Introducing the Universal Basic Coin
Redefining currency as we know it.
As the cryptocurrency market cap surpasses 1 Trillion Dollars and the total value locked into Defi projects exceeds 21 Billion Dollars, the time for building the foundations of a crypto future is now.
We introduce the Universal Basic Coin (UBCO): an algorithmic stable coin with the aim of replacing money as we know it, by creating a truly democratized currency.
One of the largest hurdles currently faced by the integration of cryptocurrency is just that: currency. Finite supply currency is leading to confusing fractional pricing whilst the growing interest and mass market attention is generating wild price volatility. This all acts as a deterrent to the adoption of cryptocurrencies in regular off-chain business.
UBCO aims to address and correct these issues.
With a price target of $1 and a non-capped supply, UBCO will avoid confusing fractional prices and makes the currency easier to integrate in pre-existing business. UBCO also has no collateral backing, utilising a truly ‘democratic pricing approach’, allowing the userbase to control the coin’s inherent value. We have implemented this ‘democratic pricing approach’ in an attempt to prevent long-term price volatility because, it is in the interest of the entire userbase for the coin to maintain a consistent, stable value.
Current Stable coins
Whilst previous and current stable coin attempts have undoubtedly inspired us, there are many inherent flaws in their execution.
1. Incorrectly incentivise and inadequately deter: Most current stable coins struggle to maintain a positive equilibrium due to the inability to offset selling pressures in contraction phases. This manifests as spiralling prices which are a by-product of systems which incorrectly incentivise and inadequately deter. Most coins incorrectly value what user actions are most important, underestimating early interaction and instead rewarding ‘general’ actions. The solution is to incentivise early action and deter delayed interaction as this will do the most to offset falling prices. The best way to avoid a price spiral is to not have one in the first place.
2. Unnecessary capital risk: The trend of creating expiring assets is peculiar. If the aim of the system is to stimulate users to destroy their active coin holdings, why then does the system put them at such risk when they do so?
For example:
A contraction phase occurs and a user destroys all their active holdings for stagnant coupons. They are now banking on the rest of the system to follow suit.
If the rest of the userbase does not choose to destroy their active holdings and instead trade the coin for profit on the external market, the user is now stuck and is being penalised for the rest of the users not acting accordingly. Alongside this, the lack of deterrent to ‘extra-system’ actions actually places those who have not converted their coins in a better position, they will have the option to maintain liquidity, trade the coin or just wait for a price rally and convert just before (at the same rate as the early converting user) to maximise profits. Now, some may say the solution is to partly convert and partly stay liquid, well then that is a flaw in the framework as it is encouraging an anti-system action.
For this reason, we do not believe in exposing users to this unnecessary capital risk. Expiration and stagnation are not ways to reward users when they act in the best interests of the system.
3. Finally, most ‘stable coins’ are not actually designed to be stable coins. With this being said, we cannot deny that many of these projects are useful and provide solutions for many other Defi spaces but we feel their ‘stable’ coin existence is merely the result of the current Defi trends.
Why algorithmic?
Coins backed by assets are inherently as stable as the backing asset and massive collateral crashes will leave these ‘collateral backed’ coins devalued. Another problem is the vulnerability to mass withdrawals following drastic price changes of the backing asset.
We have opted for an algorithmic approach as, although more experimental, is realistically what will be required to truly replace currency as we know it.
Our aim is clear — to create a stable coin which will replace geographized currency use worldwide. A currency accepted anywhere, in any place, at any time. The currency is not backed by any asset, it is the userbase who value the price of the coin. This is what we previously referred to as: ‘democratization of currency’ which will reduce large price swings and introduces a resilience to economic changes. The people, collaboratively, in their use of the coin will create the inherent price. We have chosen to use a price target of 1 UBCO = $1 as this will allow a seamless transition into the mass market whilst also helping to avoid silly fractional pricing and increase the ease of integration for small business. If the userbase however, decides a different price target is more appropriate then the system will follow.
Universal basic coin — How it works
UBCO will utilise an elastic supply to address changes in demand and price.
· Simply put — If we need to bring the price down we increase the supply, if we need to raise the price we reduce the supply.
The formula below is used to modulate the increase or decrease in supply:
Δsupply = Current supply * (current price — 1)/24
This just means that the current supply in circulation and the current price will decide by how much the supply is changed.
· Price > 1 — system will increase the supply
· Price < 1 — system will decrease the supply, so will stop creating new UBCO and the stabilisation protocol will begin.
There will be 24 time units in a day in which change will occur. An increased number of time units allows for better response to price fluctuations. Time units may also be refereed to as ‘Epochs’.
This formula is not intended to be final. With increased data acquisition and adaptation, other factors will need to be addressed and we hope our community will be involved in researching and carrying out these changes.
Expansion & Contraction
There are 3 main phases of the UBC lifecycle –
1. Expansion
2. Contraction
3. Equilibrium
Expansion Phase
This is when the supply needs to be increased as the price of UBCO is rising. Currently this is when the price goes above $1.
This increase will be calculated using the ‘change in supply’ equation above.
How will we distribute this increase in UBCO?
Personal fund
Each user will have a personal fund (we have decided against the misleading title of ‘bond’ as bonds usually represent loans and your personal fund is not a loan). All UBCO present in personal funds during equilibrium or expansion will receive a baseline 4% return every 720 epochs (approximately every 30 days). Alongside this, personal funds will receive 50% of all newly generated UBCO every epoch.
Providing liquidity
Each user also has the option to provide liquidity to the system through a range of currencies. Providing liquidity means providing the system with financial ‘flexibility’ which will allow users to convert their UBCO to other assets with ease and without greatly affecting market price. *This will require the user to both deposit UBCO and the equal amount in the currency they are providing liquidity for.
As liquidity is an active process versus the more passive personal fund, the baseline return for liquidity providers will be 8% every 720 epochs (approximately every 30 days). Alongside this, liquidity providers will receive 50% of all newly generated UBCO every epoch.
Contraction Phase
The Contraction phase occurs when the price is below $1 — new supply stops and existing supply needs to be reduced via the stabilisation protocol
Enter the stabilisation protocol
The stabilisation protocol consists of:
1. UBC liquidation fee
2. Treasury Bonds
3. Bond liquidation fee
UBCO liquidation fee
The UBCO liquidation fee is formulated as follows:
Fee (%) = (1 — Price)/2 * 100
So assume the price of UBCO is at 0.7 and you want to sell 100 UBCO, the liquidation fee is as follows:
1–0.7 = 0.3
0.3/2 = 0.15
0.15 * 100 = 15
You will be charged 15% so 100–15 = 85: the sale will only consist of 85 UBC
The fee charged on all transactions in contraction phases will be sent to the autonomous fund (more on the autonomous fund to come)
Treasury bonds
Treasury bonds are guaranteed bonds. Capital is not at risk in a treasury bond purchase but is open to penalisation if used inappropriately.
Treasury bonds are used to incentivise users to convert their UBCO into treasury bonds (simply a guaranteed IOU which gives you more then you paid originally).
Each treasury bond will come with a premium, with emphasis on users converting their UBCO to bonds earlier rather than later, and being incentivised accordingly. The premium is calculated simply as:
Reward factor = 1 + Price
Simply put if the price is 0.9 when you purchase bonds then the reward factor is:
1 + 0.9 = 1.9
This means you will receive 1.9x the original amount you purchased bonds for.
This reward factor defaults to 1.2 once the price drops below 0.5 and will not reset until expansion phase is reached
These bonds hold no expiry date. We feel there is no justification for the capital risk that comes with expiration.
Those who hold bonds for longer during contraction phases will receive further return on the bond value. Every 24 epochs this will increase by 1% maxing at 4%. This will be paid as a lump sum on return to equilibrium or expansion.
Bond liquidation fee
We also do not believe in ‘stuck’ capital, this not only brings stagnation to the system but as this is still an experimental framework, un-useable tokens are not very fun or interesting and can make the user feel an absence of control over their capital.
With this being said, outstanding bonds are necessary in returning the system to equilibrium as they will reduce the available supply of UBC to the system. Just as those who sell UBC in a contraction phase are penalised in the form of a fee, those who attempt to call their bonds in a contraction phase, in return for UBC, are also acting against the system and are also penalised:
There will be a 25% fee on all bonds called during a contraction phase — All bonds called early (in a contraction phase) will be reverted to the original purchase value.
This fee is then distributed amongst the current bond holders as active UBCO, as a reward for holding bonds during contraction.
Equilibrium phase
The Equilibrium phase occurs when there is prolonged price stability (so the price is hovering around $1 consistently)
Personal fund users will receive 2% return every 720 epochs (approximately every 30 days), rising by 2% every 720 epochs of stability elapsing until a max of 10% Is reached
Liquidity providers will receive 4% every 720 epochs (approximately every 30 days), rising by 2% every 720 epochs of stability elapsing until a max of 10% Is reached
What is the autonomous fund?
The autonomous fund is a self sustaining fund. It is not controlled by anyone and has set aims. It receives 100% of fees from all sales of UBCO during contraction phases.
The aims of the autonomous fund are:
1. Aid the honouring of bonds
2. Self sustained growth
3. Continued development
Aid the honouring of bonds
The UBCO in the autonomous fund will be used to aid bond redemption as soon as redemption is available (price at or above 1). This will help address the issue of prolonged expansion phases being required to honour all outstanding bonds and some users finding themselves unable to redeem before another contraction phase is started.
Self sustained growth
In times of prolonged contraction the fund can convert all its UBCO to bonds. These bonds will be set at a defaulted reward factor of 1.2 and will only be paid out once all outstanding bonds are fulfilled. This reduces supply of UBCO further and also allows the autonomous fund to grow with the rest of the system. This will continually provide larger cover for outstanding bonds without disrupting the supply of UBCO as the autonomous fund can be considered a neutral store of funds.
Continued development
We have suggested 5% of the total fund to be distributed every 720 epochs (approx 30 days) to a community wallet which will be used to fund continual development as UBCO increases in adaptation and popularity.
Rewarding those who believed in us:
Seeding and founders phase
During the initial seeding phase we will need to greatly increase the amount of UBCO in circulation. Alongside this, we will also be rewarding those who participated early. For this reason, those who participate in the ‘founders phase’ will be rewarded with the following:
Personal fund with a 5% return on fund value PAID EVERY 24 EPOCHS (approx. 1 day)
Liquidity providers will receive a 10% return on fund value PAID EVERY 24 EPOCHS (approx. 1 day)
We believe in rewarding those who have believed in us.
The founders phase will only occur for a limited time and only to those who interact early. Following this phase there will be enough liquidity and circulating UBCO to fulfil most trade scenarios efficiently. The founders phase will not be a way for us to pay ourselves, it will be open to ALL who participate early and an announcement will be made before it begins (so join the social media links below).
Rewarding early participation and involvement
As mentioned above, the ‘founder phase’ users will be provided with many perks and rewards for their early involvement as a gesture of thanks from us. Early users are also very important to the initial development of the system and incentives to use new currencies have been used by governments in the past.
Rewards and perks include:
· Access to the initial seeding phase
· Increased return on personal fund and liquidity provision outside of founder phase
· No fee for early bond calling
· Priority bond redemption
· Increased returns on prolonged bond holding (6% max)
· Spontaneous direct UBC rewards for early users
These are just some of the ways we hope to pay back the early support and we hope to add more rewards to this list in the future. So come and drop us some more ideas!
How will we get paid?
We do not hide the fact that the team should be rewarded for the work they do.
Just as early users are rewarded, founding contributors should also be rewarded. We aim to do this in the exact same way early users will be rewarded, with a seeding phase of temporary increased return. Each ‘founding contributor’ will be paid 1000 UBC. That’s it. They then must interact with the system like everyone else to gain an increased return. This also means that any early users who purchase more then 1000 UBC will be able to generate a greater return then any of the team.
Why would I get involved if the algorithm works to stabilise the UBC price as $1?
The long term aim is stability with UBC replacing currency as we know it. However, the initial stabilisation phase is filled with opportunity. The exact reason you know the algorithm is working towards $1 is why you should join: it makes the market predictable. We do not shy away from the fact that many people will be involved in UBC initially to make money nor do we discourage using the opportunity to make money. We trust the algorithm and fundamental framework to shine through in the long term, but the early phase will be filled with volatility and opportunity, we hope many lives are changed for the better during this historical shift in the economic world as we know it.
Summary:
The Universal Basic Coin has been designed to create a true long term stable coin. It works off the basic principle of an elastic currency and removes the use of collateral assets to create a user defined ‘democratised currency’. We have explained the different mechanisms the system adopts to stabilise the price of UBC including the novel ‘stabilisation protocol’ and how it will be used to create a self sustaining framework. We aim to reward those who get involved early and actively encourage anyone to capitalise on the early opportunity UBC will provide. We hope to form a strong community which will continually analyse and implement improvements to the system, as we begin to change the economic world as we know it.
UBC is looking for founding members (access to seeding phases and all rewards!) to help with the development of the system including but not confined to:
· Developers and developmental leads, Ui design, Graphic designers, Content creators, Moderators, Data analysts
Join us on:
Email us at ubcoin@protonmail.com
