Decentralized Gold Standard for the New Digital Capital Markets
Since the inception of human civilization, access to capital has been a determining factor in the success, domination, and survival of communities. This was historically manifested as intense competition over food, territory, serfs, or scarce resources: ceramics or metals, such as tin and copper. Throughout time, precious metals such as gold and silver have become a universal store of value. As humankind evolved, gold and silver were replaced by bills of exchange, while ownership of the resources of organizations that mined those precious metals became equity, representing an ownership share in these organizations. This is how Capital Markets first appeared. As our civilization and all aspects of human and social relations are becoming increasingly more intertwined with the new digital world, the Capital Markets themselves are becoming more detached from the “real markets” of goods and resources. In the digital world, almost no restrictions exist on digital resources and, therefore, on opportunities for organizing communities based on various economic incentives, gamification, art and creativity, or simply some viral potential. All these aspects are now manifesting in the industries of cryptocurrency/DeFi, Play2Earn, NFTs, and fan tokens, respectively. Thus, new, more complex Digital Capital Markets appear and expand.
In this article, we describe an approach to automated management of so-called POL (protocol-owned liquidity), which is a key concept behind DeFi 2.0.