Today the famous BitShares +5% "high-five" returns like a reborn Phoenix
BitShares has a new formula pegged asset (FPA) or dreamcoin called the "HERO" that is mathematically defined to appreciate annually by 5%. A few well-known BitShares old timers decided to byte the bullet and just do it. We've only donated the technical mechanism to the cause. Its up to the community to decide what to do with it - via The HERO Foundation.
The HEROic Vision
The HERO is a unit of digital currency whose value is mathematically pegged to the US dollar plus 5% APR since the Creature from Jekyll Island began printing it in 1913. Today the value of the dollar is worth less than 2 cents in 1913 dollars. The HERO is worth over $150 in 2017.
Here's the key point. Nobody in cryptodom has put a product together that matters to the mainstream public. Most don't care about cryptocurrencies and still trust the current system. But if they could earn 5%, that is suddenly speaking their language. Why should they put up with slim or negative interest rates from their banks? This, I believe, is the way to bypass the speculative altcoin markets and offer a simple, useful product directly to the masses. The HERO doesn't care about rankings on coinmarketcap. It is designed, with all due respect, to compete with fiat!
How much demand does the world’s population have for what amounts to a secure, liquid certificate of deposit (CD) appreciating at 5% APR from day of deposit to day of withdrawal?
The HERO's Unique Value Proposition
Where else can an unbanked fixed-income retiree, passbook saver, or small time investor earn 5% APR on a fully liquid certificate of deposit that they can spend like cash or send to anyone in the world in under 3 seconds? Where else can that same common person own a share in a new global financial system that is doubling in value multiple times a year?
Given this value proposition, the demand for the Hero could well be unlimited
making the value of its supporting BitShares platform theoretically unbounded.
The HERO is Honest Money. It is backed by transparently auditable equity in an income-producing company, not debt or gold long pilfered from Fort Knox. Honest money on an incorruptible, light speed, smart contract platform might just result in economic superconductivity ... Then again, it might merely deliver global prosperity and new earning power to all humanity.
The HERO could become the new flagship of the bitAsset family of financial instruments that use equity in the platform as collateral to back those assets with no counterparty risk. The consumer no longer needs to worry whether that backing will be quietly diluted, seized, or rehypothecated. They are transparently held in robotically honest escrow – visible for public inspection at all times.
Dual Asset Synergy. HEROs are collateralized by a second currency, BTS, which represents shares in the BitShares DAC, the smartcoin factory that creates them. The market value of that widely held Sovereign Software Company (SSC) grows with HEROs sold because BTS must be purchased from a fixed-supply of its shares at market prices to back them. Consider the value of equity in Microsoft, Google, Facebook, Twitter, Oracle, or Bitcoin after their similar core software gained market dominance. Now imagine the value of shares in a company that implements part of the world’s next financial infrastructure! As this company grows, its shares grow in value and can back more and more Heros. Hero demand drives BTS demand in a synergistic growth spiral. And Hero demand is unlimited.
Formula For Success
Seeing this actually implemented is particularly pleasing to me, since I first floated the idea about a year ago (to rave reviews and cat calls):
Perhaps this was in response to all that bitsharestalk.org and Telegram discussion about ways to bring back the +5% competitive edge to BitShares. Perhaps its because I've been evangelizing the idea with everyone I meet and word got out. But there may be also be unseen whales behind it, cruising deep beneath the surface. Hmmm... I have been speaking with quite a few whales lately, now that you mention it. The technically savvy familiar with the community can probably deduce who donated the HERO price feed oracle, for experimentation purposes or perhaps as a mere exercise for the terminally overemployed.
Assuming that the new public feed code faithfully implements one of my recent advocacy slides, here's how my suggested formula would have looked (in USD) if the HERO had been introduced on Dec 23, 1913 at the birth of the Federal Reserve. Who do you want managing your money?
Here's the defining python code for your analysis. Maybe someone can grab the official github version and generate a plot to see how well it matches an old rocket scientist's Excel and PowerPoint plot?
from datetime import date, datetime, timedelta
print(1.05 ** ((date.today() - date(1913, 12, 23)).days / 365.25))
On May 3 2017, this formula mathematically pegged the HERO at: $154.94
The HERO Foundation
The HERO is too big for any for-profit company or individual to run. We'll leave that to a neutral "HERO Foundation" or "Legion of HERO Supers" to supervise and maintain. They can turn on the HERO for trading when they have identified enough reliable people to run the defining price feeds.
Note that our original definition of the Hero allows for the possibility that it may need to decouple from the dollar if USD begins to collapse or gets pushed aside as some expect in the near future. Thus, the neutral HERO Foundation will need to supervise a conservative process of adapting the formula definition in a way that tracks the most stable value point of reference, +5%, in a seamless, transient free way. Any such changes should be announced far in advance so the value of the HERO is reliably predictable. Xeroc suggested the following roadmap for the future Hero Foundation to consider:
- Phase 1) Start with simple formula pegged to USD+5% that's easy to explain.
- Phase 2) Setup a legal structure with a foundation to set the asset's parameters
- Phase 3) Reach world domination
- Phase 4) Smooth transition to a basket of world reserve currencies +5%
Ideally, they should try to schedule the collapse of the dollar for sometime after Phase 3.
The HERO - Two Sides of the Same Coin
Who would want such a dreamcoin? Well, who would use a lightspeed digital currency that functions like an inflation proof certificate of deposit guaranteed to appreciate against the best of the world currencies by +5%? Who has their life savings currently deposited in retirement or passbook savings accounts earning near zero or even negative interest. Perhaps someone in the 38 million member American Association of Retired Persons (AARP)? Maybe my own mother? Nah, she's more likely to be in the following category..
Who might be willing to short it into existence? Hopefully the community can find lots of ways to use this asset and it will attract other whales and dolphins to back more HEROs and in the process generate demand for more BTS to back them. Note that, if BTS is rising due to creation of HEROs, others may find it a no-brainer to short other bitAssets into existence. The HERO could wind up driving liquidity for everything else. Place your bets.
If whales adopt the HERO as an investment strategy, Katie bar the door.
I suggest you bar your door.
There are plenty of whales out there eager to use their economic power to create a better world. Is it possible to leverage the Hero’s robotic integrity to safely harness that whale power for the good of humanity? The Hero’s platform is designed to allow a friendly whale to infuse that power safely into the Hero’s ecosystem without destroying its essential self-governing, sovereign robotic integrity. All the whale has to do is join the public in gradually buying up BTS and selling Heros to meet demand. This maintains gentle buying pressure on the market …like a benevolent fin on the scale.
The resulting confidence from predictable growth encourages investors and speculators to do the rest. Only a fraction of the Hero’s backing comes from Hero the Whale himself, and that invested equity grows exponentially with the network. This is the secret value of a “whale backed asset” – and the optimum application of a whale’s true power.
A New Metaphor
Explaining Market Pegged Assets (MPA) is always a challenge. Formula Backed Assets (FBA) are really just MPA's with a formula instead of an equal sign defining the price feed. The HERO is currently just bitUSD+5%. Still, rather than using Bookie Bob's pawn shop metaphor, why not just define it as a private decentralized relationship with the BitShares blockchain itself?
If you want to borrow a HERO, simply sign a smart contract with the counterparty free BitShares network. No one else is involved. Give those honest robots permission to lock up some of your BitShares as collateral and you get handed a brand new HERO to hold or sell. You now have an asset appreciating at +5% APR and twice that initial value appreciating with BTS. Go buy whatever you want with your double-collateralized HERO. Maybe more BTS?
The HERO does not pay 'interest' or a 'dividend' but the value of each will, by definition, gradually rise over time (at +5% APR). It works the same as inflation...in an offsetting way. This also means that the HERO growth should be treated as capital gains, not income, which is often taxed a lower rate.
The HERO can not only be backed by individuals who want to borrow them, but also by businesses that see the value of an internationally accepted currency with rock solid predictable value. The first business to support this currency will be BitShares itself. Not because HERO is run on the BitShares platform, but because the transaction fees paid in BitShares lead to a profitable company eventually. If markets react rationally, and BitShares profits by at least 2.5% a year, HERO borrowers don't even need to update their collateral position since the backing equity shares (BTS) appreciate sufficiently to back their HEROs.
So, the +5% comes mostly from
buying pressure induced appreciation in the growth phase
and increasingly from BitShares network profits approaching full scale.
The HERO is a new generation of privatizing international money, uncoupling money from the power and abuses of governments and their masters. It's business money made by businesses for use by businesses.
Stan's Seven HEROic Assumptions
I state the following assumptions without proof for your consideration:
- Mainstream Crossover. Most of the coins in the industry target cryptophyles - those attracted to the technology, philosophy, or speculative volatility of digital assets. The HERO is the first true cross-over asset for the mainstream. I think ordinary people will want it simply as a savings vehicle - without caring about its technical properties or light-speed spendability.
- Insatiable Demand. There is an insatiable demand from ordinary people for a safe place to park their savings and earn a modest bit of interest. As a boy, I could park the earnings from my lawn mowing empire in a passbook savings account and earn five or more percent interest. Why can't my grandson?
- Shorting Confidence. If there is great demand for the HERO, speculators will fill it by locking up BitShares to borrow HEROs from the network at 2x leverage -- especially if they are confident that this will drive up BTS against the decaying dollar +5%. BTS only needs to grow by 2.5% annually for speculators to break even. BTS grew by over 400% in March and April - before anyone even knew about the HERO or EOS or This Summer. There is virtually no difference to the risk of adding +5% to the shorter's equation, but there is a huge difference in the potential mainstream demand for the result. We've been BTS-wise and bitAsset-foolish... until now.
- Virtuous Spiral. If people are grabbing more BitShares to back the HERO, this fixed supply asset will appreciate in value -- creating a virtuous upward spiral. Once that gets going, lots of people will do it because lots of other people are doing it. I think this will bring liquidity to all bitAssets, not just the HERO. And all that new traffic ought to be great for everything else in the ecosystem.
- Whale Bait. I believe there are many whales out there eager to back the HERO because they are confident in their own ability to sustain growth in the price of BTS as long as they are sure there will be a demand for HEROs. That +5% feature is easy for them to believe in as a mainstream winner. The Hero could become BitShares' first Whale Powered Asset. There's only one way to find out! If we build it, they may come.
- Bitcoin Did It. Ok, so everybody thinks they can launch a successful digital currency because "Bitcoin did it". But they don't have what Bitcoin had - first mover advantage. The HERO is the first currency to assemble the powerful economic mechanisms that will drive mainstream adoption. The first mover opportunity for the mainstream is still wide open and BitShares is the only platform positioned to quickly seize it. And Bitcoin didn't have the steady buy pressure that the HERO is able to generate automagically.
- Simple Sales Pitch. Our community has been lamenting for years how hard it is to explain BitShares to a blind man on a galloping horse in an elevator. Now we don't have to. Explain the Hero. Entrepreneurs, Speculators and Steely Eyed Geeks can study the details.
Summary
Digital currencies have yet to attract the mainstream consumer. Most are too slow, complex, and/or volatile to interest anyone but technophyles and speculators. More importantly, they offer no motivating advantage to the average consumer who is not yet awake to the dangers of global financial mismanagement. So we argue among ourselves which is best. Grandma doesn't care. Meanwhile, the Hero offers something that the ordinary passbook saver is desperately seeking – a safe, stable, liquid place to earn a decent return. The Hero’s definitional formula has out-performed the dollar since the Federal Reserve was formed in 1913.
Perhaps the single biggest take-away from this post is we now have the best reason yet for people to buy BitShares. To back their HEROs! And it's been right under our noses all this time!
All in all it's just another brick in the wall.
But stay tuned. There’s more to this iceberg.
And This Summer has not even begun.
Stan Larimer, President
Cryptonomex
The Godfather of BitShares and Steemit
Previous in the Series:
The Origin of BitShares Rides Again (Parts 1-10)
Part 11 - It Is Very Cold in Space
Part 12 - Never Let Them See You Sweat
Part 13 - Cryptonomex Rears Its Head
Part 14 - The Jump to Light Speed
Part 15 - Blockchain Platform Surfing
Part 16 - Developer Freedom Trumps User Convenience
About the Author -- Stan Larimer
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