Setting the Problem
The financial system and the fiat money it uses are proving more and more inefficient. Frictions and large overheads have led to a system that is barely able to cope with the dynamic business environment of today. It is slow and expensive. While established investors may be used to this system, newer ones—especially the younger generation—are extremely sensitive to these issues.
Any currency, be it fiat or cryptocurrency, needs to fulfill the three functions of money to be accepted in society.
Functions of Money
Medium of Exchange
Store of Value
Unit of Account
All these characteristics are compromised when a currency is too volatile: goods prices become unstable, account values fluctuate wildly, and only risk-seeking investors will want to invest. In other words, stability is a desirable characteristic for any currency. Unfortunately, cryptocurrencies have proved to be extremely volatile, and Bitcoin is no exception: its price can change by over 10% in a normal trading day.
To solve Bitcoin’s volatility problem, we will provide a Bitcoin-collateralized stablecoin using a three-party system:
We strip Bitcoin’s volatility into two separate tokens:
- The Dollar on Chain (DOC), for risk-averse individuals
- The BitPro, a token for risk-propense Bitcoin holders seeking a passive income in BTC
The Dollar on Chain (DOC) tokens will be stable and pegged to the US dollar, such that each DOC token will have a value of USD 1. As these tokens will be entirely stable, they are a volatility-free asset that will perform the three functions of money mentioned above: a medium of exchange, unit of account, and a store of value.
The tokens for risk-propense Bitcoin holders seeking a passive income (BPRO) will follow the volatility of Bitcoin’s price and take on the unwanted Bitcoin-related risk of the Dollar on Chain tokens. BPRO holders will then be able to sell that volatility to traders looking for leverage. BPRO will thus be even more volatile than Bitcoin itself, but it will earn a passive income from leveraged operations made by traders. For more on DOC and BPRO, see the tokens chapter.
The symbiotic relationship between DOC holders, BPRO holders, and leveraged Bitcoin operation traders is at the heart of our model. Demand for both currencies and leveraged Bitcoin operations is a key success factor. BPRO token holders’ assets appreciate more thanks to DOC holders, who transfer their gains from Bitcoin’s appreciation to BPRO holders and leveraged Bitcoin operations made by traders in return for the stability of the DOC.
We will also implement a decentralized cryptocurrency exchange for Bitcoin-leveraged operations that will be open to the Bitcoin community. It will operate BTC/USD swaps, Bitcoin-settled. Exchange fees will be paid in MOC and burnt.
The target group of Dollar On Chain (DoC) are risk averse individuals. The peg against the dollar guarantees stability and therefore a risk free asset.
Tokens for Propense Risk Investors (BPro) bear more risk because of the Bitcoin risk and the assumed risk from Dollar On Chain holders. The high volatility makes BPro tokens interesting for individuals who bet both on the rise and fall of the price of bitcoin in the short term.
At the same time BPro Tokens are interesting for bitcoin Holders that are not interested in short-term. High-risk operations can use different leverages to adjust the risk.