Sound money and sound economics are the cry of people all around the world

Central Bank of Nigeria report 30% bank lending rates

The Coronavirus pandemic is eating deep into the world’s economy,it has in some ways expose how it’s not beneficial to a large majority, the current economic design does not have sound money neither does it economic principles benefit a majority. The currency valuation of many nations like

Another challenge is the hurdle that citizens face when it comes to borrowing. The current banking system does not enrich the masses,customers are paying more on loans and getting less on deposits

The next challenge is financial inclusiveness,banking and fintech have come a long way but more than 2 billion people do not have access to financial services like bank accounts,loans and others. A large majority of these people use the internet and have a smartphone.

Decentralized finance is the answer to the flaws in current traditional finance,it is a whole movement that is aimed at porting the entire traditional finance sphere to the blockchain with better primitives and incentives. It is open,inclusive and permissionless. They currently offer the best rates more than banks. While DeFi is growing it’s currently limited by the shackles of interoperability,a large majority of DeFi apps are not cross-chain and are unable to access liquidity from other chains.

In this article,i will present The ACALA dollar,It’s like the MakerDAO,you lock your collateral(While crypto offers the opportunity to transact in a cheap,borderless and transparent way,we cannot overlook the flaws of volatility. A look at data from data analytics website like coingecko can see the price movements in the last 24 hours and ee top gainers and top losers

As a merchant who sells articles or any merchandise,you will welcome the concept of anyone anywhere to be able to buy from you,your customers pay cheap fees and you get your money instantly but do not welcome the idea that the item Bob paid $40 in X crypto for last week,the $40 dollars is now $20 because it’s volatility,hence the stablecoin alternative was necessary.

A stablecoin is a cryptocurrency whose value is pegged to an asset whose value is predictable and which is in verifiable custody in a predefined ratio.The blockchain ecosystem currently have the following stablecoins

A Fiat pegged : : These are stablecoins that are pegged to some fiat currencies like the USD,EUR etc.They are issued and kept in custody by central entities. Examples include the likes of **USDT,USDC,*BUSD ***etc

Asset pegged : These are stablecoins that are pegged to the value of some physical assets like gold,oil,silver etc. Examples include *digital gold project,*Digix gold.**

Algorithm backed : These are tokens whose values are determined and maintained by code. There is no central entity that is responsible for minting and redeeming it. A good example is **DAI **from MakerDAO,users can mint it by creating a collateral debt position by locking some collateral like ETH,USDC,WBTC or bought from centralized or decentralized exchanges. The DAI can then be used in any DeFi apps within the Ethereum space.

stablecoin backed : These are new entrants to the stablecoin ecosystem,they are stablecoins backed another coin or stablecoin. A good example is ** *xDAI ***a stablecoin pegged to DAI.

The last two(Algorithm backed and coin backed) solves the challenge of centralization  that comes with the first two(Fiat pegged and Asset pegged) but one thing remain unsolved and that is the challenge of chain limitation  and by that I mean that stablecoins minted on one chain cannot be useful on other chains. A good example is Tether,a large majority of its run on the ** Omni blockchain **and a other variation is minted on the ** Ethereum,Tron **and ** Algorand **blockchains.

.. A stablecoin will cease to be a stablecoin if it cannot maintain its stability..

While DAI is useful throughout the Ethereum ecosystem,it is not on other chains. The Acala dollar (aUSD) is a stablecoin designed after the pattern of DAI but it is cross chain. It maintains its stability by adding or removing a collateral type,adding or removing an oracle provider,adjusting the liquidation ratio,network upgrade,emergency shutdown and others.

Liquid staking using Homa protocol

The next thing has to do with liquidity for staking,Ethereum as at August 4 transitioned to Proof of Stake,you will be required to lock a minimum of 32 ETH while that is very good for the price of the staked tokens due to the fact that staked tokens are taken off the circulating supply which in turn breeds scarcity which ultimately turns on price as demand surges. Currently you stake tokens,those tokens will be unavailable,there will be inaccessible to DeFi users.

“Why not we take these tokens that are staked and we issue a liquid version of them”

Just like in Compound,when you lock your ETH you get something like cETH,when you lock XYZ tokens you get the compound variations of those XYZ tokens that you can use in your smart contracts and decentralized applications.

Lets take for example that you staked your tokens for 12 months and you wish to exit your position after just one month,someone else can buy that staking contract(the tokens staked and the staked position which consists of the remaining period with its reward),it just like “transfer of ownership”

Why is it necessary?

**DragonFly Research **wrote sometime ago “ ***How DeFi cannabilizes PoS security ****”*on how lending threatens the security of proof of stake blockchains. There is a huge shift from staking to lending,whatever initiative or solution a project comes up with,the users ultimately decides what will win.

.. It’s basic human nature to ask : WHAT IS IN FOR ME? and they will accept options with better incentives..

With the homa protocol,blockchain networks can be rest assured that their networks will remain secure as users will stake tokens and users can get more staking rewards and even lend the liquid tokens for more rewards or do any other useful things with those tokens.

Before now,you can only trade the tokens on a decentralized exchange if both the tokens and the exchange are built using same blockchain. Another issue is that of fees,dex are just dapps that executes smart contracts and smart contracts can only been run by payment token of the blockchain in question.

The acala dex enables cross chain atomic swaps and users can choose to pay fees in the underlying tokens,so if you are swapping X for Y in Acala dex,you can use to pay the fees in X tokens or in ACA tokens.

Andre Cronje built a multi million dollar DeFi ecosystem and is finding it hard to sustain it

We have come across many blockchain projects that ran out of funds,some had to drop out like students who dropout because of insufficient funds or maybe forced to mint new tokens and conduct a second/third fundraising event which was never part of the roadmap or whitepaper just like Substratum etc.

.. raising money is one thing, sustaining the life of the project is another thing ..

The initial plan of the ACA was to burn transaction fees which will decrease the supply and drive the price upward,it’s not good for the project in the long run. There are two ways the circulating supply of a token can be checkmated,one of them is through staking and the other is burning.

Staking entails locking away tokens for a rewards and helping with securing the underlying network through validation. It’s beneficial both to the token holders and the underlying network. You can always unbound your stakes and do anything with your tokens as you please.

Burning on the other hand entails locking away tokens in an address where the private keys into the ocean,no one can unlock those tokens. Burning tokens are good for the price as it permanently takes those tokens off the market,they will not be available to anyone.

Jared Tate DigiByte founder once complained publicly about individuals who have made enormous profits and those who have built businesses around DigiByte and who refused to give back to the DigiByte community to aid its growth. Dash was the first cryptocurrency project to implement that concept of treasury,prior blockchain projects just gave all the transaction fees and mining rewards to validators and the miners and nothing was set aside for project development. How about ***Andre Cronje ***and his painful experience.

.. a project cannot be sustained through donations but a clear cut business like approach..

In the long run, X percent allocated to the team and Y amount allocated for ecosystem development will definitely run out in the course of time,if X project processes $100000 in transaction fees every single day and allocates 10% for sustainability,it will have $10000 *356 = $3,560,000(assuming the network maintains such rate).

ACALA does not burn transaction fees but will rather put those tokens into a decentralized sovereign wealth fund**(dSWF).** The sovereign wealth fund will cater to the overall ACALA network by investing in initiatives and projects that are to the beneficial to the ACALA ecosystem. For the start,the dSWF will ensure it has enough funds to secure a parachain on Polkadot for the security of the ACALA network for the next 6 years(thrice over a 2 year period),after that,it will participate in DOT staking,investing in other crypto tokens that have utility and value.

In order to make the network functional and viable,it needs some network participants.

Collators : They are custodians of the network,they keep state transitions of the network and makes those data available upon requests.

Oracles : Oracles are entities that feed the network with information necessary to its functionality. In Africa tradition an oracle is an revered entity that people can consult for information regarding past,present and future information,so oracles will be needed to supply relevant information necessary for executions within acala. An amazing feature of Acala is that it can use multiple oracles or switch between oracles.

Liquidators : When positions get risky,liquidators will be forced to liquidate such position if the owner of such positions does not take the prescribed steps necessary to avert such liquidations.

a community without governance and rules will end in chaos and confusion

Councils are responsible for taking governance decisions in ACALA,there are general councils and specialized councils. The specialized councils are concerned with factional or departmental governance as it relates with a sub entity or domain while the general council is a coalition of specialized councils which cater to the welfare of the overall ecosystem.

The Acala network is modelled after the design of Polkadot(network design) and MakerDao(stablecoin design). We will explain in brief the different components of the acala network.

Mandala testnet : It’s Acala network testnet,it has it own ACA testnet tokens which have no real world value other just for test purposes

Acala mainnet : The ACALA mainnet is main network,it will be the frontier of development,everything revolves around this.The Acala network has its own token called the Acala token(ACA). It consists of the Honzon protocol and the Homa protocol. The Honzon protocol is the protocol responsible for the minting and liquidation of a debt position. It defines what tokens should be allowed as collateral,the risk ratio and lots more. The Homa protocol is the protocol behind liquid staking,it enables users receive and exchange the liquid versions of staked tokens.

Karura network :  It’s like the testnet within the acala ecosystem,it similar to Kusuma network within the polkadot network. It allows for forkless updates to apps and smart contracts connected to the Acala network. You will be right to say that Karura is a testnet while Acala is the mainnet,but what differentiates karura from other testnets like **Rinkeby,Kovan **etc is that it’s a testnet with tokens which have value. The karura network has its own token called the Karura token(KAR).

ACA : It’s the payment token of the ACALA ecosystem,it is paying transaction,liquidation and stability fees. It used for voting around governance decisions in ACALA(decisions around its stablecoin ecosystem etc) and in the event of unforeseen circumstances like Black Swan events,the ACA tokens will be sold off in an auction and used to cover for such losses. There will be  100,000,000  ACA tokens minted upon launch.

KAR : The KAR tokens are the tokens of the Karura network. They are testnet tokens with value.

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