Security Reserve (and notes)

A percentage of investment goes to Security Reserve, and also a tax/fee that comes out of generated profits.

The Security Reserve is a pool of automatically diversified stablecoins that act as a buffer protection against coordinated attacks on Kingsilver.

Maybe the reserve is actively managed too… but ONLY between stablecoins and Bitcoin. So the idea is that it would be predominantly Bitcoin in a bull market, and stablecoins in a bear market.

The Security Reserve could also allow stop-loss functionality that would otherwise be impossible with the arbitrage mechanics in a fast falling market. Perhaps the trader sells to the Security Reserve instantly with zero slippage, and the Security Reserve them opens to arbitrageurs. This means that any slippage is absorbed by the Security Reserve, and not by the funds.

This limit the damage of an attack that causes prices to plunge, as losses would only be realised in the Security Reserve, not in the Kingsilver token.

Perhaps the Security Reserve is always maintained at 50% the value of all of the assets under management, so that the system is fully protected against an instant 50% drop.

Security-wise, it is probably wise to compartmentalise such a huge amount of tokens—potentially billions—into multiple pools, which security mechanics that would mean if pool is compromised by hackers, even if from within Kingsilver, the other pools are safe.

Maybe there are two Oracle systems… one is internal, and requires levels of initiation and reputation to qualify to take part in… and that is where price is determined between the managed tokens and the Security Reserve tokens. And the second oracle system is public facing where anyone can engage in arbitrage, and this is where the Security Reserve tokens are swapped for stablecoins.

Perhaps the Security Reserve is a stablecoin pool that is also the bounty pool for system vulnerabilities. Rather than attack the vulnerability, we could try to make it even more profitable to work with Kingsilver to test and resolve the vulnerability, than to exploit it themselves.

Apparently the Terra attackers profited by $800 million… imagine if there was a way they could have profited by $900 million instead by working with Terra?

We could award 110% of the money that such a vulnerability could have cost Kingsilver in the worst case scenario.

For this we would need to ensure that the Security Reserve was equal in size to the total value of Kingsilver's collateral.

This is hugely economically inefficient… so hopefully we can think of a better way… or think of a way to out that money to work somehow… maybe with short term lending, flash loans, etc… maybe that is how we create margin for our traders… instead of needing liquidity providers, we simply borrow from our own security reserve…

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With that kind of bounty up for grabs, the vulnerability would have also likely have been discovered a lot sooner.

And vulnerability collaborators could also be celebrated within the Kingsilver metaverse. People desire money, but they also desire fame and status, and we could go out of our way to award people that who contribute to Kingsilver's security. They could be given prime real-estate and special avatars within the Metaverse.

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Perhaps it all goes into the 'Unmanaged Reserve', and we always loan out the full balance of the Unmanaged Reserve'… like a bank loans out its deposits? Except instead of the interest on the loan being earned by the bank, and to a smaller degree, the depositors, in Kingsilver that interest is earned by the Kingsilver token (the gains are simply added to the Unmanaged Reserve). This means we can loan money out, if we want, with no interest. This would be very attractive for traders. A trading platform where they can margin trade with zero interest! Then again, we need to charge some interest, otherwise there is zero reason for traders to pay back their loans. We could see what the typical interest rate is and offer half, or a quarter. The rationalisation for charging higher interest… to be in line with other platforms… is that the profits would go straight into the Unmanaged Reserve, which increases Kingsilver's value… and the more mechanics we can build into the system that increases Kingsilver's value, the more people will want to buy Kingsilver, which further funds the Unmanaged Reserve and gives us more collateral, and so more incentive to stake $ASLN, which creates more utility for $ASLN, reduces selling pressure on the market, which drives the price higher, which makes more people want ASLN.

So, with capital gains tax for investment funds, we can grow the UR, and then build profitable services off of that capital.

Does that mean that we can't build a lending platform for end-users/investment funds to allocate capital to so funds and citizens can earn interest?

Perhaps we have both.

Perhaps when the value of Kingsilver goes down, due to poor active management, the Security Reserve is used to keep Kingsilver stable while the poor performing funds are punished by stakers moving their ASLN stakes to better performing funds. If we can build this into the system, to the degree we can ensure that Kingsilver will never lose value… is the degree to which we ensure Kingsilver will surpass Bitcoin as the #1 cryptocurrency in the world, and the true reserve digital asset.

ASLN staking

The default mechanic, without putting much thought into it, is that an equal value of stablecoin is allocated to a fund from the UR when ASLN is staked. $1,000 of ASLN staked, $1,000 USD is allocated.

The problem with this is that in a bull cycle, there is an incentive to NOT stake, but to wait for prices to continue rising so they can get the best possible results from their stake.

Or is that a problem?

When prices are falling, there is an incentive to stake, to lock in the best deal… this then removes selling pressure from the market… which is what you want in a bear cycle.

With this mechanic, in a bull cycle where the value of all crypto is going up, we would see Kingsilver being bought a lot more, since its value would be going up due to the rising value of the collateral, while at the same time the amount of ASLN staking would either decrease, or at least not rise at the same rate as the Kingsilver purchasing… and so in a bull market we should see the expansion of the UR.

In a bear cycle, the collateral would likely not grow as fast, or could even fall in price… which lowers the desire to Buy Kingsilver… and we could even see Kingsilver being sold… and so the unmanaged reserve would either grow much slower, or shrink. If Kingsilver's actively managed collateral can actually GROW in a bear cycle, then this could actually attract MORE Kingsilver buyers than in a bull cycle, as investors would seek refuge, not in stablecoins, but in Kingsilver, which could be the only crypto to be appreciating in price.

ASLN would also be staked a lot more… since stakers would want to get the best deal they could, and so would stake it as soon as they bought it. And so a bear market would result in more and more selling pressure being removed from the market.

What we need to design into the system is a way to ensure that there is ALWAYS more supply in the UR than there is demand for ASLN stakers. Perhaps we need to ensure a healthy ratio… how would we attract more Kingsilver buyers when we need more UR supply, and attract more ASLN stakers when there was an over supply?

We can offer Kingsilver staking rewards… but we can't offer yield from ASLN, as that will have a limited supply.

Perhaps when we want to attract more Kingsilver buyers we increase the yield on Kingsilver staking, and that yield comes from capital gains.

So we create a dynamically adjusting interest rate for Kingsilver stakers… and an AI/algorithm that learns from the results of the interest changes, and so adjusts them based on what will yield the best result for the Kingsilver UR / ASLN staking balance.

And perhaps we offer return MORE fund gains to the UR (and thus increasing the value of Kingsilver) when we want to attract more supply to the UR, and more gains to ASLN stakers when we want to attract more ASLN staking—and that share in the gains is automatically and dynamically adjusted according to an algorithm.

Perhaps we could involve a future prediction market where we actually have analysts competing to predict future upturns or downturns in the market, and so the algorithm can factor in what the best analysts are predicting for the future, and actually pre-empt market conditions, rather than merely react to them. 'Winners' of the future prediction—i.e, the market does what they predicted—perhaps could earn a percentage of the gains for a set period.