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Assets or Tokens
The CYBEX network consist of several assets, tokens or currencies. All assets are equal from a technological point of view and come with more or less the same features, namely, they can be traded against each other and can be transferred within seconds. The differences between them are of economical nature.
50% of the asset creation fee are used to pre-fill the assets fee pool. From the other 50%, 20% go to the network and 80% go to the referral program. This means, that if you are a life-time member, you get back 40% of the asset creation fee after the vesting period (currently 90 days).
CYBEX allows individuals and companies to create and issue their own tokens for anything they can imagine. The potential use cases for so called user-issued assets (UIA) are innumerable.
On the one hand, UIAs can be used as simple event tickets deposited on the customers mobile phone to pass the entrance of a concert. On the other hand, they can be used for crowd funding, ownership tracking or even to sell equity of a company in form of stock.
All you need to do is click in order to create a new UIA is a few mouse clicks, define your preferred parameters for your coin, such as supply, precision, symbol, description and see your coin's birth after only a few seconds. From that point on, you can issue some of your coins to whomever you want, sell them and see them instantly traded against any other existing coin.
Unless you want some restriction. As the issuer, you have certain privileges over your coin, for instance, you can allow trading only in certain market pairs and define who actually is allowed to hold your coin by using white and blacklists. Of course, an issuer can opt-out of his privileges indefinitely for the sake of trust and reputation.
As the owner of that coin, you don't need to take care of all the technical details of blockchain technology, such as distributed consensus algorithms, blockchain development or integration. You don't even need to run any mining equipment or servers, at all.
Common use cases include:
- Rewards Points
Merchants around the world offer rewards points for loyal customers. These points are accumulated to earn discounts on future purchases. Rewards systems are a prime opportunity to add value by making them available to smart contracts.
- Event Tickets
Event tickets are a largely unregulated use case for user-issued assets. On the day of the event, the issuer can freeze all trading of the asset and then allow users to cryptographically check in.
- Digital Property
Software and music licenses can be made transferable by issuing them as a digital asset. Every copy of a program can check to make sure that the user has control of a token before running. Software implementing such a licensing scheme can remain functional even if the company that produced the license goes out of business. Online games can use these assets to represent game items.
- Crowd Funding
Whether being used as a transferable coupon for a pre-sale, or doing an IPO on a small company, issuing an asset is one of the most effective means of raising money for a cause.
- Individual or Corporate Debt
Many businesses raise money by selling bonds. With CYBEX, these bonds can be made tradeable and/or fungible, which makes them more compelling to investors.
Exchange Backed Assets represent deposit receipts that are issued by a centralized entity. This kind of asset is commonly known as I owe you (IOU). It represents the right to withdraw the same amount (minus fees) of a backing asset from a central entity. Often, they are issued by a bank, an exchange or another financial institute to represent deposit receipts.
From the blockchain perspective, EBA are equivalent to a User Issued Assets that is created and issued by an institute. Hence, it is their responsibility to credit you with the corresponding blockchain token (the EBA) on deposits.
The most common use case would be a centralized exchange that allows their users to deposit crypto currencies in their wallets. These deposits are usually stored in their own database and the customers internal account balance is matched accordingly. These database balances serve as deposit receipts but obviously require some trust that the database is properly secured against any kind of attacks.
Instead of increasing an internal account balance of a user, new shares of an EBA can be issued to the user on deposits. Since EBAs are blockchain tokens, they can be traded on the decentralized exchange similar to any other exchange.
In order to reclaim his crypto tokens on their native blockchain, the users sends back the EBAs to the institute who then destroy the EBAs and transfer the corresponding asset back to its rightful owner.
CYBEX’s market pegged assets (MPA) is a new type of freely traded digital asset whose value is meant to track the value of a conventional underlying asset by means of an over-collateralized, smart-contract secured blockchain loan.
SmartCoins always have 100% or more of their value backed by the BitShares core currency, BTS, to which they can be converted at any time at an exchange rate set by a trustworthy price feed. In all but the most extreme market conditions, SmartCoins are guaranteed to be worth at least their face value (and perhaps more, in some circumstances).
Instead of creating a UIA where the full control over supply is in the hands of the issuer, we can also create a Market Pegged Asset (MPA) and let the market deal with demand and supply. All we need is a fair price and another asset that can be used as collateral.
Why would we need collateral for? Since the issuer of an MPA has no control over the supply, the blockchain protocol deals with increasing and decreasing supply. In order for a user to get some of the new coins, he will need to put collateral into a smart contract (technically, this contract is a collateralized loan).
A simple example would be an MPA that is backed by USDT (a stable crypto token within CYBEX) that requires a collateral ratio of 200%. Then, in order to get new coin, we can borrow 100 USDT worth of new coins by paying 200 USDT.
By this, the supply of your coin is increased by 100. But how would it be decreased? The USDT are locked in the smart contract and can only be reclaimed if the debt (here, 100 coins) are returned. Returning them will result in the coins being removed from the supply because they are no longer backed by any collateral.
So, what for do we need a fair price? Remember that we chose a collateral ratio of 200%? That number tells us how well backed your coins are by the collateral. But what would happen if the value of your coin goes to the moon? Then your collateral ratio will reduce to say 150%. At a certain percentage, the blockchain will automatically trigger so called Margin Calls which will
- Take your collateral (here, USD)
- Sell it in the market to buy back the coin you owe
- Close the contract
- Pay the residual USD
A fair price thus tells the market what your coin is worth (e.g. traded for on external exchanges) and triggers margin calls if necessary.
But there is more! Everyone that holds your (MPA) coin can convert the coin into the backing asset at a fair price. This procedure is called "settlement" and ensures that your MPA is always worth at least the fair price.
Alternatively, to regular MPA like the bitUSD, CYBEX also offers entrepreneurs an opportunity to create their own SmartCoins with custom parameters and a distinct set of price feed producers.
Privatized SmartCoin managers can experiment with different parameters such as
- Collateral Type
- Initial Collateral Rate
- Maintenance Collateral Rate
- Forced Settlement Fee, Delay, and Daily Volume
- Price Feed Update Rate
- Global Forced Settlement
They also earn the trading fees from transactions the issued asset is involved in, and therefore have a financial incentive to market and promote it on the network.
The entrepreneur who can discover and market the best set of parameters can earn a significant profit.
Some entrepreneurs may want to experiment with SmartCoins that always trade at exactly $1.00 rather than strictly more than $1.00. They can do this by manipulating the forced settlement fee continuously such that the average trading price stays at about $1.00. By default, CYBEX prefers fees set by the market, and thus opts to let the price float above $1.00, rather than fixing the price by directly manipulating the forced settlement fee.
A prediction market is a specialized BitAsset such that total debt and total collateral are always equal amounts (although asset IDs differ). No margin calls or force settlements may be performed on a prediction market asset. A prediction market is globally settled by the issuer after the event being predicted resolves, thus a prediction market must always have the global settle permission enabled. The maximum price for global settlement or short sale of a prediction market asset is 1-to-1.
If the bet resolves to true (i.e. a price feed of 1), then the PM-asset can be settled release the collateral to the holder of the asset.
If, instead, the bet resolves to false (i.e. a price feed of 0), then those that sold the PM-asset on the market and went short, made a profit since it PM-asset became worthless.
A user can take either bet on a positive outcome, or a negative outcome. We here show how this works, technically.
- Betting for a Positive Outcome
If you are confident that the bet will resolve positive, you want to hold that particular PM-asset since it allows you to settle it for it's collateral on a 1:1 basis.
In order to get hold of those tokens, you can put a buy order for them at any price (between 0 and 1) and wait for it to be filled or buy at market rates. By this technique, a user can pre-define at which odds to buy shares.
For instance, if you think that the bet resolves positively at a probability of 80%, you can put your buy order at a price of 0.8. If the bet resolves positively (price feed of 1), then you can settle your shares at 1 and make a 20% profit.
If you can buy tokens at a price of 0.2 (i.e. market participants think it is unlikely to resolve positively), then you could make 80% profits at a risk of losing with 80% probability.
- Betting for a Negative Outcome
In order to bet for a negative outcome (bet resolves to false with a price feed of 0), you need to sell the tokens. In order to get them, you should not buy them at the market, but instead borrow them from the network by paying collateral at a 1:1 ratio.
For example, in the PM.RAIN20190101 if you want to bet on a negative outcome with 100k CYB, you can borrow 100k PM.RAIN20190101 by paying 100k CYB to the network.
Once you borrowed the token, you can sell them at any price between 0 and 1. If you think the probability of a negative outcome is 20%, you should consider selling your tokens at 0.2.
If the bet resolves negatively (price feed of 0), your debt CYB are worth debt = amount * price = 0 CYB, you can reclaim your collateral at zero cost, and get to keep 20% profits from selling the token at 0.2. If instead the bet resolves positively and you sold all tokens, you cannot close your borrow position to redeem your collateral. However, your total loss is reduced by 20% for selling the tokens at the market.
If, by the end of the bet, you still have some of the tokens left, you can of course close your borrow position partly and redeem the corresponding percentage of the collateral.