This is my MyStateraProject writing entry.
Digging into this project brought some excitement back into my life due to the fact that this project seems to offer something that is slightly different from anything I have seen before.
In MyStateraProject writing entry, I decided to provide you 5 things that you need to know about Statera before investing into it. At first glance, this stuff can get quite tricky especially if you have never studied (token)economics (it was very confusing for me initially). Hope this explanation helps you all!
Without further adieu, I bring to you, Top 5 Things You Need To Know About Statera Before Investing.
1. What Is Statera Exactly?
This is the all-important question and can get quite confusing when you read the tagline on their homepage;
“A smart contract Indexed Deflationary Token (IDT)”
What does that even mean?
Well, let me break this down for you today.
The entire point of the Statera project seems to be to lower the barrier to entry for users who would like to use advanced investment tools.
You see, it can be more easily understood if we call Statera a self-balancing index fund. This is a type of traditional financial vehicle that has a pre-constructed portfolio that is weighted and then tracked to maintain the weightings manually.
For example, a fund could consist of GOOGLE, APPLE, and TESLA - all at a 33.3333% weighting each. When the prices of these individual stocks change, the portfolio has to be rebalanced through a stockbroker which costs fees.
Statera, on the other hand, is a self-balancing index fund.
The “self” part of this terminology is derived from the fact that it is completely driven by Smart Contracts on the Ethereum network. The balancing part we will get to in another question below.
The entire idea of Statera is to allow users to come and invest in these self-balancing index funds in a simple fashion which will allow users to maintain a strong cryptocurrency portfolio. To invest, users add funds into the liquidity pools that Statera currently offers which are then locked away.
Whilst locked away, the balancer holds the weightings of the pool which consists of 5 tokens;
Chainlink 10%, Bitcoin 10%, Synthetix 10%, Ethereum 30%, and Statera Delta Token ( 40% in total - 20% STA 20% ETH).
This portfolio is designed to reduce volatility and increase positive price pressure which is explained in detail in the “burning mechanism” section.
2. What funds do Statera currently offer?
Currently, Statera has two options for investing in the ecosystem;
- The Phoniex fund
- Delta Token
The Phoneix fund was created by the team and it holds the four currencies mentioned above along with Statera itself.
The Delta Token is a simpler investment fund which just contains a 50/50 split between ETH and STA.
3. What is this burning mechanism?
This is a very important aspect as it produces the deflationary aspect of the project.
Remember that Statera describes itself as “A smart contract Indexed Deflationary Token (IDT)”.
The deflationary part comes from this burning mechanism which takes 1% of the value from every Statera transaction and burns it. Over time, we see a decreasing supply due to the fact that 1% of every transaction is burnt.
Statera explains this by stating price is a direct function of the interaction between supply and demand. If the demand goes up and the supply goes down it should result in sustained price increases over time. Even if the demand stays constant and the supply goes down - the price will also increase.
The deflation aspect also creates a need for arbitrage in the Balancer Pool due to the changing prices when the supply is adjusted. Each time a trade is made to rebalance the pool, Statera tokens are burnt. This affects the supply which, in turn, affects the price and causes another rebalance in the pool to start the entire process again. This effect creates a feedback loop of positive price pressure.
It also incentives a stronger loyalty to the token as early adopters see a reduction in supply over time causing the value for their investment to increase.
4. What about all of this self-balancing?
This self-balancing is not new at all to cryptocurrency. In fact, Balancer Exchange became the first project to offer a self-balancing portfolio vehicle and it seems that Statera is using this to their advantage - and rightly so! The tools in the cryptocurrency world are here to be used by everybody.
The Phoneix Fund is held on a pool on the Balancer platform itself. The great thing about self-balancing portfolios is the fact that you don’t pay a stockbroker to rebalance for you, instead, you get paid yourself.
You see, the liquidity pool is also used as a mechanism for decentralized exchanges. Users deposit into the pool which is a basket of tokens. When other users want to come and swap between any of the tokens on the pool, they are free to do so by utilizing the liquidity provided.
When the prices of the tokens change, the weightings in the pool are skewed and need to be rebalanced.
To do this, the pool will buy and sell between the basket of tokens on the exchange. When these trades are made, the liquidity providers (those that invested in the Phoneix Fund) are paid to allow the swaps to facilitated.
Fantastic isn’t it? Rebalance for free and get paid in the process!
WIN-WIN on all fronts!
5. Can we trust the smart contract?
Although it is very hard to find every single potential attack vector I can honestly say that - Yes, I feel we can trust the Statera smart contract. This is due to the fact that it has been certified as secure by a well-respected third party auditing firm called Hacken.
The founding team has verified that they can not control the contract anymore, mint any new tokens, or change the code. This is equal to a true vision of decentralization.