Implementation of Rising Coin
Rising Coin game theory needs constant adjustment of the production cost, therefore an interface with an exchange is an absolute must. We have a few options about how to implement game theory of Rising Coin on different kinds of exchanges.
Implementing Rising Coin on a centralized exchange would be theoretically trivial but centralized on more than one front. A smart contract can set the production cost for the day, mint and sell coins through an oracle that accesses a CEX. As CEXes have order books, managing a maximum daily price would be easy as this smart contract could create a sell wall at the daily production cost.
The smart contract, the oracle and the CEX would be centralized parts of this solution, so it is not as decentralised as we prefer. We do not plan to implement Rising Coin on a CEX until we find a valid solution to centralization issues.
DEX implementation of Rising Coin will be more complex compared to the CEX implementation but highly decentralized.
Rising Coin project will initially be implemented on Uniswap as it is the largest decentralised exchange with highest volume.
Uniswap and all other DEXes which depend on a constant product formula and liquidity pools have the following characteristics:
They do not have order books, therefore they can not have fixed price walls that could act as Rising Coin’s production cost.
The constant product formula creates a trading environment where every swap order moves the price with an amount depending on the ratio of order size to the size of the liquidity pool. If the order size is not small compared to the size of the liquidity pool, this effect becomes non-negligible and creates significant slippage.
When traders exchange coins at a market rate below the production cost, there is no need to make any price adjustment. An intervention is necessary only when a large order consumes all the sellers and hits and surpasses the daily production cost. When an investor buys from the production cost, depending on the size of the position he has, he will buy from a median price that is higher than the production cost. We are more interested in the fact that such a buyer will also leave the market value at a price higher than the production cost. Therefore, a decentralised mechanism that will mint and sell new coins to bring the price back to production cost is needed.