The term “Reserve Currency” refers to a currency that is essentially backed by a Reserve, much like how the Central Banks manage their currencies using reserve assets, a Decentralised Reserve Currency Protocol (DRCP) manages their currency with their crypto reserve assets. This means that the price of the issued currency/token is backed by a Treasury, also known as the Reserve, giving users of the protocol a further layer of assurance knowing that the price of the token they have purchased does not fall below a floor value.
We develop the system by creating a free-floating reserve currency, CST token backed by basket of crypto-assets, with the goal of developing a decentralized financial system to support Crypstarter Economy. Crypstarter argues that by focusing on supply growth rather than price appreciation, can function as a currency that is able to maintain purchasing power, stabilize and gradually increase in value independent of volatility of the market.
We can't mint without at least one unit of RFV backing each CST. The funding originates from our revenue-generating operations, which are now mostly bonds. We sell bonds by minting CST against 1 unit of RFV and selling it at a discount to the market price. This means that our revenue is determined by the market price.
So, if we simply increased supply without taking this into account, our market price, and thus our revenue, would plummet. There will be no revenue, no supply increase, and no reserve currency.
No, CST isn't a stable coin. CST wants to be a decentralized algorithmic reserve currency backed by other decentralized assets. CST, like the gold standard, gives free floating value to its users that they can always rely on, thanks to the fractional government reserves from which it derives its inherent value.
Each CST is backed by at least one Stable coin rather than being tied to it. Because the Treasury backs every CST with at least 1 BUSD, when CST trades below 1 BUSD, the procedure would purchase it back and burn it. As a result, the CST price has risen back to 1 BUSD. Because there is no protocol-imposed maximum limit, CST might always trade above 1 BUSD. Rather of having a value of 1 BUSD, CST always has a value >= 1.
You may claim that the CST intrinsic value or floor price is 1 BUSD. We believe the true price will always remain 1 BUSD plus premium, but the market will ultimately decide.
Crypstarter's protocol managed treasury, protocol owned liquidity (POL), bond mechanism, and staking rewards are all meant to keep supply expansion under control. The protocol makes Profit through bond sales, and the treasury uses the profit to mint CST and distribute them to stakers. The protocol can accumulate its own liquidity by using liquidity bonds.
CST can only be coined or burnt by the protocol since it owns the funds in its treasury. This also ensures that 1 CST can always be backed up by 1 UST. Because you can be certain that the protocol will endlessly purchase UST below 1 UST with treasury assets until no one is left to sell, you can simply quantify the risk of your investment. The Market cannot be trusted, but the code can.
More runway is promised for the stakers as the procedure gathers more PCV. Because more money are available in the Treasury, stakers may be certain that the present staking APY can be preserved for a longer period of time.
Because of its bond structure, Crypstarter owns the majority of its liquidity. This offers a number of advantages:
- To motivate liquidity providers, a.k.a. renting liquidity, Crypstarter does not need to give out large farming incentives.
- Crypstarter ensures that liquidity is always available to facilitate sell and buy transactions.
- Because it is the largest LP (liquidity provider), it receives the majority of the LP fees, which is an additional source of revenue for the Treasury.
- CST may be backed up with any POL. For this aim, the LP tokens are discounted to their risk-free value.
It's critical to recognize that the Crypstarter protocol is still in its early stages of development. The present price has sparked a lot of debate, as has the expectation of a constant value in the future. In actuality, these features have yet to be defined. The network is currently geared for CST supply growth, which, when combined with Crypstarter's staking, bonding, and yield mechanisms, results in a considerable bit of volatility.
Because the market is willing to pay a significant premium to grab a portion of the present market capitalization, CST might trade at a very high price. However, if market sentiment turns adverse, the price of CST might plummet dramatically. During our expansion period, we expect high price fluctuation, so please conduct your own research to see whether our project is a good fit for your goals.
When you purchase and stake CST, you are capturing a part of the supply (market cap) that is expected to remain relatively constant. This is due to the fact that your staked CST balance rises in tandem with the circulating supply. The consequence is that if you acquire CST while the market capitalization is low, you will be able to capture a higher portion of the market cap.
Rebase is a process that automatically enhances your staked CST balance. When the protocol generates fresh CST, a major amount of it is distributed to the stakers. The protocol uses the rebase technique to enhance the staked CST balance so that 1 staked CST is always redeemable for 1 CST.
The proportion by which your staked CST balance rises on the next epoch is known as reward yield. It's sometimes referred to as the rebase rate. This number may be found on the Crypstarter staking page.
Annual percentage yield is abbreviated as APY. It considers the effect of compounding interest to calculate the real rate of return on your principal. In the case of Crypstarter, your staked CST represents your principal, while the rebase process adds compound interest on every epoch (28,038 Crypstarter blocks, or roughly 8 hours).
One unique feature of APY is that your balance will grow exponentially rather than linearly over time! If you start with a balance of 1 CST on day 1, and assume a daily compound interest rate of 2%, your balance will rise to about 1377 after a year. That's a lot of information!
The APY is calculated from the reward yield (a.k.a rebase rate) using the following equation:
It raises to the power of 1095 because a rebase happens 3 times daily. Consider there are 365 days in a year, this would give a rebase frequency of 365 * 3 = 1095.
Reward yield is determined by the following equation:
The number of CST distributed to the staking contract is calculated from CST total supply using the following equation:
Note that the reward rate is subject to change by the protocol. For example, it has been revised due to this latest proposal.
If the protocol aims for an APY range of 1,000% to 10,000%, this translates to a minimum reward yield of roughly 0.2105%, or a daily growth rate of about 0.6328%. Please see the above calculation to see how APY is computed from the reward yield.
If 100,000 CST are now staked, the protocol would need to mint an additional 632.8 CST to accomplish this daily increase. This is attainable if the protocol generates at least $632.80 per day in income through bond sales. Even if the protocol does not generate that much income, the surplus reserve in the treasury allows it to maintain 1,000 percent APY for an extended period of time (see the runway chart, for example).
To issue fresh CST tokens, APY relies on the selling of CST bonds. High APY rates may be sustained if enough bonds are sold. If the protocol aspires for a 10,000 percent annual percentage yield and 10,000 CST tokens are staked, 200 CST tokens must be produced daily to meet the APY (Roughly 2 percent growth a day). The APY is sustainable if at least 200 CST tokens are brought into the system via bond sales.
Because of compounding interest, the annual percentage yield (APY) can be rather large. Every day, funds are automatically staked in order to produce exponential growth.
Crypstarter is a 'spoon' (a fork that evolved into its own unique system and prefers cooperation to competition) by OHM built on top of the Crypstarter Network, allowing it to utilize the speed, security and scalability that our blockchain offers.
Crypstarter is more than simply an OlympusDAO clone; it is an integral aspect of our business operating system. Because we are developing a new generation of DEFI for our economy, the CST Token and its treasury are regarded as the primary value of the Crypstarter economy.