A strange new alt HODLCommodity
Tags: Token Economy, Ethereum, Commodities, Tokenization, Altcoins

A strange new alt HODLCommodity

Is it possible or even plausible to create an endless chain of wealth generation? Is there intrinsic value to a token that is its own exchange and can’t be controlled or censored? The HODL project opens up a wealth of questions. HODLCommunity Apr 23, 2020·4 min read

This HODL project is defined, within its white paper, as a social experiment. It would fit in the category of experimental economics as the known dynamics of supply and demand are used unconventionally.

At first glance, it would be easy to dismiss this challenge as a form of Ponzi scheme, where the early investor is paid from the investment of subsequent investors, creating the illusion of a sustainable network. This would work as long as there is a steady supply of new investors to inject funds into the project and/or that early investor does not liquidate all or nearly all of the assets at one time.

In the HODLCommodity project, the sustainability of the network is based on a balance between supply and demand. If there is too much supply and not enough demand, the price will stagnate or grow slowly. Conversely, if there is too much demand and not enough supply, the price will also stagnate or grow slowly. In any case, like a Ponzi, the network depends on the continuous injection of funds and the constant sale of assets to function. However, unlike a Ponzi, the tokenomics of HODL do not rely on a steady stream of naive investors. Instead, savvy investors are needed to create a balance between holding and selling, thus increasing the price incrementally.

The tokenomics of HODL create a strong inclination toward holding, as it is beneficial to hold onto an asset as long as one can. However, this must be balanced with selling, as excessive holding leads to stagnation in price. With this type of asset, profit is realized through the liquidation of assets for Ether. Similar to the stock market or other commodity or crypto-asset exchange, the asset is purchased by new or recurring participants. The main difference would be that instead of price volatility, you have price increase volatility and an available liquidity threshold. This means that the increase in price will fluctuate from day-to-day according to the current trading board and that the ability to liquidate will be proportional to the current volume of buying and selling. These are all known forces of economics.

In a normal Ponzi, the cascading effect of paying the early investor with a subsequent one is unsustainable in the long term, because there is no reason to inject funds other than investment and no actual profit is generated through the business process. In the end, investors lose confidence, and the business ends up with no assets to liquidate.

Interestingly enough, in the commodity market, there is no reason to buy or sell assets other than for investment purposes. Return on investment is calculated by subtracting the entry price from the exit price, which, in this case, will always be positive if calculated from a USD perspective and will fluctuate when compared to other crypto-assets. (The price of other crypto-assets will fluctuate in relation to the USD.) This, in itself, enables participants to leverage the network continuously, to protect capital in the form of digitals assets, and to make hedging crypto-assets much safer, provided there is a buying and selling market.

This also can serve as a robust savings account; the returns might not be as impressive as with typical digital assets, but the fluctuations are mitigated.

As the network does not belong to any individual, it has been designed so that tokens are initially drawn from a reserve. The smart contract holds the only pre-minted tokens. Once the reserve is empty, no more will be minted, and the network will need to rely on itself to match supply and demand.

An interesting feature to this is the fact the token is initiated from a smart contract that is its own exchange, bypassing the need for an exchange listing, and making the exchange decentralized, uncontrolled, and uncensored. It is well known by now that one of the defining underlying values of Bitcoin and other similar projects is the fact that they are based on the ability to avoid third parties, thus making them uncensorable. On its own, this ensures its future as a trustless means of value exchange.

This begs the question, does an uncensored exchange have any intrinsic value on its own? In this particular case, the answer is even more challenging. The HODL Token is presented as being a commodity. As opposed to a currency, it can never be used as a means of payment. It can only be bought and sold from the commodity exchange, the smart contract itself. It has a good level of fungibility, whereas any HODL token is as valid as the next to any buyer or seller, but it cannot be transferred.

Many difficult questions lie ahead for this project. Primarily, it is common knowledge that incentives to buyers are generally made in the form of price reduction; what happens if the price in USD can never decrease? Having said that, it should be noted that the Ether digital asset itself can fluctuate.

Other digital assets, such as stablecoins, can be used as a form of payment or can be transferred, and generally correlated to an underlying asset, such as cryptocurrencies or gold/silver, so the similarity ends there.

In conclusion, this project is a definite challenge to currently accepted laws of economics and does not follow any usual paths taken by a crypto asset such as an Initial Coin Offering, Initial Exchange Offering, or Security Token Offering, widespread marketing, airdrops, and referral schemes, pre-minted tokens, an official organization or even the sacrosanct convention of exchange listing and price fluctuations. This originality could be its doom or its success.

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…