Is 30% APR really possible on a very stable token?
The velocity of tokens is a key aspect that affects future token value; however, it is also one of the least understood. This post attempts to describe velocity, how it impacts any token price over time and on top of that we will present you our solution of why our token does not have this problem at all.
Equation of exchange
The equation of exchange is defined as: MV=PT
Where: M= money supply, V= velocity of money, P= average price level of goods, T= index of expenditures (such as the total number of economic transactions)
In token economies, this has been adopted by two prominent people — Chris Burniske and Vitalik Buterin.
Burniske definition: MV=PQ
Where: M= size of the asset base, V= velocity of the asset (the number of times that an average coin changes hands every day), P= price of the digital resource being provisioned, Q= quantity of the digital resource being provisioned
Using the Burniske definition, valuations typically solve for M by rearranging the equation: M=PQ/V
In order to solve for token price, one must calculate M, by working out the size of the market in dollars (PQ), divide it by the velocity (V) and then divide M by the number of coins in supply.
Buterin definition: MC=TH
Where: M= total money supply (or total number of coins), C= price of the currency (or 1/P, with P being price level), T= transaction volume (the economic value of transactions per time), H= 1/V (the time that a user holds a coin before using it to make a transaction)
Using the Buterin definition, to solve for the token price, one must solve for C:
C=TH/M
In either definition, one can see that the velocity of the coin is inversely proportional to the value of the token i.e the longer people hold the token for, the higher the price of each token. This is intuitive, because if the transactional activity of an economy is $100 billion (for the year) and coins circulate 10 times each over the course of the year, then the collective value of the coins is $10 billion. If they circulate 100 times, then the collective coins are worth $1 billion. Thus, understanding and calculating the velocity in any token economy is extremely important.
For FSK we have a very different system that I will present to you now!
A bit of history:
Index funds have been around since the 1970s and have become a popular investment option for many good reasons. For example, the S&P 500 is one of the most actively traded indices in traditional finance, resolving the value of the 500 largest companies on the New York Stock Exchange into one convenient investment.
Save your time and money / understanding an index
Knowledge really is power when it comes to investing. However, there are far too many crypto-currencies available for a trader to research them all in a quick manner. Crypto-currency index tokens allow investors to give their portfolio broader exposure to the digital asset market without diving into the intricacies of which projects they want to back and with how much money.
Indices also allow investors to instantly diversify their holdings while reducing currency exchange fees and other hidden costs associated with manually managing a diversified portfolio. This simplifies the investment process, especially for newcomers.
Since it is possible to redeem the underlying assets of the index using one’s token, new traders have an excellent starting point for understanding the index’s plans.
Of course, not all chips are worth investing in.
Decentralised Finance (DeFi) is the culmination of years of attempts to bring the vast array of financial services into the realm of digital assets. For some, learning the basics of DeFi may be too much, and understandably so. With so many concepts, protocols and terminology, it’s very easy to get overwhelmed or hit a wall trying to figure out where to best invest.
With blockchain bringing a tectonic shift to the foundations of financial services, it was only a matter of time before index funds also found their way to crypto-currency investors.
While the demand for these tokens today is still tiny compared to the cash and derivatives markets, we are positioning ourselves with FSK as a reference in this field with our own interpretation of this system.
The world of trading is a vast one, and many strategies exists. But unfortunately, it’s not easy to get there, time and failure before success are components that few people can afford to have.
Banks do not allow to protect against inflation anymore, and a traditional product with a high return and classified as a risky asset like the sp500 has an average return per year of 15%. Our goal is to outperform it, and maybe replace in part centralized hedge fund and banks.
Anchor and many other protocols offers more than interesting returns on stablecoins and the risk of losing the tokens is relatively low, but this is not enough for us, our goal is to have a minimal and viable return via our token of 30% per year for the entire existence of the project, and believe me, we don’t want to let it go!
To reach this goal, the main idea is to allow traders and investors to work together anonymously, enhanced by an automatic and algorithmic regulation coded in the FSK smart contracts. This regulation is crucial and will reward investors and traders that acts in the right direction of mutual benefit.
Let everyone agree and participate in the creation of this ecosystem, we hope you will join us !
Solution
Our solution is simple. To allow profitable traders to participate actively in the fund and be rewarded for doing so but also for investors to have a real credible alternative to protocols like anchor or other fund managers. Our goal is to have a transparent management of the traders, so that the reward is as interesting as possible for you as investors.
We will come back together on the precise tokenomic of our main token in the FSK ecosystem.
For easy understanding, this token is only the representation of the performance of the FSK investment fund, our goal being to offer 30% APR for our investors. The only way to vary the token is to buy it, sell it and it will not affect the price.
The variation of our token is as follows:
Price of the PWR$ = evolution of the performances of the pool (made by the traders) — 30% APR (for the investors) — 12% per year of rewards for the traders — 12% per year of rewards for the developers.
Now more concretely.
The token is farmed every day at a rate of 0.07% for our investors, so the token has a variation of -0.07% per day for investors and for traders + developers this represents a daily proratta of 0.066%. So every day to get a stablecoin we need to make a performance of about 0.14%.
Does this sound impossible? Not for us.
To do the math, we need to make a 55% return per year, including fees, to get a stablecoin.
And now if we do more?
Then the token will increment and benefit from the total increase.
If we achieve a performance of 70% over the year then the token will have in addition to the native farming reward an increase of 15%.
We will then have a token that grows in a stable, linear fashion, rewarding every stakeholder in the project.
Our system of classification and allocation for traders allows for very precise management and minimizes the loss for our investors.
The objective is still to have the most healthy and virtuous relationship between each stakeholder of the project.
If you have any questions or concerns, please feel free to join us on our social networks:
Official Twitter : (https://twitter.com/Flask_fund)
Official discord (https://discord.gg/zgFFwYcXa5)
