1.
clearmαtics
Seigniorage Shares and Stablecoin
Coinscrum / UCL / London
Robert Sams
23 February 2018
218fbe1fa72c2b590f0952a2971068ceddc83c46

2.
Where we were a few years ago
Bitshares
• Dan Larimer
Schellingcoin
• Vitalik Buterin
Seigniorage Shares
• Robert Sams

3.
Where we are today
https://multicoin.capital/2018/01/17/an-
overview-of-stablecoins/

4.
Seigniorage Shares Paper

5.
Seigniorage Shares in 5-minutes: Key ingredients
1. Two coins:
• A stable coin (like fiat currency, call it ”mass” - m)
• A volatile coin (like equity shares, call it ”energy” - E)
2. A stabilisation target ˆP
3. A purchasing power oracle Pi
4. A voluntary/market rule for converting m into E (and vice
versa) based on 2 and 3.

6.
Seigniorage Shares in 5-minutes: coin demand, fixed supply
CD
CD∗P
Q
P∗

7.
Seigniorage Shares in 5-minutes: coin demand, elastic supply
Every n blocks, change coin quantity Qi by Pi/ˆP.
CD
CD∗
Q
P
Q∗

8.
Seigniorage Shares in 5-minutes: Conversion rule
If Pi/ˆP > 1, auction new m supply for E (and burn the E).
If Pi/ˆP < 1, auction new E supply for m (and burn the m).
Key conclusion: valuation of E (”shares”)
There is a simple dynamic portfolio argument showing that
E is a perpetuity of cashflows equal to changes in demand
for m.
E can therefore NPV’d (hence the name ”Seigniorage
Shares”.. it’s like having an equity stake in money printing)

9.
What’s wrong with current stablecoin thinking?
Stablecoin is more than an economic mechanism for
changing coin supply, it’s also about changing coin
demand.

10.
What’s wrong with current stablecoin thinking?
Stablecoin is more than an economic mechanism for
changing coin supply, it’s also about changing coin
demand.
Goal is to steer speculative demand into E (shares)

11.
What’s wrong with current stablecoin thinking?
Stablecoin is more than an economic mechanism for
changing coin supply, it’s also about changing coin
demand.
Goal is to steer speculative demand into E (shares)
.. and transactional demand into m (coin).

12.
What’s wrong with current stablecoin thinking?
Stablecoin is more than an economic mechanism for
changing coin supply, it’s also about changing coin
demand.
Goal is to steer speculative demand into E (shares)
.. and transactional demand into m (coin).
But most appetite today for a stablecoin comes from
speculators looking for a way to de-risk the asset class
without creating a tax event.

13.
What’s wrong with current stablecoin thinking?
Stablecoin is more than an economic mechanism for
changing coin supply, it’s also about changing coin
demand.
Goal is to steer speculative demand into E (shares)
.. and transactional demand into m (coin).
But most appetite today for a stablecoin comes from
speculators looking for a way to de-risk the asset class
without creating a tax event.
Transactional demand still lacking, paucity of useful
Dapps.. chicken-and-egg problem?

14.
Some thoughts on stablecoin research
Don’t peg anything!

15.
Some thoughts on stablecoin research
Don’t peg anything!
Make ˆP a measure of some endogenous scarcity

16.
Some thoughts on stablecoin research
Don’t peg anything!
Make ˆP a measure of some endogenous scarcity
• e.g., block scarcity.. target a constant gas price?

17.
Some thoughts on stablecoin research
Don’t peg anything!
Make ˆP a measure of some endogenous scarcity
• e.g., block scarcity.. target a constant gas price?
Let m be inflationary, it’s supposed to be a
medium-of-exchange not a long-term store-of-value.

18.
Some thoughts on stablecoin research
Don’t peg anything!
Make ˆP a measure of some endogenous scarcity
• e.g., block scarcity.. target a constant gas price?
Let m be inflationary, it’s supposed to be a
medium-of-exchange not a long-term store-of-value.
Go deeper into protocol research.. in cryptoeconomic
mechanism desgin, everything is connected.

19.
Some thoughts on stablecoin research
Don’t peg anything!
Make ˆP a measure of some endogenous scarcity
• e.g., block scarcity.. target a constant gas price?
Let m be inflationary, it’s supposed to be a
medium-of-exchange not a long-term store-of-value.
Go deeper into protocol research.. in cryptoeconomic
mechanism desgin, everything is connected.
Consider questioning the whole premise of
protocol-defined ”digital scarcity”, coin supply logic.

20.
Some thoughts on stablecoin research
Don’t peg anything!
Make ˆP a measure of some endogenous scarcity
• e.g., block scarcity.. target a constant gas price?
Let m be inflationary, it’s supposed to be a
medium-of-exchange not a long-term store-of-value.
Go deeper into protocol research.. in cryptoeconomic
mechanism desgin, everything is connected.
Consider questioning the whole premise of
protocol-defined ”digital scarcity”, coin supply logic.
• Maybe proof-of-work difficulty is the only real digital scarcity
discovered so far

21.
Some thoughts on stablecoin research
Don’t peg anything!
Make ˆP a measure of some endogenous scarcity
• e.g., block scarcity.. target a constant gas price?
Let m be inflationary, it’s supposed to be a
medium-of-exchange not a long-term store-of-value.
Go deeper into protocol research.. in cryptoeconomic
mechanism desgin, everything is connected.
Consider questioning the whole premise of
protocol-defined ”digital scarcity”, coin supply logic.
• Maybe proof-of-work difficulty is the only real digital scarcity
discovered so far
• If so, back to Szabo’s ”Digial Gold”?

22.
Some thoughts on stablecoin research
Don’t peg anything!
Make ˆP a measure of some endogenous scarcity
• e.g., block scarcity.. target a constant gas price?
Let m be inflationary, it’s supposed to be a
medium-of-exchange not a long-term store-of-value.
Go deeper into protocol research.. in cryptoeconomic
mechanism desgin, everything is connected.
Consider questioning the whole premise of
protocol-defined ”digital scarcity”, coin supply logic.
• Maybe proof-of-work difficulty is the only real digital scarcity
discovered so far
• If so, back to Szabo’s ”Digial Gold”?
• Unit-of-account is the difficulty of the puzzle?

23.
Thank you!
Questions
More information
https://github.com/rmsams/stablecoins
rs@clearmatics.com