners LP".
Traders can trade freely within the bounds set by the market maker bot. If the bot does process an order to sell ABT for BTC, it would simultaneously sell BTC for USD on the other exchange. Similarly, if the bot processes an order to buy ABT for BTC, it would simultaneously buy BTC for USD on the other exchange.
At market close, the BTC balances will be equalized between the exchanges. If there are net sales of ABT, and a surplus of BTC, then the extra BTC will be used to buy more hard assets. Then the price point of ABT can be adjusted upwards since there is more value backing it. If there are net purchases of ABT, and a shortage of BTC, then assets will be sold to replenish the BTC levels. ABT/BTC price would be adjusted downwards since there would be less backing assets.
Analysis:
How is this good for everyone involved?
traders - have a quick flight to cash option in an all digital currency world.
investors - as trust builds in the target ABT, its value will grow and allow for the purchase of larger and larger asset reserves, which the investors ultimately own.
exchanges - increased volume and trading fees
manager - management fees
Risks:
poor fund management/performance - clearly if copper futures fall drastically, and 80% of the funds were invested in copper futures, no one would be happy. A good manager, an established fund strategy, and diversity of investment are all important.
any threat to the assets - legal or otherwise (disagreement among investors) Good protocols for decision making and outlines of exactly when funds can be withdrawn must be drafted clearly from the beginning. The pool of investors should be large enough that the system does not depend on any single entity.
complete failure of digital currency eco-system - investors would likely abandon their obligation to back ABT. Realistically however, this is no different than being a retail investor in a typical stock. If the company goes bust, common shareholders get left out. As legal status of digital currencies becomes established, there could possibly be a way to legally link ownership of the ABT to the assets held by the limited partnership.
The purpose of this post is to release a business strategy / organization to public domain such that no one can patent it in the future. If this idea has already been conceived and/or patented, please consider the good to the world of releasing it. Most certainly all the bits and pieces for this already exist on this forum. This is simply my digestion of it all. Please do feel free to take credit for being the 1st to think of any of this.
This proposal is to create a digital token who's value can be backed by classical investment options (ex. physical gold) without central ownership of the digital currency itself, and using existing legal structures, technologies, and business partnership arrangements. Good for anyone to employ a lawyer for legal approval before attempting this business model however.
The need for this type of coin is seen when, for example, Bitcoin falls drastically in daily trading. Nearly all other coins fall with BTC. This leaves traders on sites with no fiat currency option at an extreme disadvantage. They must withdraw from one account, deposit to another site, and then wait for that deposit to show up. As we all know, on a busy day, the time involved for all of that to happen costs traders money.
A successfully implemented "asset-backed" virtual currency that is not centrally managed would solve this problem for traders. The purpose of this coin is to be a tool for short term traders and not as an investment in the backing assets -- there would, as yet, be no legal obligation that owners of the tokens would have on the backing assets.
Ingredients:
1. An asset managing partner corporation --- "Manager LLC"
2. An asset holding limited partnership company ---"Asset Partners LP"
3. Investors
4. Digital currency "only" exchange ... this process should work even on a distributed 'un-owned' exchange.
5. Commercial accounts and trading relationships on exchanges that are currently linked for trade in fiat currency.
6. Trade-bots to handle balancing accounts between exchanges
7. A target "asset-backed-token" which is designed to behave like cash when trading against bitcoins; but that is also freely spent 'off' exchange like any other digital currency.
Setup:
The investors buy shares of "Asset Partners LP". The money is used to form an investment fund which can derive its value from any investment like stocks, bonds, metals, futures, fiat currencies, or derivatives. The money must also be used to buy up a controlling share of a digital currency -- or use a pre-mined coin. ****This is the one step many will disagree with most. If anyone has ideas on how to avoid this, please do share.****
The investors have legal claim to the assets purchased with their money just the same as in any other limited partnership. There would be a prospectus in place to guide what percentage various assets shall be held. For example, the prospectus could read: Asset Partners LP shall maintain a value in copper futures which is between 80 and 90 percent of the total value of all assets.
"Manager LLC" shall have no stake in the "Asset Partners LP"; but shall be authorized to manage the assets for a fee and keep all assets within the ranges specified in the prospectus. This includes management of the corresponding target "asset-backed-token"(ABT). The tokens will be multi-encrypted such that no single party is authorized or capable of releasing coins outside the guidelines set in the prospectus.
A trade-bot, managed by "Manager LLC", will act as a market maker for the "asset-backed-token"(ABT)/BTC trade pair on any exchange where there is no fiat currency option.
Another trade-bot, managed by "Manager LLC", will counteract exposure to the daily volatility of USD/BTC by executing mirroring trades on a trading site that supports fiat exchange. Essentially, the trade-bots are providing instant pass through to fiat, while traders simply carry out an ABT/BTC trade on-site.
To support daily volume, large cash and BTC balances must be maintained on the trading sites that support fiat. As well, large balances of ABT and BTC shall be maintained on the non-fiat exchange.
Operation:
Trading will follow normal stock market schedule. At open, "Manager LLC" will asses the value of "Asset Partners LP" portfolio, the current bid and offer prices on the order book, and that day's market outlook. A price point will be set for the open and pegged to USD at an amount such that the entire balance of the ABT could be purchased with the assets held by "Asset Partners LP".
Traders can trade freely within the bounds set by the market maker bot. If the bot does process an order to sell ABT for BTC, it would simultaneously sell BTC for USD on the other exchange. Similarly, if the bot processes an order to buy ABT for BTC, it would simultaneously buy BTC for USD on the other exchange.
At market close, the BTC balances will be equalized between the exchanges. If there are net sales of ABT, and a surplus of BTC, then the extra BTC will be used to buy more hard assets. Then the price point of ABT can be adjusted upwards since there is more value backing it. If there are net purchases of ABT, and a shortage of BTC, then assets will be sold to replenish the BTC levels. ABT/BTC price would be adjusted downwards since there would be less backing assets.
Analysis:
How is this good for everyone involved?
traders - have a quick flight to cash option in an all digital currency world.
investors - as trust builds in the target ABT, its value will grow and allow for the purchase of larger and larger asset reserves, which the investors ultimately own.
exchanges - increased volume and trading fees
manager - management fees
Risks:
poor fund management/performance - clearly if copper futures fall drastically, and 80% of the funds were invested in copper futures, no one would be happy. A good manager, an established fund strategy, and diversity of investment are all important.
any threat to the assets - legal or otherwise (disagreement among investors) Good protocols for decision making and outlines of exactly when funds can be withdrawn must be drafted clearly from the beginning. The pool of investors should be large enough that the system does not depend on any single entity.
complete failure of digital currency eco-system - investors would likely abandon their obligation to back ABT. Realistically however, this is no different than being a retail investor in a typical stock. If the company goes bust, common shareholders get left out. As legal status of digital currencies becomes established, there could possibly be a way to legally link ownership of the ABT to the assets held by the limited partnership.
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