Issuance and Stability Mechanisms
Overview of the Mechanics
Last updated
Overview of the Mechanics
Last updated
Here is a description of how the stablecoin might work:
When a contributor publishes an article they will give three tipping options. As an example priced in dollars it could be $.20c, $.50c, and $1. This is similar to what one often sees in restaurants where tips of 15%, 20% or 25% are suggested. Contributors would be expected to raise and lower their tips in response to demand to maximise earnings.
Each information sector will have an average of tips and each sector will have a different total volume of tips. The weighted average of these could make up a 'price' basket which the stablecoin could target.
This basket would be imperfect however as not everyone will use the suggested tips. Some will tip less than suggested and some might tip substantially more. There is likely to be much more heterogeneity than one would find in a CPI basket of prices. Further, it wouldn't account for demand from fact checkers, judges and other information market participants. Therefore another stablising mechanism is desirable.
Since all payments are on-chain, the interest rate mechanism would have perfect information on the velocity of money. The higher the velocity, the greater the demand for articles on Olas. The converse is also true. There may be demand outside the protocol too but the mechanism would be able to distinguish internal from external demand given contributors have Olas IDs. The internal velocity of Olas protocol transactions could therefore be used in tandem with tipping prices set by journalists for monetary policy.
The interest rate mechanism will increase or decrease rewards for minting (the interest rate) the stablecoin in accordance to what suggested tipping prices and velocity are suggesting about demand. Holder of OLAS would be able to earn an additional return on their OLAS by minting currency to satisfy demand. If the interest rate mechanism detects there is too much currency in the system relative to demand for Olas usage, rates will be reduced, and people will be incentivised to close their positions and remove currency from circulation.
