Hello friends from our community! I am Elva Zhang, the founder of Alchemint. Our project name, Alchemint, is actually comes from a combination of words: Alchemist and Mint (mining). You may wonder the meaning by the name of the community, standard. Alchemint is the name of our project, and the standard is the Chinese name of the SDS token. Representing us as the ideal of the basic cryptocurrency. Everyone can call us “standard” in the future.
Reasons for the occurrence of stablecoins and their application scenarios
Let me first talk about why we need stable coins. Every time when I do a roadshow in Europe, I will ask everyone a question: “How many people have heard of stablecoins?” From the reaction of European audiences, only about half of them will raise the hands. So when heard the Stablecoin project, many people couldn’t figure out what does that mean. In fact, the earliest stablecoin project is raised by BitShares, which is based on the matching of risk preference and risk aversion.
- The currency for pricing in the crypto asset exchange
The USDT, which everyone knows, is a 1:1 dollar-anchored stablecoin issued based on the needs of the crypto currency exchange, which is a mapping of the US dollar. After the emergence of the USDT, it quickly became a convenient medium for the exchange. Investors are equivalently buying the USDT, and then buying other crypto currencies, therefore USDT can be used for pricing and conversion. The earliest application scenario of the stablecoin became the exchange.
2. Online & offline payment tools
But in fact, in our opinion, the application scenario of stablecoin is far more than the exchange. We paid attention to the application of stablecoin very early. You may also see our recently Japanese Bitcoin payment research article. Although Japan has done a lot of work on the promotion of bitcoin payment, there are very few people who are willing to actually pay with bitcoin. We have been stay at the checkout for a long time and can find few cases. Bitcoin payments are hard to come by. cryptocurrency is difficult to apply in life because its price is fluctuating. How to settle with the other party in the environment of e-commerce or cross-border payment? If the financing is using cryptocurrency, it will definitely face large fluctuations in its assets.
The payment environment and the environment of financial services that I just mentioned are all natural applications of stablecoins. The blueprints we have built in the whitepaper include the application scenarios we want to implement. What is the first step to achieve? First of all, we hope to be able to implement the application scenarios on the exchange, this is its most fundamental scene. Then there is the payment online and offline. We hope to achieve all payment applications through stablecoins, which means to become a bridge between the real world and the digital world.
3. Use as an internal value transfer tool for DApp projects
Another environment is that in the context of a large number of value exchanges, everyone knows that there are now many blockchain projects, each of which has its own token, and now there may be thousands of tokens on the market. Some Tokens are given value. For example, it may be an exchange platform token, but after actually studying it, we found that most of the tokens were given functions only for the purpose of issuing tokens. For example, if you are a credit-based project or a project in the game or social category, then the transaction is actually facing a price fluctuation problem. In the context of value exchange within these blockchain projects, it is very suitable to use stablecoins. Some people think that many tokens will disappear in the future; instead, some of the transactions will be replaced by stablecoins. We also agree with this view, there is a huge space for the application of stablecoins in the value exchange field of blockchains. Since it appears too late, people so far have not realized its value and have not used it extensively.
4. The issuance of stablecoins and debt financing
What is the larger application scenario? This involves one of the core and greatest values of our project, a free currency distribution platform.
What is a free currency issuance platform? Why did the well-known Ethereum break out later? Because it is genius to design a smart contract, through code, through algorithms to solve the Code is law. Therefore, Ethereum became a super project. At present, there are two applied projects on the market, one is bitcoin, and the other is Ethereum. So the market value of both of them is the market leader. What is the most powerful application on Ethereum? It is free to issue ERC-20 tokens at a low cost. That is why there are so many tokens on its public chain. It is true that in this initial stage, there will be many phenomena that make everyone feel incredible. There are various projects that can be easily proved as fraud because the issue token is now something that everyone can do and has no threshold. In fact, Ethereum invented such a token issuing system to solve the problem of equity financing of startup companies, so huge amount of blockchain projects happened only overnight, and then the world began ICO.
The principle of Stablecoin
We believe the SAR-B is the most important function in our project. As Ethereum allow people/companies issue token freely, by issuing cryptocurrenies, the companies and people solved the problem of equity financing. And by our SAR-B, its solved the problem of debt financing. How to understand that? Basically, any individual, if you have asset to backed, currency is like IOU, if i have asset, i can write you a IOU, if you believe I have the ability to payback the IOU, you can accept the IOU. It’s the most primitive concept of currency. According to this concept, if you have asset, you can issue your currency via our SAR-B.equity financing.
If Ethereum’s ERC-20, NEO’s NEP-5 solved the equity financing, if their token is aiming to replace stocks, then Alchemint SAR-B is like a debt financing platform, it aiming to replace currency, because it’s pegged to fiat currency. It can be set to pegged at USD, or other countries currency like JPY, EUR. As a debt financing platform, Alchemint not only need to care about the rationality of the economic model, but also care about the risk management. In the future, we will cooperate with other platform like Identify verification, credit evaluation/enhancement platform.
How to evaluate the asset behind the SAR-B stablecoin? Because Alchemint is a decentralized platform, it can’t and have no way to check your credit score. So in the system we designed, all the information is key information need to be transparent to public, can solve the credit evaluation by using on-chain method. For example, if the applicant public his asset information, can using a third party evaluation institution, to verify their credit.
In Alchemint mechanism, people using SAR-B required 100% reserve asset, they need verified by someway to prove they have 100% asset reserve. For example, if I have company, and I want to issue $1million stablecoin, what do i need to do? First thing I need to do is to proof I have more than $1M in the bank account, or can be other type of asset (like gold, oil).
If have $1M as reserve so can issue $1M stablecoin. But in order to reduce the risk, we add one more layer protection, people can’t issue stablecoin with only asset reserve, they also need to have SDS as reserve. Why we need this? In case company issued stablecoin and the company scammed people and runaway, now the SDS reserve showed it’s use, it will be distribute the reserve SDS to all the people holding the SAR-B stablecoin their issued to make up their lose.
This is our SAR-B biggest innovation, excess reserve. This is the first project have this model, we believe by this solution, we can solve the supply and liquidation of stabelcoin.
Deflation: Support the SDS Value
So people might have a question, what if SDS price drop? So this system is not 100% safety. The reason we design the SDS total supply will be deflation after it been use. Because people need reserve SDS to issue SAR-B stalecoin, due to the deflation of the total supply, when more SDS in reserved, the less circulate supply among in the market, the SDS price will get higher. On another side, because the deflation can protect the investor benefit, when SDS price go higher, the SAR-B reserve can have it value.
Personal side stablecoin issuance mechanism
Through our introduction, I think everyone has some understanding of our B-side mechanism. In addition to the B-side mechanism, we also have a C-side mechanism (personal-side stablecoin issuance mechanism). The C-side mechanism is not unique to us in the market. The C-side mechanism is a standard type of mortgage-type stablcoins. What is a mortgage-type stable currency? First, the platform created a smart contract, setting a certain algorithm and mortgage rate. Alchemint’s smart contract is called SAR. If the user holds digital assets, whether it is NEO or something else, put it in SAR and then you can get the corresponding stablecoins. If the mortgage rate is 200% and you deposit a hundred dollars in digital assets, then you will get stablecoins of 50 dollars. The 50-dollar stablecoins can be used in any market, like real coins.