How do I check the currency price of ATOM?

A while ago, I was chatting with Uncle Su, and he asked me what I thought about the price of ATOM. I couldn't explain the topic in a few words, so I had to brush him off. Now I'm here to pay off my debt and talk about my views on the ATOM currency price.

1cm=1cm; $1≠$1

Everyone knows that the price of something is important. Even if I often hope that the public will broaden their horizons and pay attention to aspects other than currency prices, I will not deny this fact. I also like the fireworks of the world and pay attention to prices, but I don’t focus too closely on currency prices so that I can focus on more important things.

In addition to affecting work, paying too much attention to currency prices can easily lead to blind spots. No, I’m not talking about philosophy or metaphysical concepts such as value and meaning. I’m simply saying that if you focus too much on currency prices, it’s easy to ignore the impact of changes in quantity and misjudge the total asset value or investment return.

Everyone knows that the total asset value is "unit price x quantity". When we hold assets such as gold and stocks, we focus on the unit price, hoping that without buying more quantities, the total asset value will rise with the unit price; when we hold cash, the unit price is always 1 yuan. , will only focus on quantity, hoping that the more the better. 1 cm is 1 cm, and 1 kg is 1 kg. This natural physical phenomenon gives most people the illusion that the unit of 1 yuan is constant like other units of weight and measurement.

"In the past, the vegetables weighed a kilogram, but at IKEA they cost dozens of mosquitoes." This is a typical gossip that my mother and I often talk about. Because of the above-mentioned misunderstanding, my mother mistakenly believed that the unit of value measurement "mosquito" (yuan) is fixed, so when the price of vegetables is higher, it means that the food is more expensive. She feels that society is greedy, but she cannot understand it. Even if various objective conditions Remaining unchanged, the price of vegetables will still increase over the years. For no reason, the current 1 yuan will never be as good as the previous 1 yuan. Although the unit of money has always been called "yuan", with the increase in currency issuance, the purchasing power of 1 yuan continues to decrease, and this change is beyond your control.

This is inflation. Everyone has heard of this word, but folk wisdom generally understands inflation simply as "increased prices", and less often understands that it is not that items are getting more expensive, but that the purchasing power of the unit "yuan" continues to shrink. After all, this The phenomenon is very counterintuitive to human beings. Just imagine, if the weight unit kg has the same characteristics, the mass contained in 1 kg decreases every year. Even if you stay slim, your weight will continue to increase. Everyone should switch to becoming a fitness coach.

Inflation increases the denominator, the total amount of money. When the numerator, the amount of money you own, remains unchanged, the purchasing power of each dollar will decrease. This is the basic financial logic of modern society. Although banknotes are constantly being issued, they are not sent to your pockets. The two parameters in "unit price reduce.

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ATOM style inflation

If we understand the blockchain as an economy, the native currency of the public chain is equivalent to the legal currency of the nation-state. The macroeconomics of the two have a lot to learn from each other.

In the design of Cosmos Hub, ATOM will continue to be issued like the legal currency of other countries, and the inflation rate is not low, floating in the range of 7-20%, currently 14.43%. But unlike the national government, in addition to 10% of the continuously issued ATOM being put into the community pool to be allocated to community development through referendum, the remaining 90% will directly go into the wallets of people's "cosmonauts" and validators, but there are A prerequisite: users need to stake (or delegate) ATOM. In other words, as long as you choose to pledge your coins, your assets will generally not be diluted.

Here are some fictitious numbers as examples to help illustrate:

• Assume that the current total circulation of ATOM is 1 bil and the market price is 1.2 bil, that is, the total market value is 1.2 bil magnesium.

• Assume that the inflation rate is 20% and the staking ratio is 66.7%, that is, 2/3 of the coins have been pledged. After one year, the total issuance of ATOM will increase to 1.2 bil.

• Assuming that the total market value of ATOM remains unchanged at 1.2 bil magnesium at that time, the calculation of the total market value will become 1.2 bil x 1 magnesium = 1.2 bil magnesium, that is, the market price will fall by 16.6%

• In other words, when the currency price rises or falls by less than 16.6%, the total market value of ATOM will increase.

Let’s look at the changes in total personal assets using hypothetical figures:

• Assume that Alice holds 1,000 ATOM at the beginning of the period, pledges it to the validator, and receives additional ATOM in proportion to the reward.

• Generally, validators will charge a commission of several percentage points to cover the costs of servers, storage and bandwidth. For simplicity, it is assumed below that Alice’s validator commission is 0% and is ignored.

• Since 20% of the additional issuance is obtained proportionally by holders of 66.7% ATOM, the staking return rate is 20%/66.7% = 30%. Ignoring the compounding effect, Alice will hold 1,300 ATOM after one year.

• If the market price of ATOM drops by 23% at that time (i.e. 1-1/1.3), Alice's total asset value will be 1,300 x 0.77 Mg = 1,000 Mg, remaining unchanged

• In other words, if ATOM rises, or falls by less than 23%, Alice's assets will appreciate

The above is just basic arithmetic, very simple, but most people, even ATOM currency holders, don’t know how to delve into it. They purely use the currency price to make an intuitive impression of profit and loss. Outsiders who do not hold ATOM are of course even more so. We will use ATOM's price chart to judge the performance of this asset.

This constitutes another illusion, the opposite of the one described above. For fiat currencies, we tend to fall into the illusion of unit price stability; for ATOM, conversely, we tend to fall into the illusion of quantity stability.

The sustainable game among stakeholders

Regardless of whether we agree with ATOM's token economic design or not, we'd better understand its original intention first.

From the beginning, ATOM has been set to inflate without an upper limit. Therefore, excluding speculation, unless demand continues to increase or a burn mechanism is introduced, according to the most basic supply and demand theory of economics, the currency price will There is no reason to keep going up. However, due to the above logic, as long as the currency price remains flat, even if the inflation rate is at the lower limit of 7%, ATOM stakers will earn about 10% in a year.

ATOM's inflation rate will adjust itself to reach the target pledge rate of 67%, which will fluctuate dynamically because it takes 21 days to withdraw the pledge. When the pledge rate reaches the target, it means that no one can buy 34% of the voting rights in a short period of time. To veto a proposal or generate a new block, the security of the entire chain is high enough. When the ATOM pledge rate is less than 67%, the inflation rate will gradually increase to encourage users to pledge, until the upper limit is 20%; conversely, when the pledge rate exceeds 67%, the inflation rate will gradually decrease until the lower limit is 7%.

The general principle of blockchain is to assume that user behavior depends on self-interest and cannot be generated by love alone. In a high-inflation token economic model, users holding ATOM are facing games every moment. The advantage of holding ATOM without pledging is that it is flexible enough and can be sold at any time, whether it is cashing out due to rising prices or losing money due to falling prices. Escape, in short, care about money rather than heart; however, the disadvantages are also obvious, just like being in a country with sharp inflation of legal currency, the shareholding ratio continues to be diluted every minute. As for those who choose to pledge, it is equivalent to casting a vote of confidence in the community, which is a commitment. The corresponding benefit is that the proportion of points held continues to increase; the disadvantage is of course that no matter whether it rises or falls, you have to wait for at least three weeks before you can withdraw it. If you miss it, Arbitrage from sudden surges is trivial. In extreme situations such as the LUNA death spiral, the currency price has fallen by 99.99% before there is time to withdraw funds and escape.

Let’s do some rough calculations with my ATOM. The current currency price of ATOM is 7.41 USD, which is about 20% of the highest point, or about 3 times the currency price when Cosmos Hub was created in early 2019. This is the most basic reference, but what we want to calculate is the total asset value. I bought ATOM in batches in 2019 and 2020. In 3 or 4 years, the compound return nearly doubled my holdings. However, due to financial needs, I have stopped buying more ATOMs with pledge returns recently, and have instead cashed out to meet my daily needs. Although I don’t have a lot of money, it is barely enough to eat, buy books, and subscribe, and I use the remaining margin to buy more. Got two scanners.

In addition, staking ATOM over the past few years has also brought me many airdrops. The largest ones are OSMO and JUNO. When they were high, they directly doubled the total value of the original ATOM assets. Although the current price is already quite low, these are worthy of the name. Nothing to complain about, nothing to complain about. However, the airdrop is purely accidental and is not part of the ATOM token economic design at all. If there is any, just treat it as luck and be grateful. You should not have any expectations, especially today when the airdrop culture has declined.

Overall, ATOM has given me good returns over the past few years, which is something you can't tell from the price history chart. However, this is the wrong point. The real point is that ATOM uses a sustainable game mechanism to allow holders to choose between "holding currency" and "holding shares". Those who are willing to give up some liquidity for the ecology and cast a vote of confidence Although stakeholders may not necessarily make money, their proportion will definitely become higher and higher, which also means their voting rights are getting bigger and bigger. From an individual's microscopic perspective, this change is likely to be too small to be felt, but from the macroscopic perspective of the entire community, this means that every time a block is generated, the proportion of "coin holders" will decrease, while "stakeholders" will The proportion of "people who stay" will increase, providing an advantage to those who "stay" for a long time.

I would not say that the currency price of ATOM is a false proposition, but unless it is speculation, the currency price must be considered in conjunction with the entire context for the discussion to be meaningful. Different cryptocurrencies adopt different token economic models. Bitcoin is deliberately designed to be deflationary. The supply is getting smaller and smaller. In theory, the price will be higher and higher, but you should not expect to earn stable returns on it; Ethereum does not The upper limit is slow inflation, but a destruction mechanism will be added from 2021. When the latter is greater than the former, it will enter deflation, which is exactly the current situation. In addition, you can also earn about 5% annual return through staking. As for ATOM's high-inflation design, it interprets a completely different idea from the two big guys. It is not necessarily a gift to investors, but it interprets the meaning of "stake" vividly.

"Blockchain Sociology" weekly newspaper, reimagining money, media and democracy, practicing freedom of the press, financial freedom and democratic freedom. Articles are published every Thursday and sent directly to subscribers' mailboxes.

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