Introducing StandardDAO: The First Standard Digital Asset Protocol
Most cryptocurrencies lack intrinsic value and are only backed by the token/coin itself. This leads to uncertainty within existing holders and prevents wider mass adoption.
Much of the crypto sphere believes that Bitcoin and Ethereum along with many others are deemed currencies when they are more so commodities. Most traditional investors can agree that both BTC and ETH along with the others do not fit the term “currency”, and actually are programmable stores of value distinguishable from one another which is why they can be traded as futures. With the influx of new investors brought in by overall crypto adoption as well as outside investors looking in, these issues are of an all time importance. The understanding of these seemingly nuanced distinctions by the masses is imperative if crypto is to be pushed in a distinct and forward direction.
What attributes deem the correct usage for “cryptocurrency”?
To us, the term “cryptocurrency” is a generalization for all blockchain related projects rather than a true representation of what they are. The perfect attribute for a digital asset, as OlympusDAO puts it, is one that “holds the same purchasing power today as in 50 years”, as well as something that holds a strong foundation for which an economy can run on. We completely agree. Today, there is a need to fit that role. Without something that can provide a backed store of value for decades to come, the issues shared above may never be clear by the majority.
The main solution today for an independently valued digital asset is the algorithmic stablecoin model. It is essentially having an over-collateralized basket of reserve assets that ensures the coin will maintain its dollar peg, by always correcting the market when the value goes above or below its price peg (generally the USD). This idea was a pivotal piece of innovation in aiding the expansive growth seen in DeFi, but there are issues with it. One would think that a “stable coin” is considered a store of value because it’s pegged by the U.S. dollar and will hold its value in the future, but that’s not true. FIAT currency always has and always will be constantly devaluing since it is not backed by real world or digital commodities. The U.S. dollar, for example, has lost 90% of its purchasing power since 1950 and is clearly not a true store of value (See figure below). How much longer will USD and dollar backed stablecoins be able to maintain their reserve-currency status at this rate?
The answer to this is unclear but it is obvious that a dollar pegged “cryptocurrency” is not a healthy and sustainable way for DeFi to reach the citadel. Let’s change that.
With a brand new asset class that fixes these issues — Standard Digital Assets.
$SDA token will be the first Standard Digital Asset to launch and backed by the Standard Treasury which will be ran by StandardDAO. StandardDAO is building a diversified and decentralized treasury of Standard Digital Assets in an effort to bring measurable value backing to a dynamic programmable investment vehicle by holding both real world and blockchain standard assets in its reserves.
The innovation of Standard DAO over the algorithmic stablecoin model is to create not a stable coin, but a floating price reserve asset inspired by OlympusDAO that is backed by risk-free value of treasury assets, rather than pegged to the US dollar.
To do this, Standard is building upon the fundamentals and code of OlympusDAO with a few key distinctions:
- We are launching the first Standard Digital Asset.
- We are building a treasury with Standard Assets.
- We are building a community of crypto natives and new entrants to the space through encouraging learning, innovation, and winning together with exposure to Standard Assets.
A treasury with standards
Each SDA token is backed by a basket of assets identified by their given vertical called “Standard Assets”. We will keep a balanced ratio of higher and lower-risk investments, and our portfolio holdings diversified among various asset classes and across sectors in order to hedge overall risk. This exposure to non-correlated assets helps establish long term viability of our treasury. They are defined by three key features called simply, ‘The Standard Test’:
- An asset that has proven it is “Too Big to Fail” by showing staying power through bull and bear cycles
- Top asset in a given vertical by utility and/or market cap
- Shows consistent growth and adoption over time
Every Standard Asset in the treasury must fit into two or more of these key features.
We have identified the first list of treasury assets that we consider to be “Standard Assets” according to this test:
While it is a short list of assets in the beginning, we plan on adding exposure to Standard Assets of the energy, art, real estate, supply chain, and many other major sectors as they move on-chain.
Gold compared to other assets during market busts fairs much better:
S&P 500 (Red) vs. Gold (Yellow)
As it is a far more mature asset, the price of gold is not nearly as volatile as the emerging crypto market as a whole, reflected in the performance of gold versus Bitcoin and Ethereum below.
Bitcoin (Orange) vs. Gold (Yellow)
Ethereum (Green) vs. Gold (Yellow)
Gold shows strength during market downturns in both the stock market and crypto market. The vertical lines on each chart represent areas of significant drawdown for each asset vs Gold: 40%+ drawdowns on the S&P500 (Red), 60%+ drawdowns on Bitcoin (Orange), and 60%+ drawdowns on Ethereum (Green). When the overall market is down, gold holds its value extremely well, sometimes even increasing in value. This makes it an essential asset to hold in a treasury as a reserve asset for StandardDAO. This small example also shows how powerful holding $SDA can be in times of market busts comparative to other assets.
This is just the start
Standard DAO is out to build a robust and diversified treasury backed by a diversified basket of Standard Assets providing increased stability over boom and bust cycles. We aim to provide stability to OlympusDAO and all asset types across verticals in and out of the blockchain space. One of our mandates is to identify, acquire, and incubate Standard Assets across all verticals. Just like Olympus, Standard will utilize a policy-controlled currency system, in which the behavior of the SDA token is controlled at a high level by the DAO. Of course as more verticals like Energy, Real Estate, Art, and others continue to move on chain and gain adoption, the DAO will vote on more Standard Assets to be added to the treasury.
Welcome to the paradigm shift.
StandardDAO is a true store of value backed by a basket of Standard Assets. With this backing of the strongest real world and digital assets, Standard delivers sustainable yields and growth over assets that are not backed in such a way. Join the conversation below.