7.3. Price stabilization mechanism
The price stabilization of cryptocurrency projects starts with acknowledging market failures caused by unreasonable inequity of information acquisition, which can be regarded as actions such as price manipulation without balanced growth of the entire ecosystem. Although the price is determined by the supply and demand of the corresponding currency, the distribution of tokens due to the business model and Node operation is an essential element for the expansion of the ecosystem. In addition, it is the eternal task of all projects to define autonomous regulatory principles to control this, define the roles and responsibilities of each Node in the ecosystem, and to implement social consensus among Nodes as participants in this ecosystem through smart contracts. LiQuiD Prime De-HF discloses the definition of an algorithmic circulation control technique and price stabilization mechanism despite the active supply of money in the LiQuiD Prime (LQD) ecosystem, and suggests a stable optimization methodology. I hope that it will remain as a successful encryption project after testing using blockchain technology for the next several years.
The participation of more Nodes in the market is a great force to activate a more stable ecosystem. We are waiting for active market participation from passionate supporters of the successful expansion of the LiQuiD Prime community.
7.3.1. LQD Fair price policy
LQD Fair Price is LQD is a utility token used in ALPHA, a security token that is operated based on the profits of underlying assets. Therefore, through mathematical analysis and prediction of stakeholder behavior and economic behavior, it is possible to obtain an optimized price for business purposes. direction can be provided. The price model that predicts the appropriate volume of supply and demand based on the price of the direction of this project is disclosed as a result of the name fair price.
The distribution price of LQD is always determined by supply and demand. In order to maintain a sustainable and reliable cryptocurrency economic structure, the price drop of LQD due to excessive inflation or rapid change in circulation can act as a threat to the participants of the LQD ecosystem. Accordingly, the number of LQD that is paid as a bonus when acquiring ALPHA in this project is paid based on the fair price announced through the official channel. There can always be a difference between the fair price and the market price. This is because fair prices do not reflect sudden market price volatility. However, when the LQD fair price collapses due to sudden unconfirmed rumors, temporary selling in large quantities, malicious damage to the ecosystem or market disturbance by inducing price declines, the fair price is a great help in decision making by individual investors. Will be. Since the fair price is a price announced based on the exact quantity and demand of LQD circulating in the market, it can be interpreted as a price direction that reflects the diverse needs of Node participants in this ecosystem. This will definitely help you make smart decisions. Since the compensation standard of LQD is always paid based on this fair price, the gap with the sharp market price is inevitably narrowed.
7.3.2. Principles of increase or decrease of LQD circulation
7.3.2.1. Adjustment of the staking interest rate according to the increase or decrease of the money supply
Increase Circulation Factors
Decrease Circulation Factors
S1
Total daily mining
D1
Daily Node Sales Payment Quantity
S2
Quantity rewarded with NFT products
D2
NFT Product Sales Payment Quantity
D3
Token purchase by new users
a) Total amount of increase in circulation (S1+S2) - Total amount of decrease in circulation (D1 +D2 + D3) > 1,
because the LQD supply increases -> Staking compensation that can have the same effect as a drop in interest rates, NFT token allocation of service tokens to slow down the rate of increase in circulation.
b) Total amount of increase in circulation (S1+S2) - Total amount of decrease in circulation (D1 +D2 + D3) < 1,
because the LQD supply decreases -> Staking compensation that can give the same effect as interest rate increase, NFT token allocation amount of service tokens Increases the rate of increase in circulation.
c) Net inflow rate of new investors
Net New Investment Rate = D3 / D1 = Token market purchase quantity of new investors / Token quantity paid for total Node sale The goal is to maintain the net inflow ratio of new investors around 20-30%.
d) Net sales cash flow generation
Calculation that becomes the actual cash flow of the company: (D1-(accumulated mining volume for the previous period - cumulative mining volume for the current period)) + D3 (token purchase by new users)
7.3.2.2.Fair price control policy according to the increase or decrease of the rate of increase in the token supply
The rate of increase in circulation is as follows.
Threaten State
Decrease Circulation Factors
State
Slope of the flow increase curve (differential coefficient) > 1
State
The slope of the flow increase curve (differential coefficient) < 1
Response
Keep fair price above market price
Response
Keep fair price below market price
Effect
Inducing the slope of the circulation increase curve to decrease by reducing the quantity of tokens recovered during Node sale
Effect
Inducing the slope of the circulation increase curve to increase by increasing the number of tokens recovered during Node sale
7.3.3. Fair pricing model (Peter Lynch’s Fair Value Model)
Although LiQuiD Prime is a cryptocurrency project, it derives a fair pricing model optimized for LiQuiD Prime by applying the Fair Value Model used by Peter Lynch in the traditional financial market.
Peter Lynch’s Fair Value Model is as follows.
Using this model, LiQuiD Prime’s Fair Value formula was applied and developed as follows.
According to Peter Lynch, a ratio value = 1 means that the stock is trading at fair value.
Based on his interpretation of the fair value ratio, Peter Lynch has the following interpretations in relation to the fair price of the LQD of digital assets. LQD’s fair price (LFV) means that when value = 1, LQD is trading at fair price. Therefore, the following evaluation is possible with the value of LFV, and the flow of market price can be controlled through fair price determination using the appropriate fair price as an index.
Liquid Prime’s Fair Value(LFV)
LQD Value Interpretation
Correspondence Direction
When less than 1
Overestimated state
Investor warning
When 1
Fair market price state
When 2
Undervalued
Investment recommendation
When greater than 3
Very undervalued
Buy recommendation
7.3.4. Trend of Node Sales volume
If the Node sales growth rate is constant, Fair Premium Factor = 0, and if it continues to increase by 30%, Fair Premium Factor = 0.3. The goal is to keep Node sales rising to 30% at all times.
In case of a decrease in Node sales, the unsold unmined amount is transferred to the reserve pool to prevent the movement of the amount that promotes a decline in the market price.
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