USTX: a token designed to grow
The blockchain technology allows the creation of tokens or coins to store value, transfer value and be an investment. Since 2009, the year of the launch of Bitcoins, digital currencies have proven to be a functional alternatives to fiat, with a great potential for value storage and investment.
The trustless architecture of the blockchain combined with the smart contract functionality integrated in the latest generation blockchains allow for innovative ways to handle liquidity provision and price behavior. Automated market makers have arisen as a true decentralized way to exchange coins and tokens. Typically AMMs work in two ways: the constant price model and constant value model. The constant price model is used for stablecoins, where tokens are constantly minted or burned to guarantee a 1:1 pegging to a reserve of value (typically a fiat currency, but it can be other assets). The constant value model is used for swap services like Uniswap, Justswap and others where the product of the pair reserve is kept constant and the price is automatically determined by enforcing the constant product relation within the smart contract.
Stablecoins have proven to be a very interesting asset for the users, given the high market cap reached (over 100B$ at the time of writing). It is also observable a stablecoin trend to increase the cap even during bear market periods, meaning that users tend to transfer value from growth coins to stablecoins to reduce their risks during adverse market phases. Still they represent less than 5% of the overall cap of the digital currency market, meaning that most users seek growth in their investments.
A novel approach to liquidity management allows the implementation of a growth token, at the same time guaranteeing good resilience during bear market phases. A well thought mechanism, actuated by a smart contract without the need to have a central authority like fiat central banks, allows to increase the reserve during bull market and using that excess reserve to dampen the token reduction in price during bear market.
A sustainable fee structure, leveraging the intrinsic low cost TRON blockchain, is an additional positive aspect. Smart contract parameters will allow tuning of the system behavior during the initial deployment. These parameters include the target reserve level, expressed as a percentage of the market cap at any given time, and the expansion and contraction coefficients that dynamically drive the price change response for buy and sell operations.
The internal reserve of the pool will be multiasset, made of several stablecoins on the Tron network: USDT, USDJ, USDC and TUSD (TRC20) tokens. Being stablecoins with a known value, it removes the need for oracles and reduces the risks involved in the change of value of the underlying asset, that would be present if the reserve was made of unpegged tokens or coins. A multiasset reserve will give users choice about the swap currency to trade against USTX and will also reduce the dependency on one particular token, improving the resiliency and future proofing of the system. Both the token and the swap pool smart contracts will be deployed in the blockchain, implementing a truly distributed and trustless system. The contract owner will be acting only to manage parameter tuning and will not be allowed to access the reserve funds, since the contract will not present an interface to withdraw the liquidity from the pool.
The choice of the underlying blockchain was driven by three main factors: the fees, the stablecoin contracts available and the environmental impact. TRON is a low fee blockchain, there are ways to lower the transaction costs down to zero using TRX freezing. In any case the transaction fees will be an order of magnitude lower that an equivalent ERC20 contract. The Tron blockchain already is hosting some of the most widely used stablecoins, like USDT, TUSD, USDC and USDJ. Also, having a Delegated Proof of Stake consensus mechanism, the environmental impact due to CO2 produced by the nodes is much lower than Proof of Work chains like Bitcoin or Ethereum.