Economics AMA Video & Full Transcript
We answer the questions you posed to us on our newly released Economic Model
After releasing our Economics Paper on January 31st of this year we had an overwhelming amount of interaction and feedback from our community, which we are extremely grateful for. As part of our AMA we tried to get through as many questions as we could that had not already been answered in our FAQs and social media channels. All questions that were not answered as part of this AMA will receive answers in the next week or so in a blog post to follow.
In the meantime, you can watch the video of the Live AMA here and read the transcript in full below.
Q1. Was there any reason to use a VC when the money could have been raised in the community? What was the deal the VCs received? What do these VCs bring to the table?
Piers: There’s a simple answer to that and a longer answer to that. The simple answer is that they were offered equity in Radix DLT Ltd, which is the entity that both myself, Dan and the rest of the team are employed by. The full details of what that company does and how it works are at the back of the Economics Paper. If you’re selling equity, which is a Security, there are a load of rules behind how you offer that equity, so one of the ways that we could do that would be via an equity crowdfunding platform or something like that, it ends up being quite a lot of work. It is something we would like to do in the future and we would like to be able to offer things to the community but the upfront work in doing that means that you tend to move a bit slower to do the fundraising. The other things that VCs offer tends to be what you would call ‘Smart Money’, so mentorship, people who have been there and done it, people who have actually grown fast-growing startups and can give advice and introductions. They can give advice for people that need to come in at different times and are able to provide recruitment resources. So if we have a job that needs filling, very often you can get access to a network of people who have been in startups before and are now looking at the next opportunity and we’ve been able to tap into those sorts of resources. Also introductions to other companies that can help in what we’re doing now or what we’ll be doing in the future. All of those can be incredibly helpful if you have the right venture capital backer, but as I say, community involvement in being able to offer equity to them is something we want to do and is something that we’re working on, but it will probably be the next round.
Dan: There are reasons for institutional investment, there are reasons for venture capitalists and there are reasons for community investment. They all carry different pros and cons and I think it’s important though that as a company you don’t just pick one and go with that because you might be doing yourself a longer-term disservice by not being with one of the other alternatives.
Piers: On the deal, it was $2.5 million at a 25 million dollar cap on a convertible note.
Q2: Can we link a representative node to our main wallet that could claim our interest and not put our funds on the grid to avoid them being hacked?
Dan: Somebody somewhere has got to hold those funds right? So somebody somewhere has the private key for those funds and somebody somewhere can potentially get hold of that private key. The question doesn’t really go into a lot of detail about why you were going to do this and for what purpose. I mean, you could have a custodian of your currency or you could even potentially just leave that in the system for you to claim it at a later date when you’re ready. It is a ledger after all so the system always knows how much you’re owed and how much you’ve been paid from that debt that is owed to you, or in this case, the redistribution. So, essentially, the safest thing to do is just leave it sitting and claim it later.
Piers: Just to be clear on that, you don’t have to claim every period, you can wait.
Dan: Yes, there will be a minimum waiting duration otherwise everyone would be claiming what they’re owed every five minutes and there’ll be a million transactions per second which is just everybody claiming their pennies. So there is a minimum duration of an economic period, but you don’t have to claim it, you could potentially set your client to say you don’t automatically claim, I’ll claim. But you still have the problem that if somebody has your private key that those funds relate to then they can still potentially claim. If they steal your key they can claim all of your historic reserves of redistribution that you have, so it’s a tricky problem. You want to make sure that your funds are safe later on and they’re not particularly associated with you, but that means by doing so it either leaves you open to risk, whether it’s counterparty or the risk of you losing your private key and unfortunately there is always a kind of audit trail. One of the things that could potentially mitigate that would be the rollout of strong privacy in the future. If you’re able to guard your identity and who you are then you can break that kind of paper trail if you like, the trail of what funds you’re owed and where they are and how many open claims you have. That’s obviously down the road yet…it’s a difficult problem to solve.
Piers: I think one of the things that is being posited here is ‘I want to be able to keep my funds in a cold wallet and I want it to not necessarily be connected at all’. That’s not a problem, you could come back in 5 years time and claim.
Q3. Stage 2 is set up for an initial dump in price as investors take interest profit. Leaving many Stage 1 investors underwater for an indefinite period of time.
Piers: So this is saying, if Stage 1, you’re selling at $1 by the approved minters all the way through Stage 1, at Stage 2 when the DEX goes live won’t there be an initial dump when everyone just comes in and sells essentially at whatever the market can take all the way down to P minimum when it will hit against P minimum and won’t necessarily recover for an extended period of time. Do you have any comments on that Dan?
Dan: Yeah I think you will get some people cashing out, I suppose it also depends on how long Stage 1 is. If Stage 1 is very short, then it may not be quite as drastic as it may be if Stage 1 is very long. In the period between when Stage1 starts and finishes all different manner of things can happen to somebody’s financial lifestyle that they need to cash out. I think over the longer term if you’re a smart individual and you’ve got in at Stage 1 then you’re probably not going to want to crash out straight away because then you’re taking cents on the dollar anyway right? You’ve bought in at a dollar, you’ve got some redistribution supply from other people after you’ve come in but even if you crash out too hard then you’re going to end up at a loss anyway. Somebody else is going to profit from that loss because now they can buy them from you for 20 cents on the dollar or wherever P minimum is and you’ve paid a dollar for them. They don’t have to pay a dollar for them now because they’re very bullish on where it’s going to go after. So I think you will get some locking in of returns but I don’t think it will go all the way down to P minimum because that would be quite irrational.
Piers: If it did go all the way down to P minimum, it’s actually overall quite helpful to the system in that it reduces the total supply. Every time you hit P min you’re going to be burning supply and reducing the total supply which means you’re increasing the scarcity of the Rad which long term. Provided that the network is needed to be used (as in there is traction for the network and people are getting utility out of it and they’re spending fees on the network) you will eventually get to a certain point where there has to be more demand than there is supply because actually, the use of the network itself is deflationary. So every time you spend 50% of what is being spent on the network in fees, it gets pulled out of circulation. That’s a choice between donating it to the foundation to continue the development of the system or between burning it, but either way, you’re removing it from circulation. It doesn’t get to be recycled for the next time that those fees have to get spent and you will get to the point where there is a scarcity in the market that means there is demand greater than supply. That could be a long period, and one of the things that we have constantly tried to make clear about this system is that it will be volatile at the start. We’re not saying that it will start off as being low volatility right from day one. Stage 1 certainly is of higher risk than Stage 2, which means that some people will decide that they want to come in at Stage 1 because they want to be part of the system early and other people will decide that they want to come in later on. The other thing I’ll say is that you’ll always be able to see what P minimum is, or at least work out what P minimum is even in Stage 1 because you can see what the reserves are and you can see what the total supply is. As such, you can continually make that decision as to whether or not it is something you want to come in on or you want to wait until the next period and just be part of the market when that’s live.
Dan: I’ve seen a lot of discussion on Telegram and our social channels about this potential Stage 2 dump and really if that happens it’s only bad for the people getting out because they’re going to be selling at cents on the dollar. So if there is a large amount of XRD / XRI in the market and it all disappears because these guys are getting out and locking in their value and I’m left and I’ve got a thousand of it and it all goes. The majority of it disappears and it’s just me left in the system with a thousand, on the next inflow it actually benefits me. Because I’m the only guy left in the system, so my amount of redistribution that I get from that point forward will be quite high because there’s only me in the system at this point, everybody else has left. So for those that don’t leave, it’s actually beneficial because they can then maximise redistribution on the next inflow.
Piers: It’s an interesting dynamic, when you think about large dumps moving out of the market, a large number of Rads being burnt and a small number of holders being left. It means that those small number of holders are the main people who receive any redistribution that may happen the next time the inflow comes. So I’d encourage people to play around with what happens in large dumps with a large exodus of Rads but maintaining a small number of people holding. It’s quite fun, the output of that.
Q4. Can you tell me more about the requirements for an Approved Minter? How do you assure that they will not run away with the collateral?
Piers: That’s a really good question, so we will be putting out more material around approved minters in the next month or so, but one of the basic requirements is ‘are you regulated in your jurisdiction to be a custodian of funds?’
The regulation in any jurisdiction around the custodianship of funds generally covers the protection on people running away. There are different levels of regulation in that space, you got the high end of them which is people like Gemini and Paxos operating under the Bitlicence as well as being regulated financial institutions for being custodians of funds. Then you’ve got the next level below that who are using regulated custodians as separate third parties but then provide the token on and off ramps. However, they don’t actually have control of the money and again the regulated ring fence around the money. We’d only really be looking at institutions that can demonstrate a minimum level of trustworthiness, as in they are regulated to do so for holding representations of fiat in the system to be an Approved Minter. That doesn’t mean that anyone can’t come along and create their own fiat backed token. I could come along and create a Piers fiat backed token and not be a regulated entity but then you would ultimately not be selected as an Approved Minter.
Q5. Is the protocol of the debit cards point of sale feature still EMV or has it changed?
Dan: So we haven’t actually done any work on the POS systems for quite a while now. We’re aiming to get to an MVP that we can launch as quickly as possible and there is not much scope for the rollout of those key POS features at the moment. I don’t imagine that it will change too much from what the prototype was like, it worked very well. I think what we’ll get it to do is integrate quite seamlessly into the Radix core so that those machines can communicate efficiently. There is nothing that’s changed on the core side that means that the current implementation of that technology won’t work, it just isn’t in scope for launch so we haven’t done much on it since then. We’ve done some investigation around different card manufacturers that we can use so we can reach into costs and that kind of thing but nothing too active on the development side.
Piers: The debit card system for Radix, when Dan says it’s not in scope for launch it’s basically not in scope for our Technical Go-Live. One of the things that you constantly want to do when you’re building a startup is really focus in on a small Minimum Viable Product (MVP) that allows you to go to market and then expand out the feature set from there. This is something that we think is really important and really interesting, this ability to hold crypto on cards without the need for like a Visa or Mastercard payment rail being able to make payments. This really draws on Dan’s experience with working with payment card technology prior to Radix. But it’s one of those things that if the ledger isn’t working properly and we don’t have the proper on and off ramps and we don’t have the ability for people to send around tokens and hold tokens in wallets, then the next stage of it doesn’t really matter so much. It’s getting the basics right before you then build the infrastructure around that makes it really easy for your grandma to pick up and use crypto.
Dan: Yeah it’s just proof of concept. Is it possible to do? Yes, great. Now we can focus on the more immediate, important things.
Q6. What is the most important goal of the Rad? Can’t this be achieved with fiat tokens that are 100% stable and a fixed quantity of Rads where operations in Radix pay ‘gas’ taxes in Rads?
Piers: So basically, why do we want to create the Rad as a stable token why not just use fiat. So like fiat tokens instantly being traded into Rads to pay for some gas fees but otherwise, the Rad can fluctuate in value.
Dan: I’ve seen this and it happens in a few proposals that I’ve read from what other projects are working on. If you’re using fiat tokens then fiat isn’t truly stable, it’s an inflationary currency. The buying power of it reduces over time, sometimes unpredictably depending on what’s going on in the larger economy that that currency is for. You obviously have a lot of counterparty risk with the US dollar as well; can you move it around can you cash it back out as dollars, is there any friction there? If you can’t then you’ll get instability in the value of that dollar token. You might remember back in the day when Bitcoin was traded on BTC-e before it was shut down and then it was traded on Poloniex. The price of Bitcoin on BTC-e always trailed the rest of the crypto economy because getting your dollars out of BTC-e was such a pain in the ass. So even in the same ecosystem, you find the dollars or stable assets aren’t really stable because you have all this other risk going on. Then you get arbitrage by all those exchanges in alignment so while from a ten thousand feet view that will work, our ultimate goal isn’t to be pegged and inherit all the problems with the dollar or the euro or anything else. Ultimately we want to be stable against a basket of things which can be a dollar and it can be a euro but it can also be grain and it can be gold. It can even be some internal RadDogs Token that’s doing very well that happens to have a lot of value. So using US dollars and fiat at the beginning was just the first step of the entire process and that’s still the goal regardless of any modifications we make to this economic model. It’s still that we don’t want to be pegged to the dollar we want to be relatively stable and a first class currency in its own right that is eventually a representation of a basket of things and the GDP of the entire Radix economy. So you could do what you suggest in the question and it would probably work to a sufficient degree if your economy was quite small, but once the economy got big then you’d have a lot of reliance on the US dollar actually staying stable.
Piers: There’s also a wider issue here, so if you make it so that you’re only going in to the gas to use the system, there’s no other reason that you’re holding that token, you’ve essentially got an incredibly high velocity on the underlying crypto. So while you can say ‘Oh this is something that could be speculated on’, it’s not actually a very good store of value because all people want to do is get out of it. I as a business user don’t care about the Rad, I don’t care about holding the Rad I just want to go straight into it pay for the use of the network and get out. On the other side, as a node runner, because this thing is moving so much in value, I have no idea what my revenue is going to be, so I just want to get out of it as soon as I get it. I don’t want to hold it, because the more that something goes up and down, the more volatile it is, the less time people want to hold it for. The more you increase the velocity of anything within the system where it’s not being used up with use, it’s just going around you’re essentially just recycling, even though there is some burn occasionally. Every time you’re doing that you’re basically just a value transference mechanism and the value transfer mechanism is only as valuable as the total amount of value that needs to be transferred at any given moment. So you’re not actually conferring any of that residual value on to the underlying token you’re just having it cycled, cycled, cycled through and the more volatile it is the faster people want to do that. So you’re actually just pushing volatility straight into the underlying token and make it very unlikely to capture any of the value of the system. The only way that you can capture any value of the system is by making people want to hold things long term and they’re only going to want to hold things long term if it’s not going to be unpredictable; it could be worth nothing tomorrow so why would I hold it? Why is this a good store of value? It’s not, it’s a terrible store of value.
Dan: Your XRD in this scenario would be an order of magnitude more volatile than the XRI.
Q7. What will be the percentages of surplus reserves going into the new reserve versus redistribution? Is it 50/50 or other?
Piers: That’s defined by an algorithm which is in the mathematical section of the Economic Paper. Please go and check it out, it’s too complicated to be explained on this AMA but it is very well defined in the paper.
Q8. P minimum won’t get to 0.9 without billions of Rads being bought at the ceiling price of $1.1. What incentive does anyone have to buy at the ceiling price?
Dan: If you wanted to come into the market and there is nobody selling below the ceiling price, so there’s a large spread between the asks and the bids then your only option is to bid up because you want to get hold of XRI. Now there could be a variety of reasons why somebody might want to do that. It could be to speculate with it, or they want to actually use it for something, they might have a kick-ass application that they want to go in and use that requires them to have XRI or XRD. So there is a whole basket of reasons why somebody might be prepared to pay up to 1.1 dollars for their XRD on the flip of that there is a back side of them being able to do that. If they are buying close to 1.1 the incentive for doing that is that their P minimum for doing that will also increase. So if Pmin is the same low and somebody buys at 1.1 then their purchase of that XRD at 1.1 actually protects their XRD a little bit more than previously, but that effect obviously mitigates away the closer the curve gets from 0.9 to 1.1. I would imagine that most of the activity in the market when Pmin is very high will just bounce around between the low and the high and it will rarely hit the high unless there is a large influx of demand and then the supply to quench that demand. But for me, as an individual, I have a need for XRD and me buying it high protects my bottom line as well.
Piers: There are also some other factors to this. One of the interesting things in how companies want to acquire currency in a system that they use often is that they don’t necessarily want to be a market actor. They just want to be able to buy at a set price in a predictable manner, so that they can always know what the cost of using a system is. That predictability is actually more valuable than getting the best deal in every single instance. I know what this is going to cost me, I can budget for it accordingly and I can use the system over the long term. So if you’re not wanting to be a market actor, you just want to use the system because it’s useful for you, then being able to buy at a predictable price is more valuable, far more valuable than working out how to use the DEX and come in at whatever the best price is. We have 2 markets here, one is the market where people are going to be market making between Pmin and Pmax and that’s a perfectly legitimate activity. Then there is the other market where people are not there to speculate or be part of this market, all I want to do is use this system and I want to know what the cost of using that system is going to be because fundamentally I want to keep part of my infrastructure on it. It’s that second aspect of it that we expect to be the main driver of the Radix platform because while the speculation around what the value of the Rad is something that is interesting to a small number of people the implication here for what we’re trying to build is a platform that is ultimately useful for the world. We’re building something that as a company or developer, I want to build and base part of my infrastructure on top of it. I want to do that because it’s scalable and because it’s easy to build on and because it’s price predictable. I’m not really there because I want to be day trading on this, I’m here because I want to use this as a platform for my company.
Circling back, the question is really, is this platform going to be something that a large number of companies are going to want to pay to use, is it something that a large number of developers are going to want to pay to use? If the answer is yes, then this is something that has real value and you will benefit from part of that increase in the total use of the network by being someone who’s holding Rads. Now, if that’s not the case and it’s literally just another coin for people to ‘Moon Boy’ on, then the second part doesn’t really matter because there isn’t going to be billions that come in because there isn’t going to be large numbers of legitimate people coming in who have a legitimate reason to use it. It’s just going to be a small number of people who are trading around the speculative value of something that doesn’t really have any functional utility beyond that speculation. That’s not fundamentally something we’re trying to build here. We’re trying to build something that is useful and trying to make that thing predictable so that people can decide to base real businesses on top of it. That difference between, this is for speculation or this is for businesses is where things like Pmin and Pmax come in because it’s creating that predictability so that people can make those decisions.
Dan: If it is purely just a speculation market then it will bounce around a lot between the 2 bounds and somebody will put a buy and sell wall in the appropriate places and stop it hitting those bounds to create more supply. Why? Because that’s beneficial to them as a market participant but even if it’s only ‘Moon Boy’ coin, eventually you will get to the point where somebody is going to be paying 1.1 for it because of speculation. The entry is just so high because they want to enter that speculation. So it won’t just be a ‘Moon’ as in the price goes up there will be defined points that you are able to enter the market and there may be an initial cost for you to make your way into it. That’s fine if that’s all it ends up being then the model allows that to happen. You may have to change your trading mentality a bit to extract the most from it if you’re a day trader, but the main players will be institutions because they want a known cost of doing business. So if somebody is launching a big application on Radix and if they need some XRD to be able to fuel that for their users like an airdrop e.g ‘download this app and get an XRD free’, they will just buy it at 1.1 because their return isn’t the value of the coin it’s the use of it.
Q9. Any ETA on the Node Runner?
Dan: Well, the release of this Economics paper took me by surprise. We pushed the paper out and I thought: great, that’s done. A few conversations about that and then I can concentrate on the Node Runner. Then I was working furiously on the Node Runner for a few days and I opened Telegram and I think there were 4,000 messages in the chat waiting to be read. They were all about the Economics, so a lot of time was spent having conversations around the model and I did not expect the level of feedback, positive and negative, that were receiving. So Node Runner had to take a bit of a back seat while I got involved in them. There is a candidate that Zalan is working on at the moment to go out, I believe it’s good. I can sync up with Zalan and find out what the status is on that release train.
Piers: It hopefully should be some time in March that we’ll be able to release our first node runner candidate.
Q10. Not just static but public IP. You need to accept client connections to process public transactions. Any chance that this is going to change in the future?
Dan: You don’t need a static IP now, I’m not sure if that’s what you meant in the question. You can use a public IP, a dynamic one, it doesn’t make any difference in terms of the nodes. There is a requirement that we want to have over the longer term that it’s not just IP related protocol, so we’re looking at having support in the core, not initially, so that our networking layer can support mesh networks and all these other kinds of connectivity and application protocols that are out there. So, over the more long term, it won’t be a public IP address, it could be your ZigBee address, for example, but we need to make sure that the core is flexible enough to allow that. This is beneficial, say if you are in the third world in a village where they don’t have a great internet connection but they still want to trade with each other, you can have a mesh network and there’s a Raspberry Pi in the village that has someone’s iPhone connected to it, those kinds of things are really interesting moving forward.
Q11. As a stable currency XRI looks better than XRD, people may use XRI more than XRD, why should they exchange it to XRD?
Dan: Because XRI doesn’t have a guarantee, it doesn’t have a Pmin or a Pmax.
Piers: You could say that the XRD has the guarantee of the underlying currencies, so if you have a basket then I can go into and out of the basket.
Dan: Yeah, but then you’ve also got counterparty risk, so if you got an XRI from one of the approved minters for example that fails or a currency fails, then the value of your XRI is severely damaged and may alter when governance procedures come in to sort that out. Whereas XRD doesn’t get affected in the same way. So if the basket has to be removed entirely an asset from that basket then it can massively change the value of the basket. Whereas if you’ve got XRD that issue doesn’t occur.
Piers: I think there are two aspects to this as well. The first is, what is the purpose of the XRI vs what is the purpose of the XRD? If you want something that is just a pure stable for use in the clearance and settlement of a financial trade or something like that, then the XRI is an interesting instrument. It’s initially a diversified portfolio of stable coins. So in that case, it looks pretty interesting. However, it has no potential increase in value. There is nothing about it that represents a potential for any kind of return. If more people use the network and it gets traction and becomes successful, the Rad will also become more valuable or has the potential to be more valuable for the people who are holding it. So if you’re looking for something that has both the ability to be a store of value as in, it will not fluctuate too much around, but also provide you with a potential return on top of that, then the Rad looks more attractive than the XRI. But both of them have very good functional uses in the system and I think that both will end up being used by different people.
Dan: If you want something that is very predictable and flatline and you want to take the counterparty risk then XRI is a good bet. But then, as Piers says, you don’t get anything from holding it. Your incentive for holding is that it’s stable and the likelihood of a currency failing or an approved minter going offline is pretty slim. But with the potential high stability, you pay the costs in rewards. However with XRD, it’s not quite as secure as an XRI, but you take that risk with the promise of the potential reward from that.
Q12. Stable coins like Tether have run into difficulties getting banking for their fiat money. How will you avoid that?
Piers: This is not something that we are directly dealing with. The stable coin has been approved in a number of jurisdictions the fact that Tether hasn’t is more to do with the way that Tether is set up than it is with jurisdictions or regulators having a problem with fiat backed tokens. You’re seeing Gemini, Paxos, TrueUSD in America, there are a number of European companies that are starting up as well and have all been approved by regulators. JP Morgan with their JP Morgan coin is an ironic example of a fiat backed token, but this is already a well-trodden path by a number of institutions that are operating within regulatory frameworks and a lot of banking institutions are looking at fiat backed tokens as well as options. So I don’t fundamentally think that there’s going to be a problem with the fiat backed token, I think there is a problem with some institutions that are creating fiat backed tokens and the manner in which they’re doing it. But that just comes down to the people that are trying to build them rather than a problem with the token itself.
Q13. Why are Approved Minter Tokens exchanged for XRI instead of XRD? Price can be calculated from weight in DEX pairs. ECA can trade on AMT/XRD pairs to meet AMT W in R & Pmin<P<Pmax.
Piers: What you are basically adding is an extra layer of complexity to the system. So, in Stage 1 Approved Minter Tokens are directly tradeable for Rads, you don’t need the XRI. The XRI doesn’t exist in Stage 1, you essentially just go and give some dollars to an Approved Minter and in principle, they’ll just send you back Rads.
In the background, they will be going and sending those Approved Minter Tokens to the Economic Algorithm which will mint them a Rad and send them back a Rad. But in practicality I expect most Approved Minters will just say, you give me dollars or Bitcoin, Ethereum or whatever and I will send you back Rads. Because there is no need to go via users and to the Economic Algorithm and back again. When the XRI is in place, you’re right, theoretically we can have some kind of rebalancing algorithm that is a market maker in between so that it can go from an Approved Minter Token to a Rad and just sort things out in the back end. Auto trading against different multiple pairs across the DEX is a non-trivial problem but requires a fair amount of technical work. I know Dan has looked into things like that before.
Dan: It’s way too long of a topic to have in an AMA, but let me tell you, it’s not easy.
Piers: This approach introduces complexity which is not necessary to get to the final product. It’s essentially an optimisation of the product to bring it to a more user-friendly version. Of course, we’ll be constantly looking at those optimisations but you want to start with the easiest version of it first, in terms of technical build. Then see what you can do in terms of market makers secondary. Institutions help to make that easy until you build it into the system itself.
Dan: The main problem with building Economic models isn’t so much the mechanical mathematics behind them. I’ve got this thing and I want it to be stable against that. It’s the game theory side of it which kills most models, it’s not the mechanical aspects of it at all. You’ve got all these different actors who are all trying to manipulate the system, game it etc, it’s rarely the actual mathematical mechanics that are the issue.
Q14. Estimated time of arrival on the Governance Paper?
Piers: That’s a big piece of work, I can’t say exactly. I think there is going to be a paper before that which will be our Security Paper or the Tempo Paper v2 which is going to be a chunk of work as well. There are probably going to be a few more versions of the Economics paper, but we know that Governance is really important so I want to have it out at least 2 months before we go live, but I can’t say anything more than that at this stage.
Q15. If the process to stabilise the volatility of the RAD will take 10 years how can financial services be built on the platform without a stable base?
Piers: I think we’ve covered this to some extent. The purpose of Pmin and Pmax is to provide predictable cost of using the platform to the users of the platform. The people that are actually building applications and building companies on top of the Radix platform. The purpose of Pmin is to make sure that if you are a provider of services or if you are running a node and validating transactions that you’ve essentially got this SLA with the network. You being there and providing resources to the network makes sure that the network continues to function. If the price of the underlying crypto can drop so far through the floor and stay there you essentially kill the incentives for these third parties to be running the nodes in the first place. For a decentralised ledger technology to survive then it needs to have these rational thrid parties who provide resources to the network. So Pmin is there to make sure that ultimately as a node runner I can predict what my minimum revenue is going to be. It could be a lot better than Pmin, because it can go up and there can be redistribution. But ultimately, I’ve got a low end that I can predict what I’m going to make so my fixed costs and my variable costs of electricity make sense from the point of working out whether or not I want to supply resources to the network. If we have no one that decides they want to be node runners then you ultimately don’t have a network.
Q16. When can we build dApps with the new Atom Model? And once the token goes live in Q4 can we use the token in dApps?
Dan: The definition of dApps is obviously pretty far reaching. The Atom Model allows you to do a lot of things that people currently do with smart contracts but allows you to do it natively with a lot less complexity. That is the first toolbox you’ll have for creating dApps with the Atom Model itself. The Atom Model is currently being implemented at the moment, it’s quite a long way along it’s development pipeline. The Node Runner that’s going to be coming out is based on the old legacy Atom Model. The new Atom Model with the full constraints machine that allows us to do tokens, multi-sig, structured transactions etc is ready, should be getting rolled out in a Beta tentatively around the end of May. The purpose of the Alpha net and the next Node Runner is to test consensus, then the Beta will be to test the Atom Model, Dapp functions etc. More complicated dApps will be supported by Scrypto in a future release post MVP, so it’s not in scope for MVP. Also potentially things where users and developers can deploy their own atom and what schemas and components they can plug in. There are still some security concerns there and a can of worms to review with that. But they are basically the 3 main tools you’ll have the Atom Model, you’ll have Scrypto and then potentially the ability to drop in third-party atom model schemas to do a particular task. As for the tokens, I don’t see any reason for any of the tokens created with the Atom Model during the MVP prior to Scrypto not being able to be traded across all of the Economic Stages. They don’t really have any reflection on what an XRI or an XRD is doing. There is no DEX around to start with you can only trade on third-party markets.
Piers: From Stage 1 onwards any token that is created on the Radix platform can be used in any way that is enabled on the Radix platform. Just to be clear, Stage 1 at Technical Go-Live there is only a restricted number of functions on the ledger. The ability to create your own single issuance token, the abilit yo create your own multi issuance token and the ability to access all of the APIs around those functionalities. So you’ve got restricted logic on the ledger, everything is just focused on how can you make it easier for people to make scalable tokens. Then from Economic Go-Live onwards we start to open up the number of feature sets that are available on the network, but from Stage 1 you can absolutely build your own tokens and deploy them. Be that fiat backed tokens, asset-backed tokens, fractionalization of ownership or equity or bonds or whatever it happens to be. All of which can just be built at Stage 1 and then beyond that in Stage 2 you can’t start to add in logic around that as well.
Dan: Even though there are restricted features to build dApps in the MVP, we did a lot of digging around on dApps on Ethereum & EOS and other places for what are the fundamental components which are common between them all. Essentially, a very large proportion of the dApps that are out there right now do the same thing in a slightly different way to one another. So, if you can capture those fundamental functions as logic in the core that people can build against, then you can essentially build a large amount of the current dApps that are out there now. The problem with dApps is that we have a new tool to build them but we haven’t figured out what all the possibilities are with them yet. So the very first thing that always happens with new technology is that the old stuff that we used to do just gets built on the new stuff. Then you can say right, I know this works because I’ve got the old stuff that I had before and I know that works. I’ve got it here and it works the same, so that’s great. Then past that point you start thinking about more exotic ways to use the tech. We don’t need to have a full ‘bells and whistles’ dApp framework in there when all the current dApps are doing is 1 or 2 common functions between them in slightly different ways.
