HODLCommodity (HODLC) — The Importance Of A Recurrent Network And Fixed Deflation Rate
Today’s post is about the critical importance and role played by the fixed price increase rate, its linear progression, and how this impacts the network. This article also outlines the importance of a recurrent approach to the network, such as savings, prepayment, placement, lending, etc.
It aims to explain how this model will remain competitive against classical savings at each stage of its scaling toward mass adoption. This must be understood as this project is not based on exponential growth. On the contrary, its deflation curve will stabilize over time. This will create stable and predictable growth, making the asset more suitable for recurrent continuous capital injection than long positions with high stakes.
A recurrent network
For the purposes of this project, a recurrent network is the continuous and regular cyclic injection of reasonably small amounts of capital for short-, mid-, and long-term saving goals. It also includes all other business logic built around its principles. The value proposition for the participant is quite simple: the capital stored in HODLC will gain in USD nominal value according to the daily number of transactions. Even if significant increases happen, as long as the network is building itself, the linear mathematics behind the price increase ensures that widespread adoption will flatten the curve up to a steady line.
The counterpart to this is that the commodity must be liquidated through the network either by public sale, address-to-address trading or community pool trading. This means that the daily volume represents the number of assets that can be liquidated in a single day. Interestingly enough, the daily volume is also directly tied to the daily price increase. Each valid transaction will increase the price in a linear fashion, US$0.00001 each time. Each transaction can have a variable amount of Ethereum in it. For now, it is locked at 1 Ether, which means that the number of transactions per day is correlated to, but not tied to, the volume. This will become even more true when the thresHODL (defined as the 100,000th transaction) is reached, and that single transaction limit is lifted.
In the context of this commodity market, recurring deposits toward savings goals create a stable amount of daily transactions and contribute to the velocity. At the same time, hedging and large players provide episodic liquidity injections toward the network contributing to the volume.
These dual mechanisms ensure a form of stability between professional traders and the average recurrent participant.
The wheel: fixed deflation rate
A commonly asked question is, how does this scale toward mass adoption and what would that look like. The answer highlights a fundamental difference between HODLC and a Ponzi scheme. An article on the subject was produced earlier. Still, I think it is essential to expound further on the wheel mechanics of the fixed deflation rate using the price increase feature of the smart contract.
First, the HODLC deflationary value is based on the price increase mechanic. This mechanism is hard-coded into the smart contract and can be verified and tested. The mechanism manages it using a simplistic linear equation each time a successful trade of HODLC occurs between two participants or between a participant and the smart contract.
It is important to note here that this equation is infinite and will never stop incrementing the price. The growth, as developed before, will vary depending on the velocity, i.e., the number of daily transactions. In simple terms, this means that, whether it is put in today or one year from now, one Ether will gain on its capital value in a competitive but not exponential way compared to traditional banking or the placement market.
In a recurrent network, this plays a significant role as it ensures that continuous use of the network is not only beneficial but practical and that its benefits are not limited in time.
Mass adoption
Let’s push the reasoning a little further. Let’s say the network is adopted by billions of participants, becomes mainstream, and is used daily by most people. (I know, but it’s a thought experiment.) What then would be the value proposition for participants?
The Ether, or any other asset that is accepted at that stage, put into HODLC will still dutifully increase based on the number of daily transactions.
Let’s speculate a three-billion participant network. Assume that
- 1/1000 HODL for two years or more;
- 1/10,000 participants are recurrently depositing once per month and withdrawing once every quarter ;
- 1/10,000,000 are trading hedging at 100 per day; (In fact, this would probably be more likely due to reserve bounces, day traders, bots, funds, businesses etc.)
- the remainder of participants uses it once a year.
That would yield:
- 100,000 transaction per day with recurrents;
- 30,000 per day with trading;
- 3000–5000 per day for 2-year long;
- Approximately 4–7 million per day due to the yearly deposits of long.
In this case, even if the price of HODLC would be incredibly high, let’s say US$100,000, it would still increase at least US$400 per day (0.4%).
These numbers are entirely fictitious, of course, but they lay out the concept that even at this stage, the daily US$100 put in savings would benefit from a fair deflation.
To wrap up, the wheel in HODLCommodity refers to the fact that the deflationary value of the asset is infinite and will be more stable over time.
HODLCommodity Information
This article is not intended as financial advice. Please do your own research.
Whitepaper: https://archive.org/details/thehodlproject_202004/page/n5/mode/2up
Fansite: https://www.hodlcommodity.com/
Source code: https://filebin.net/dpyx74njujhw7b67…
Smart Contract ABI: https://filebin.net/i17nsou0juhi7x90…
