Standard Digital Assets
The Digital Store of Value Currency Backed by Standard Assets
Most cryptocurrencies lack intrinsic value and are only backed by the token/coin itself. This leads to uncertainty within existing holders and prevents wider mass adoption. Standard Digital Assets are backed by a diversified treasury of assets that have proven to maintain their value in both bear and bull cycles. Through a unique swap mechanism Standard Assets are brought into the protocol treasury and never leave providing backing for the Standard Digital Asset. These mechanics drive value creation as backing for the token increases. Each holder of a Standard Digital Asset maintains certainty that the value of each token will not decrease below the amount backed by the treasury, while also holding voting rights for the direction of the protocol. As the treasury grows in value and revenue, the backing for token holders also grows providing stability for the protocol and the ecosystem.
For years, the narrative surrounding crypto has been something along the lines of “it has no value...it’s not backed by anything...it’s all vaporware” and in response, native users have hemmed and hawed about “utility...market capitalization...network effects...use cases” without addressing the underlying issue and more often than not leaving their listeners glassy-eyed and not buying their token at the end of the night. For the first time since inception, the narrative surrounding crypto will point directly to the assets backing and PCV giving non-native individuals the answers they need to confidently enter into the space. SDA capitalizes on this innovation by being the first of its kind in the newest asset class of Standard Digital Assets.
The blockchain space is made up of a bunch of different asset types. A lot of it actually is vaporware and created for the sole purpose of making a quick buck. But blockchain at its core is one of the most significant inventions of the decade and there is technology that is being built that will be just as fundamental to our lives years down the line as the internet is today. And just like there were winners and losers in the development of search engines, there will also be losers here.
So what do we do? We pick the clear winners.
Standard digital assets are the ones that most people know of and use and have typically been around the longest. By building a treasury of Standard Assets, SDA is more likely to survive and even thrive in bear cycles, grow to become a top asset in the space and even the world, and gain more rapid utility and adoption given its strong backing. The benefits of this asset class and protocol are vast.
- Easier to explain the value of a blockchain asset when there is a diversified basket of standard crypto and hard assets backing it,
- Provides permanent liquidity for Standard Assets regardless of market cycle,
- Provides market stability on a large scale (i.e., liquidity in, no liquidity out),
- Increases network security for assets that are used for validation of blockchains and node networks through staking,
- Creates buy in from maximallists when their asset is brought in as the standard,
- Adds fuel to the flames of blockchain adoption by incubating new standard assets and funding development and innovation on a large scale.
In August 15, 1971, President Richard Nixon took the US dollar off the “Gold Standard” with the intent of “...protect(ing) the position of the American dollar as a pillar of monetary stability around the world…”. Since then we have seen the value of the dollar plunge at an exponential rate compared to previous decades with unforeseen social and financial crises correlated to this event.
In a traditional crypto bear market we see the majority assets plummet, some more than others while standard assets have less downside risk and greater potential to push back to all time high eventually. A good example of this is in 2017/18 when Bitcoin topped and we saw the entire market drop 80-99%. The assets that dropped the least were those that had the most confidence from long term holders. The assets that dropped the most were those that were newer, more speculative, and/or providing the least value. After the despair phase, it was standard assets such as Bitcoin and Ethereum that led the liquidity overall in the push back up into the new cycle. A similar scenario during economic recessions like the ‘08 financial crisis where the stock market sells off 40%+ while assets like gold not only maintain their value but sometimes increase in value as capital flows into the most secure assets. We see similar outcomes in gold during crypto bear markets as well which is what makes it a perfect non correlated asset to hold in any treasury.
S&P 500 (Red) vs. Gold (Yellow)
SDAs represent the top asset in their space. It should be clear what the dominant player in any market is and assuming they fit all other criteria, that is the player Standard is betting on. Given the maturity of the blockchain market, only a few asset classes are useful to categorize here.
- 1.Cryptocurrency - Bitcoin (BTC)
- 2.Smart Contract Platform - Ethereum (ETH)
- 3.Oracle - Chainlink (LINK)
- 4.Algorithmic Stable Coin - Dai (DAI)
- 5.Gold - PAXG (on-chain 1-1 backing)
A treasury is only as good as the assets it holds and the ability of those assets to not only hold their value, but to also increase in value over time. The assets we are choosing are just that and what we would call “recession proof assets”. The foundation for this will be choosing the most stable assets that are least correlated to the ebbs and flows of the market. Gold is a great choice for this given its history and fundamental position as a store of value (i.e., the Gold Standard). Bitcoin is moving in this direction given its market dominance over the last 10+ years and seeing governments and large corporations starting to hold it in their treasuries.
Another feature of assets like Ethereum and Chainlink is their utility and network effect due to the absolutely vital infrastructure they both provide. Smart contract platforms enable digital agreements to be built on top of blockchains enabling the development of a number of different applications and services (Dapps). Oracles enable smart contracts to bring in and utilize real world data in these agreements and applications. Both systems work synergistically to enable the building of secure tools and applications that benefit society. Both networks use the respective asset to pay for transaction fees and incentivize security, decentralization, and validator/node development. As these networks grow, this drives increased utility for the respective assets, shrinking circulating supply and eventually driving up the price in correlation with the value secured by the network. Utility is a nontrivial metric in this definition and we expect to bring in many more blockchain assets in other verticals over time once their respective niches mature.
Building a treasury in this way not only provides security for the underlying token it is backing, but also provides stability for the entire network since the treasury holdings will not be sold off in market downturns, which is what makes the Standard treasury the most secure backing for any asset.
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Last modified 1yr ago