This document provides an opportunity to fully immerse yourself in the Money On Chain protocol, gain a comprehensive understanding of the tokens, and discover the rationale behind our decision to utilize Bitcoin as collateral.
Money On Chain is a comprehensive and trust-minimized protocol designed to empower Bitcoiners to explore new avenues for using Bitcoin, while maintaining full control of their private keys. The protocol comprises several features, including a stablecoin, liquidity token, governance protocol, and more.
Money On Chain's innovative approach is rooted in a risk-sharing mechanism that is made possible by a proprietary financial model. This model has been extensively developed and tested, demonstrating robustness even in the face of extreme market conditions.
In 2019, Money On Chain launched a Stablecoin Protocol on RSK (Rootstock), which includes two tokens. The first is the Dollar on Chain (DoC), a stablecoin that is 100% collateralized in BTC, designed for Bitcoiners who wish to hold the current value of their bitcoins in USD terms. The second is BPRO, a token that offers leverage to Bitcoiners, providing passive earnings while retaining full control of their private keys.
The protocol also includes three other components: a decentralized token exchange known as TEX, operating on RSK, decentralized oracles named OMoC, and the MoC token that provides governance to the protocol, staking rewards, and protocol fees.
Let's explore Money On Chain in greater depth.
Bitcoin's rapid growth is causing significant disruptions in the traditional financial system. However, for a currency to be widely adopted for everyday transactions in society, it must fulfill three key functions - serving as a medium of exchange, a unit of account, and a store of value. Unfortunately, Bitcoin's extreme volatility undermines its ability to serve these functions effectively.
To address the problems caused by volatility, stablecoins have been developed as a solution. These digital assets are designed to replicate the value of fiat currencies, like the dollar or the euro, and enable fast and cost-effective transfers globally while maintaining price stability.
Prior to the advent of Bitcoin, the only means of digital value transfer was through intermediaries like banks. However, Bitcoin disrupted this model by eliminating the need for intermediaries.
While Bitcoin is an excellent medium of exchange from a technical perspective, its value fluctuations make it less suitable for payments. The coins may be worth significantly more or less than at the time of the transaction by the time they are settled.
Stablecoins, on the other hand, have resolved the issue of volatility but have introduced new concerns, such as counterparty risks, particularly when using fiat currencies as collateral or less established crypto assets as collateral. Immutability, a characteristic unique to Bitcoin, makes it a more appealing option for collateral over other crypto assets. Immutability refers to the fact that there is a preset limit of 21 million bitcoins and a decreasing issuance rate, allowing for some predictability about the future. The 21 million bitcoins limit also ensures scarcity.
Money On Chain presents an innovative solution that addresses Bitcoin's volatility issue.
Money On Chain is a protocol that has been developed to address the issue of Bitcoin's volatility. The protocol allows for the creation of a stablecoin that is collateralized with Bitcoin, using a two-party system approach.
The Money On Chain protocol offers several tokens designed to cater to different needs of Bitcoin users.
Firstly, the Dollar on Chain (DOC) is a trust minimized stablecoin that is pegged 1-to-1 with the USD and is backed by Bitcoin as collateral. The peg is secured by a smart contract, which guarantees that a user can redeem 1 DOC for the equivalent value of 1 USD in rBTC, Smart Bitcoin, at any given moment.
Secondly, the BPRO token is built using Bitcoin and offers free leverage provided by DOC token holders. This means that the price of BPRO will increase with the price of Bitcoin (and decrease vice versa) due to the leverage. Additionally, BPRO tokens receive 20% of the fees charged in the protocol when users mint or redeem DOC or BPRO tokens. This passive income in Bitcoin increases the value of BPRO. Furthermore, the BPRO token also receives MoC tokens through a Liquidity Mining program.
The DoC is a token that is pegged to the value of the USD dollar, meaning that its value is always equal to one US dollar. This peg is ensured by a smart contract. Holders of DoC tokens can redeem them for smart bitcoins (rBTC).
DoC tokens are also highly versatile, as they can be easily transferred and stored in hardware wallets. In addition, DoC tokens can be exchanged on decentralized exchanges like Money On Chain's TEX, as well as on other secondary markets.
Users must pay a fee to issue or redeem DoC tokens.
The Money On Chain protocol was specifically designed to cater to bitcoin Hodlers, and careful consideration was given to evaluate various incentive alternatives to increase contributed collateral to the protocol.
BPRO is a token designed for long-term BTC holders, which enables them to leverage their bitcoin holdings. Moreover, BPRO tokens appreciate in value by earning a portion of the fees charged to users minting or redeeming DOC or BPRO.
Here are some key features of BPRO:
A decentralized token exchange (TEX) allows bitcoiners to trade tokens on the RSK Blockchain using a unique mechanism. Unlike traditional cryptocurrency exchanges, TEX is inspired by The London Gold Fixing method. You can find more information about TEX in this article: https://moneyonchain.com/blog/tex-the-decentralized-token-exchange-by-money-on-chain/
The MOC Protocol incorporates Oracles known as OMoC, which provide data (primarily BTC price) to the protocol and other Smart-Contracts that require it. OMoC offers several unique features that distinguish it from other currently available Oracles. Firstly, it is a hybrid protocol, comprising an off-chain and an on-chain component, enabling updates to be made to the information in all blocks. Secondly, it can be utilized by other projects/Smart-Contracts directly and is accessible as a service for other projects/Smart-Contracts.
To operate an OMoC node, a minimum stack of 250,000 MoCs is mandatory. Economic incentives are offered to encourage individuals to run OMoC nodes. OMoC nodes receive income from various sources such as 80% of the fees charged in the MOC protocol for minting and redemption of tokens (DoC, BPRO), a percentage of the decentralized token exchange (TEX) fees, and other Smart-Contracts that use OMoC. MoC holders running OMoC nodes also receive a portion of the MoC issued as MOC Rewards.
Suppose Alice is a long-term Bitcoin holder who is interested in the benefits of the Money On Chain protocol. By using her Bitcoin as collateral, Alice can mint BPRO tokens through the protocol. This provides liquidity for the issuance of DOC tokens, which can be used for various purposes.
On the other hand, Bob may not be as willing to take on risk as Alice. However, he can still take advantage of the Money On Chain protocol by using his Bitcoin to mint DOC tokens. In this case, Bob's DOC tokens will be backed by Alice's collateral. By using his DOC tokens for payments, Bob can enjoy a predictable value for his transactions.
In summary, the Money On Chain protocol allows both risk-averse and risk-tolerant users to participate in the protocol by using their Bitcoin to mint tokens.
In this example, let's say the price of one bitcoin is initially USD 10,000.
When the Money On Chain protocol starts, the price of BPRO will be the same as Bitcoin, meaning 1 BPRO will also be worth 1 BTC, or 10,000 USD.
Alice provides liquidity by minting 7 BPRO tokens with 7 bitcoins, bringing the Total Value Locked (TVL) to 7 BTC or 70,000 USD.
Bob needs Stablecoins and mints the equivalent of 1 bitcoin, receiving 10,000 DOC tokens.
The TVL increases to 8 bitcoins or 80,000 USD.
A year later, the price of 1 BTC increased by 100%, bringing it to USD 20,000. However, no one had withdrawn their position in the protocol.
As a result, Bob still has the equivalent of 10,000 USD. Had he retained his original 1 BTC, he would now have USD 20,000. This begs the question: where did the missing 10,000 USD go?
The answer is Alice, who held BPro and utilized leverage. Her BPro is now valued at USD 150,000, compared to USD 140,000 if she had held onto her bitcoins.
At this point, 1 BPro is valued at 1.07 BTC, or 21,428 USD.
Despite this, the Total Value Lock remains at 8 bitcoins, but now valued at the equivalent of 160,000 USD.
One year later, the price of Bitcoin plummeted to $5,000. Despite this, no user withdrew their position in the protocol. As a result, Bob still possessed the equivalent of $10,000. However, had he kept his original one Bitcoin, he would only have had $5,000. The question then arises: where did the additional $5,000 come from?
The answer lies with Alice, who had utilized her BPro to gain some leverage. At this moment, Alice's BPro was valued at $30,000, rather than the $35,000 it would have been worth had she retained her Bitcoins and not minted BPro.
As a result, one BPRO was valued at 0.85 BTC, or $4,285. The Total Value Lock remained at 8 Bitcoins, but their equivalent value was now $40,000.
The following graph illustrates the behavior of the model in terms of bitcoin. It is based on a starting point price of USD 10,000 per bitcoin, with 8 bitcoins in the protocol. It is observed how the model behaves after a 100% increase in the price of bitcoin. and after a 50% price drop. The protocol always maintains a fixed supply of 8 bitcoins. Any fluctuations in the USD value of bitcoin simply result in a redistribution of these bitcoins among the protocol's users.
Within Money On Chain architecture, we distinguish the following Platform users (some users may have more than one role, that is, it may be a MoC holder and a stablecoin holder):
Smart Contracts: gets data from OMoC
Bitcoin is widely recognized as the most liquid and secure cryptocurrency with the largest market capitalization and user base. Its protocol prioritizes stability, robustness, and immutability over new features that could potentially compromise network security. Additionally, Bitcoin boasts the most significant cryptographic mining power among all cryptocurrencies. These qualities make it the safest payment system available.
Moreover, Bitcoin's decentralization is its most significant advantage, as it ensures that no entity has the power to change its governing rules without consensus among its users, miners, developers, and companies. This unique quality is often overlooked and underappreciated.
Furthermore, the clarity of Bitcoin's monetary policy is another critical factor in choosing it as collateral over other cryptocurrencies. Its policy is immutable, with a pre-established limit of 21 million bitcoins and a decreasing rate of emission, which allows for anticipation of future trends. Additionally, the 21 million token limit ensures scarcity, and Bitcoin is deflationary since its supply decreases when Bitcoins are lost due to hardware damage, lost wallets without backups, death of holders without instructions to heirs, among other reasons.
Given these features, it is not surprising that Bitcoin is the most secure, popular, and widely used cryptocurrency payment system in the world. Rather than attempting to compete with it, we believe that leveraging its strengths to our advantage is a much smarter and efficient strategy.
Money On Chain offers a unique solution that sets it apart from other stablecoins in several ways:
The Money On Chain Token (MoC) serves multiple purposes on the platform, including:
Platform Fees Discount: Holders of MoC can enjoy an additional discount when paying platform fees using their tokens.
Each time someone uses Money On Chain’s protocol a small fee is paid. Users pay that fee in Smart Bitcoin that will is collected and sold for MoCs in the Money On Chain Decentralized Exchange (TEX). The result of that sale is distributed, according to rules established in the Smart Contract, among:
MOC’s holders have the power to vote and veto the platform updates, in a way that any change that might affect the interests of the MoC´s holders, shall not be implemented without a majority of such MoCs´ holders voting in favour of those changes.
Any change to the smart contract may be proposed by any MOC´s holder as long as such holder has at least 1% of circulating supply.
Only Staked MoCs can vote.
To be valid, any voting procedure require a quorum equal to –at least- twenty percent (20%) of all circulating and outstanding MoCs.
In order to be approved, a proposal shall require the affirmative vote of — at least — the majority of MoC´s holders; provided, however, that a proposal which has obtained negative vote of — at least — thirty percent (30%) of the total amount of the MoCs issued and outstanding at the time the voting procedure expires, in that case the vote shall not be approved and, therefore, will be considered as rejected. If MoC total Market CAP is smaller than total BPRO Market CAP, the BPRO holders will be able to veto with 30% of total BPRO in circulation (only vested BPRO tokens will be able to veto).
Our model is subject to several risks, which we propose to mitigate through a series of actions. These risks relate to:
Work in Progress
This document represents work in progress. This instrument may be subject to changes due to any technical, operational, financial, legal or regulatory requirements which may be necessary in order to the proper development and functioning of the Money on Chain protocol.
The implementation of the solution is built on new Blockchain technologies and it is expected that some significant changes will be required to fulfill the project vision and to adapt to evolving technologies. Such changes may be made by Money on Chain without prior consent of token holders; provided, however, that MoC´s holders will have the right to vote and veto regarding such changes that may affect the terms of the smart contract.
No information in this document should be considered to be business, legal, financial, or tax advice regarding Money on Chain or the acquisition of the tokens referred herein. You should consult your own legal, financial, tax, or other professional advisor regarding Money on Chain and its business and operation, before deciding to invest in the tokens offered pursuant this paper. You should be aware that you may be required to bear the financial risk of any purchase of Money On Chain tokens for an indefinite period of time.
No Further Information or Update
No person has been or is authorized to give any information or representation not contained in this document in connection with Money on Chain and its business and operation and, if given, such information or representation must not be relied upon as having been authorized by or on behalf of Money on Chain. This paper represents the final document regarding the Money on Chain´s project and the issuance of the tokens hereunder, and supersedes any disclosures, terms and conditions previously provided by Money on Chain to prospective purchasers.
Caution Regarding Forward-Looking Statements
This document contains forward-looking statements or information (collectively “forward-looking statements”) that relate to our current expectations of future events. In some cases, these forward-looking statements can be identified by words or phrases such as “may”, “will”, “expect”, “anticipate”, “aim”, “estimate”, “intend”, “plan”, “seek”, “believe”, “potential”, “continue”, “is/are likely to” or the negative of these terms, or other similar expressions intended to identify forward-looking statements. We have based these forward-looking statements on current projections about future events and financial trends that we believe are relevant to our financial condition, results of operations, business strategy, financial needs, or the results of the token sale.
In addition to statements relating to the matters set out here, this document contains forward-looking statements related to our proposed operating model. The model speaks to our objectives only, and is not a forecast, projection or prediction of future results of operations. Forward-looking statements are based on certain assumptions and analysis made by us in light of our experience and perception of historical trends, current conditions and expected future developments and other factors we believe are appropriate and are subject to risks and uncertainties. Although the forward-looking statements contained in this document are based upon what we believe are reasonable assumptions, there are risks, uncertainties, assumptions, and other factors which could cause our actual results, performances, achievements and/or experiences to differ materially from the expectations expressed, implied, or perceived in forward-looking statements. Given such risks, prospective participants in the token sale should not place undue reliance on these forward-looking statements.
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Version 3. Updated on April 14th 2023.