Token that diversifies value across blockchains

æpp Development Project Ideas
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This is a general idea, and better ideas and refinement can be made. The point of this is that it could become a very popular token in the crypto-sphere…

Build a token (for here, let’s call it TD - e.g. Token Diversified). TD’s represents a portion of a diverse set of tokens and coins stored by smart contracts on AE’s blockchain AND (this is important) smart contracts on other smart contract capable blockchains. The value of TD would be the combined value of all assets stored in the TD network of smart contracts divided by the number of issued TD on the AE blockchain.

People wanting TD would send some eligible token or coin to a smart contract, with an AE address for where the TD will be sent. The smart contract on AE will crate new TD and send to the address. The TD will be backed, so, they will not be subject as much to market dynamics other than the perceived value people find in diversifying.

People may trade TD back for one of the eligible coins/tokens, but I suggest with a small fee to keep TD as the preferred traded asset.

The advantage of this is that people wanting to diversify their exposure to one digital asset, can benefit by having the value spread out with others coins. Also, it might be possible to make it easy (no fee’s to change out) to other eligible coins and buy others to encourage a good balance of coins.

From an investors perspective, just a simple balancing of tokens can be better than holding one coin or token. And the value of TD will maintain average value and thus do better than the worse coin/token among those eligible because of this.

For example, if you had two coins, A and B, and as A’s value increased, you sold off A and bought B until the overall portfolio was balanced in value again between A and B. then in the long run, this portfolio would do better than the worse of A and B. But it won’t do better than the best of A and B. People wanting to diversify will see this benefit.

Thoughts? Improvements?

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Hey, thanks for the nice idea. I have a few questions/comments:

How is it backed?

If new TD is created, the value of all other TD decreases (inflation)

That could result in a lot of token pairs that need to be supported.

I think currently there is not much diversity in the the direction of token prices. If Bitcoin goes up, most coins go up and vice versa.

I am not sure this is a good strategy. You are selling someting that goes up in value, in order to increase your position to something that goes down. Also, how is this selling/buying being done? Who is doing it?

I am not a trader, so maybe I don’t get too much, but these were my comments :slight_smile:

Best,
Vlad

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This is very similar to index funds. Interesting! Very interesting. Care to discuss this in a chat?

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Sure. Also, if it comes to be a supported idea among the team here, you should maybe delete this topic thread to preserve the idea. Give me your contact info for a chat. And once I make contact, you can delete your info here.

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It is backed by other crypto assets. Coins and tokens from any blockchain that is smart contract capable. So, this would include the Aeternity coin and tokens, and any other smart contract capable blockchain (Ethereum, EOS, etc… all of their coins and tokens)

TD are created only when new coins are being sent to the smart contracts containing the assets. And new TD are created equivalent to the incoming coins/tokens value (values determined using Oracles etc…) So, inflation is zero. However, over time, the TD value should increase faster (in bull markets) and decrease slower (in bear markets) than at least half the coins/tokens in it’s “portfolio”.

Kinda. That shouldn’t be a problem, and if there were a problem a way could be made to govern the pairs.

It mnight seem like that in short time frames. There is a big diversity if you look over the long term. Look at mid December until present. Bitcoin increased 20%, Ethereum increased 70%.

There is more than one way to balance the position. You can also buy the one gaining (I’ve done back testing on this method, and it is very good). But if you did the way I described, you would do better than the worse of the coins in the portfolio.

Also, the buying and selling are not necessary for a minimum viable product. And I’m not exactly sure how trading would be done. However, you could just control how easy it is to exchange the tokens and coins with differing fee’s (this is not done over an exchange, but in smart contracts). So, if you want people to trade in more of one coin versus another, you change the fee’s automatically. The who of who is doing it… are the smart contracts. :wink:

An advanced version could control this even better using a DEX. The only concern I would have on using this could be people anticipating the TD contracts placing buys and sells on the exchange, and trying to buy or sell ahead of the TD contract buys/sells. That could be mitigated some if you program a random buy/sell algorithm. So, you might know the algorithm is going to purchase some coins, but you don’t know exactly when… and if the price is driven too high or low, the algorithm could cancel out of the trade - foiling (in part) the attempt to lead the TD smart contract trades… or if there is more than one DEX, you could choose a random DEX. And finally, for brainstorming this now, this buying/selling can be done slowly - not all at once.

There are at least two ways to do this. You hold several kinds of coins and not trade to balance, but use differing fee’s to drive people to trade in (convert to TD) one coin over another. Or you could balance the assets using a DEX. In either cases, you should do better than the worse of the assets. And if you did incorporate balancing, you can do better than all the assets. I have an example of such backtesting I could share in private.