User:
Teacher: I don’t understand some things about DW and can’t find the answer myself.
1. The meme stage is speculation, which is easy to understand, mainly the target of $1. In theory, people who believe in this target have reasons to participate in POP mining. The amount of money earned from POP mining is limited, so there is also a reason to buy. But when it comes to the BTC mortgage stage, why can DW attract customers? You don’t have the US dollar support of USDT, and your design has a stabilization fund, which means it will fall below $1. What kind of user will use DW to mortgage Bitcoin? The benefits are not obvious, and the risks are also great.
2. I have no problem in the meme stage and haven’t encountered any difficulties in the currency standard stage. Regarding the mortgage stage, I present the scene and customer group in my mind. However, I am still unsure of the scene’s elements and customer needs.
Zhu’s answer:
There are commonalities. The problem can be summarized into several questions. 1. I don’t understand why DW20 is issued by pledging Bitcoin; 2. I don’t understand the role of market-making funds; 3. I don’t understand why there are applications. Good question!
DW20 becomes the standard currency in three stages: meme, stable, and standard currency. POP mining refers to the distribution of tokens by airdrop using the POP algorithm based on the number of people.
1. The issuance of DW20 by pledging Bitcoin is the result of learning DAI. DAI is a successful case that proves the feasibility of the method. Maker DAO, the leading cryptocurrency company, issues DAI. The following analysis article, “DAI’s stumbling exploration path,” discusses DAI’s innovation and shortcomings. In theory, DAI has found uses for Ethereum and Bitcoin, and the project should be perfect, but DAI’s design errors: one is charging, the other is complexity, and of course, there are other reasons, so there is no development faster than the USDT that issued by pledging US dollars. The corresponding article, “Comparison of DW20 and decentralized stablecoin DAI,” is a discussion from another angle that can be read.
DW20 overcomes these shortcomings. There is no charge for mortgage and redemption, and the operation is very simple. The essence of mortgaging USD to issue USDT is to mortgage a valid asset and a new certificate. Bitcoin is also a valid asset, and of course, Bitcoin can be mortgaged to issue DW20. Many interest-bearing projects use USDT in cryptocurrencies, and the interest can reach 7%-10% or even more. The same interest-bearing applications can also participate when DW20 reaches the stable currency stage. Generally speaking, USDT’s interest-bearing projects must cover the interest cost of the US dollar to make a profit, while there is no fee for mortgaging Bitcoin, and there is almost no cost except for the one-time cost of cross-chain. Assuming that the interest rate of the US dollar is 4%, it is profitable to use USDT to earn interest at more than 4%. Otherwise, customers will directly mortgage US dollars to earn interest instead of USDT. However, if the mortgaged Bitcoin is exchanged for DW20 and then for USDT, the interest-bearing project will be profitable even if the interest is less than 4%, which is more competitive than USDT.
Tether arbitrages the US dollars pledged by users, while users pledge their own Bitcoin to exchange for DW20 and then exchange it for US dollars, and the interest arbitrage is their own. In this way, Bitcoin earns interest in disguise, and the holder’s Bitcoin does not lose. Users who exchange USD for USDT still lose USD interest. Still, using Bitcoin as collateral, Bitcoin is interest-free, and of course, it is cheaper than using USD as collateral to participate in cryptocurrency application projects. I also have an article about USDT, “USDT is not far from the second place,” readers can compare it.
USDT defeated DAI with its cost advantage, and DW20’s cost advantage is more prominent. After the first stage of the chainless platform, the system is safe enough, and many people will spend USD to buy Bitcoin and then mortgage it to get USD interest, killing two birds with one stone. As long as Bitcoin’s upward trend remains unchanged, this logic exists.
In the stable currency stage of DW20, the price of DW20 fluctuates, and there is also arbitrage space. The price stabilization mechanism is the same as that of USDT and Hong Kong dollars, and there is also arbitrage space. If there is no leverage, it is almost risk-free arbitrage. As for me, I prefer fixed deposits to earn interest. According to statistics, more than 70% of Bitcoins are held for over a year and not sold in the short term. Holding coins to earn interest will hit the pain points of such Bitcoin holders.
2. The role of the stabilization fund is to participate in market making. The market-making principle is the same as that of USDT and HKD, which are very mature technologies. The role of the stability fund in the first phase of DW20 is a unique design of the DW20 project to ensure the continuous rise of the coin price. Only coins with unchanged internal value can make markets. Since the internal value of stocks is changing, they cannot make markets. Bitcoin and DW20 are both coins that can make markets. For the principle of market making, please refer to “12.4 The Role of Bitcoin Stability Fund” in “Scheme for Realizing Bitcoin Dollar Standard.” Bitcoin fluctuations are divided into falling, volatile, and rising markets. With the market-making fund, falling and volatile markets are eliminated, ensuring a rising trend. The principle of DW20 is the same as Bitcoin
3. Whether DW20 can succeed depends on its application. Hal Finney, the founder of Bitcoin, wrote a paragraph on the third day of Bitcoin’s first launch: If the Bitcoin system becomes the main payment system, the price of Bitcoin will reach 10 million US dollars per bitcoin. Please refer to the article Hal Finney Conjecture and Financial Freedom. The Bitcoin system itself cannot become the main payment system. The chainless platform has patched the defects of the Bitcoin system through DW20, allowing Bitcoin to play the most important role in realizing the dream of the main payment and settlement system. It is the Bitcoin standard. According to the DW20 white paper, it will take about 33 years for DW20 to replace the US dollar. The Bitcoin standard is the biggest application of Bitcoin. The chainless platform has redefined the concept of Web3 and implemented it with the chainless system. The definition of the new web3 has not yet been publicly announced, making the chainless platform the most applied cryptocurrency platform. The number will be more than 100 times that of Ethereum DAPP, exceeding the total number of applications of the entire cryptocurrency at present, and will dominate the industry. To achieve this goal, the innovatively designed general community software Simitalk will divert traffic to the chainless platform, and the growth in the number of people is calculated based on Internet projects, which will also exceed the current total number of cryptocurrency users. With traffic, everything is available! The application demonstration examples of the chainless design are all industry pain points; we will disclose them in the next few months.
