Klondike Finance

Klondike Finance, Algorithmic synthetics platform. Our goal is optimization of stabilization mechanisms implemented by Basis Cash. According to the model, it is possible to achieve the $1 target value of the token by implementing a mechanism for controlling the money supply by buying or selling bonds. However, the rapid growth of the money supply caused by active liquidity mining leads to an imbalance in the system: the growth of the bond market volume does not keep pace with the growth of the money supply. When the price deviates down from the peg — the required number of arbitrageurs ready to buy the bonds is not found. Liquidity mining turns out to be a tool that gives adoption to a new token, but it also plunges it into a “resource curse” that destroys the price stabilization mechanism. In the real sector we will see similar examples in resource economies (for example, oil exporting countries): in the event of an increase in the price of oil, these economies receive huge profits. However, these profits do not lead to economic growth, but, on the contrary, destroy domestic non-resource sectors of the economy and lead to inflation and devaluation of the domestic currency. The economy cannot utilize “extra money”. Nevertheless, a way out of this has long been found — the creation of a stabilization fund that stores “petrodollars”, preventing them from accelerating inflation and which can be spent in case of crises (Norway’s oil fund, reserve fund in Saudi Arabia, UAE, Russia etc.). We propose to implement such a structure — a stabilization fund, which absorbs assets at the time of active growth of the money supply at the time of active farming phase and which can further use these assets to maintain the exchange rate at the time of contraction after the end of farming.