Vault Utility
If anyone can add any data to the system, how do we make sense of it? We make sense of the data by looking at the Vaults associated with Atoms and Triples. Vaults provide two important utilities:
- By allowing people to stake and unstake, the accrued value in the vault represents the strength or “signal” of its underlying Atom or Triple.
- By utilizing Bonding Curves, people are economically incentivized to signal their support of data that is both true and useful because they are rewarded for staking on “popular” data early.
Beyond this simple approach to signal, we can also look at the activity of the Vaults to determine if something happened which changed peoples’ perspective. For example, we can look at our Vaults and see that the amount staked on “Bob Is Friend” went from 1000 Ether to 0.1 Ether - which indicates that some new information probably came out that changed peoples’ opinion on Bob. If we saw the same type of activity on the “Bob” Atom itself, we might infer that “Bob” has suddenly become culturally irrelevant - which means that all signals pertaining to “Bob” are now considered unimportant by the majority of stakeholders.
Similarly, we might look at the 24 hour trading volume on our vaults and see that the highest 24 hour trading volume is on “Bob.” This would indicate that “Bob” is becoming very popular, so we might want to find out more information on why.
1. Deposits/Withdrawals
You may Deposit into or Withdraw from a Vault at any time. When you deposit, you put Assets in and receive Shares - and when you Withdraw you redeem Shares for Assets.
Depending on the Bonding Curve you are using, the shares exchange ratio may be different at the time of Deposit than the time of Withdrawal. When using the Pro Rata Curve, this ratio should allow you to Withdraw the same amount that you Deposited, minus nominal fees. But with any other curve, the redeemed amount may be higher or lower than the deposited amount depending on the economic activity of the Vault in question.
2. Bonding Curves
Bonding Curves facilitate a decentralized and algoritmic approach to pricing - removing the need for traditional market-making activities like liquidity, with prices reflecting the current state of supply and demand within the Vault.
The purpose of using Bonding Curves is also to provide economic incentives for people to predict signal. With a share price ratio that rewards more shares early on, early stakers can profit by predicting truthiness in the system.
For example, if the share price starts off low and increases on a curve, you might buy 100 shares for 0.01 ETH. Then other people might come in and purchase 900 more shares for a total of 0.99 ETH. This means that there are 1000 shares in total and 1 ETH in the pool - but because you staked early, you own 10% of the pool, meaning that you could cash out on your shares for 0.1 ETH - making 0.09 ETH in profits.
All Atoms, Triples and Counter Triples have what’s called a “Pro Rata Curve” which is linear. This Pro Rata Curve is selected by default when Creating, Depositing or Redeeming assets into an Atom, Triple or Counter Triple. It maintains a linear share price ratio across the board, thus minimizing any risk in staking or redeeming. If you would like to engage in more exciting economic activity, you can select an alternate Bonding Curve when Depositing or Redeeming from an Atom, Triple or Counter Triple.
The Bonding Curves use a Registry, which new curves can be added to over time. This works by giving all curves a common interface which converts between asset and share price with a variety of mathematical procedures.
Stay tuned for deep dives on the Bonding Curves we currently support.