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(1/30) This is a thread about the most interesting coin you've never heard of. $RSD ( @SystemDefi) is a token attempting to create a non-correlated asset that is driven by its own cycles of supply and demand. Whitepaper: https://rsd.cash/whitepaper
(2/30) $RSD, in comparison with $AMPL and $DITTO, does not attempt to constrict and expand its supply around a fixed peg (i.e., $1). Instead, a reinforcement learning policy expands and contracts supply dynamically based on average transaction volumes.
(3/30) $RSD, therefore, attempts to use its own level of usage as a proxy for market health rather than external factors such as Bitcoin's price.
(4/30) More interestingly, because this algorithm is built in, there is no need for users to step in with bond buying to stabilise the price according to a TWAP ($BDO, $MDO, $ESD V1, etc.) The market's usage of $RSD dictates its total supply and in theory, its price.
(5/30) The token adjusts supply by analysing average transaction volume over a given period for a random number of transactions. It then constricts or expands supply accordingly, then rewards validators and occasionally users for transactions (more on this later).
(6/30) Here's the kicker about the way total supply is controlled: when average transaction volume (a proxy for demand) is higher, a portion of senders' tokens are burned from the total supply. When it's lower than the average, a portion of their sent tokens are minted.
(7/30) What this means is that as long as the average transaction volume in the system continues to increase, supply is constricted. If that average volume is represented by buying demand, it means more and more supply is burned as demand reaches a peak.
(8/30) It also means that when demand and average transaction volumes are lower, users are incentivised to use the network as they are reimbursed for doing so.
(9/30) In theory, this would lead to the token increasing in price exponentially as more network participants began transacting the coin. At a certain point, however, average transaction volume will drop, supply will be minted, and users will be incentivised to sell.
(10/30) As the network expands, this could lead to cycles of higher and higher lows as the network grows and the average level of demand continues to increase over time. All the while, validators are rewarded for supporting the network via layer 1 maintenance.
(11/30) $RSD also has another unique mechanic. During preliminary simulations, the creators found that with this cycle alone, supply eventually never expanded or contracted beyond a standard deviation of an average level.
(12/30) Therefore, to ensure expansion of the network, new participants are awarded a prize randomly when they perform simple transactions. This system is known as Proof of Bet (or PoBet). Users are betting that, on average, the network will expand.
(13/30) By "betting" on the network's expansion via their own usage of it, network participants can win a lottery of $RSD tokens that expands total supply and increases the size of the network.
(14/30) All of this sounds pretty neat. What is $RSD actually going to be used for? Because its total supply fluctuates at each transaction, one of the biggest use cases is arbitrage among AMMs. Another use case leverages proof of bet for lotteries.
(15/30) It's my belief that as $RSD is listed and integrated into multiple exchanges and arbitrage is performed, an inflection point will be reached that begins the first virtuous cycle for the coin and kickstarts its network effect as supply is constricted & demand increases.
(16/30) In fact, I'm willing to bet that $RSD could become the reserve asset of decentralized finance and a reserve asset of the cryptocurrency market as a whole. That's a huge claim. Let's get into it.
(17/30) Traditionally, when investors believe the market is turning from bullish to bearish, they cash out into stablecoins such as $USDT, $USDC, etc., preserving their wealth in a stable asset. My argument is that cashing out into $RSD could prove far superior.
(18/30) Why? Because by fleeing into $RSD, investors have an unlimited upside in an intentionally uncorrelated asset. As more network participants do this, supply is constricted due to demand. $RSD would therefore be a call option on market fear.
(19/30) Instead of cashing out into a coin that stays pegged to $1, investors would cash out into a coin that exponentially rewards them for doing so. Once average transaction volume dies down and coins are minted again, investors would then return to risk-on assets.
(20/30) In essence, $RSD could become an uncorrelated reserve asset linked to every cryptocurrency simultaneously - an insurance protocol on overall market risk and health that also functions as a currency.
(21/30) Of course, because price isn't intentionally pegged to a dollar, the potential for value capture is huge.
(22/30) That's a long way away, of course, but it's where I'd like to see the project go in the future.
(23/30) The main weaknesses of the project right now are external to its code. The team is extremely small. I'm not a big fan of the website. There isn't a roadmap. There isn't currently a one-sentence answer to "what does $RSD do?".
(24/30) However, once these are addressed, I can see a road ahead for a reserve asset dependent only on its own mechanics to provide value to the market. The best thing the team can do right now is let people know their vision. I hope that this thread can spark some ideas.
(25/30) The potential for a reserve asset that provides exponential (demand up supply down price up) rather than linear (into / out of stablecoins) returns as a safe haven asset in times of market fear is immense.
(26/30) If significant network growth is achieved and average transaction volume continues to rise, I don't think it would take long for this to become a reality.
(27/30) Right now, the ETH version of $RSD is trading at ~11 cents, and the BSC version is trading at ~2 cents (yes, that's a 5x cross-chain arbitrage opportunity). It can be farmed on ValueDefi and there is a mint function on the website that provides 50% more tokens
(28/30) when bought.
(29/30) I am not affiliated with the project in any way. I like the potential of the coin. I hope you enjoyed the thread.
(30/30) Thanks for reading!
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