In a stark contrast to the volatile cryptocurrency market trends in 2017, 2018 has oddly seen the entrance of a variety of stablecoins.
While the underlying demand for these dollar-pegged (or other stable asset pegged) coins seems to be tepid at best, platforms such as Gemini and Circle have launched the new assets to provide users access to somewhat steady footing.
However, a Boston-based COSIMO Ventures-backed company Oneiro has something a little different up their sleeves with ndau. ndau (pronounced en-dow and short for “endowment”) is marketed as “the world’s first buoyant digital currency”, and according to its site, is “designed and optimized for a long-term store of value. ndau has the freedom to rise while mitigating downside volatility.”
The asset seeks to combine stability with growth, a concept strangely distant in the lexicon of cryptocurrency traders.
We got a chance to speak with Ken Lang, the CTO at COSIMO Ventures and early ndau collective member. Prior to COSIMO, Lang served as CTO and on the Board of Directors at Vringo (renamed Form Holdings, NASDAQ:FH), served as Adjunct Professor at New York University, was COO at Keane Advisors where he worked on new technology and algorithms for private equity, trading, and asset allocations, founded Lightspace and took it public, founded WiseWire and sold it to early search engine Lycos in 1998 and served as CTO.
Lang was also in the center of a patent fight with Google and, according to his LinkedIn, two of his forty published and issued patents were proven in “US District Court to be responsible for over 20% of Google’s revenue.”
Can you tell us about your background and your journey into the cryptocurrency space?
I was a computer scientist working on a PhD at Carnegie Mellon in the 1990’s, and from there began a machine learning tech startup that we sold to Lycos in 1998, where I served as CTO. A number of tech and financial startups later, my network of collaborators and I had accumulated the full suite of expertise needed to really dig deep into the challenges raised by the invention of Bitcoin.
We accumulated Bitcoin then but also began to see how much bigger the cryptocurrency market could be with fresh approaches to the issues that held it back. These ideas on fresh approaches then led to the creation of ndau.
In your opinion, what key elements are missing for crypto to go mainstream? And in what sort of timeline do you believe that crypto will go mainstream?
Crypto needs to be easier to use, safer to own, less volatile in value, and its brand needs to progress from the tainted past to a more responsible and accountable future. For this to happen, much of the crypto dogma of the past needs to grow up and mature. Responsible leadership needs to rise to the occasion and realize that not everyone is a cryptographic security expert, and that the traditional financial world has some lessons for the crypto world that should be learned from, not all tossed out.
The notion that losing one’s private keys should result in unrecoverable loss of one’s property isn’t something with which the mainstream will ever get comfortable, for example. I think these issues will largely be solved and we’ll easily break free of the highs the crypto market as a whole reached in December as a result within 3-5 years.
In your talk [at Token Fest 2018 in Boston], there was a discussion of other stablecoins as having “massive flaws,” including the Gemini Dollar, can you explain this in more detail?
I believe that was a broad generality quoted from my colleague, Ciaran Hynes, but I’d like to take this question as an opportunity to be a little more precise. There are great use cases we believe in for dollar-pegged stablecoins that are transparently 100% backed by the actual asset they represent. Great use case examples are reducing the cost of international remittances, or when the owner has a short-term expense denominated in dollars they want to make sure they are prepared to pay, and they wish to use a form of crypto for that payment.
However, any stablecoin that is not fully backed in this way is subject to the risk that expectations of future demand can no longer support methods to contract supply today, which will break the peg people depend on. Secondly, by pegging value to fiat currency, while this may be beneficial short-term, it is a guaranteed loss of value through inflation when your time horizon switches to long term store of value. People generally don’t save up for retirement by holding retirement assets all in dollars, and neither will they do so using dollar-pegged crypto.
Why is fiat currency unsuitable for backing cryptocurrency?
It’s suitable for backing cryptocurrency that purports to match the value of that fiat currency. It’s unsuitable for long-term store of value purposes due to inflation, or for hedging against the risk of a fiat currency breakdown, which has happened historically all-too-often, and we’re now seeing in Venezuela.
Can you tell us about how ndau works? What technology it uses, and how it will address the problems that current stablecoins face?
A long-term store of value needs to be competitive with other asset classes, needs to have the potential to hedge against inflation, and needs to mitigate downside volatility and other risks that come into play over the long-term. The collection of features that enable ndau to do this we categorize as a “buoyant” coin.
The main features include:
- The ndau reserve of 30,000,000 is only released as demand warrants, and is paid for along an increasing Target Price curve, with all net proceeds flowing into an endowment of real-world assets, for which ndau is named. The endowment’s liquidity is used to support monetary policy through a dynamic Floor Price at which ndau is supported at exchanges.
- Long-term holding is incentivized through an Ecosystem Alignment Incentive, which rewards ndau holders with additional ndau at a rate of up to 15% per year for locking up their ndau.
- During dips in the market price of ndau, a dynamic Contractionary Transaction Fee is applied to encourage holding rather than selling, and to contract excess ndau supply, helping to buoy the market price back up to the current Target Price.
- Blockchain-based institutions are built-in to protect holders and provide a level playing field, including Digital Governance and Dispute Resolution.
Could you walk us through how someone can purchase ndau today?
Someone can purchase ndau today by visiting the site. US purchasers must be accredited at this point, however, ndau will be purchasable through exchanges by all once ndau is listed.
How will ndau ensure a democratically elected Council and governance?
ndau is governed by the Blockchain Policy Council, a group of 9 delegates, all elected by ndau holders using multiple methods to increase resilience against consolidation of control. Elections take place through blockchain methods to ensure integrity of the process.
What are market makers and what is their role in ndau? How do you ensure that the currency remains “buoyant”?
Market makers are contracted by the Blockchain Policy Council to distribute new reserve ndau, to buy back excess supply, and to mitigate volatility. While stablecoins attempt to “peg” value to something external, this is not the approach of ndau.
We believe for long-term store of value, it’s actually desirable to have a limited degree of volatility, since this helps smooth out the ebbs and flows of capital, drawing in auxiliary sources when needed through price signals. However, too much volatility creates a level of uncertainty that makes some of the older cryptocurrencies unsuitable for fiduciary responsibility.
ndau is designed to be the right balance between these two, with potential to rise in value and compete favorably with other asset classes, but not so volatile that it keeps holders up at night. To be buoyant does not imply a guaranteed return – instead, it refers to a set of designed incentives that provide restorative forces to buoy the market price in a favorable manner.
These incentives are ensured by the blockchain software and overseen by the Blockchain Policy Council. The market price will respond to these incentives but is also driven by a variety of other forces of course, and ndau holders should set their expectations accordingly.
How will you prevent depreciation of the currency?
Long-term design, plus responsive Digital Governance, are in place to ensure that monetary policy is thoughtfully guided and the interests of ndau holders are pursued responsibly. There are a number of mechanisms to provide buoyancy against depreciation, but the Blockchain Policy Council also has discretionary power to employ other tools to serve the interests of the entire ecosystem if called for, including the interest in being resilient against depreciation.
ndau was created by a group of experts from world-class institutions including MIT, Columbia University, and Goldman Sachs. The Oneiro team behind the project is almost exclusively caucasian males. Do you think it might be hard for the wider public to relate to this? To see themselves reflected in such a company and see cryptocurrency as an appealing alternative for them?
We hope to see ndau used as a new kind of resource that benefits all on a level playing field. Our intention is to create a monetary system that will work well for anyone looking to store value – regardless of their identity – and we’ve designed a governance system that represents the diverse interests of the entire ndau ecosystem. We believe the identities of the creators of a currency are less important than the ability to work well for its users – particularly given the anonymity of many of the members of the ndau collective.
In terms of staffing, we always welcome resumes from folks of any background who wish to add their unique skills and diversity of thought to the ndau ecosystem – if you have recommendations by all means please send them!
What outcome are you expecting from the Mainnet launch?
The ndau Mainnet launch will add lots of new features to ownership of ndau and will help begin to provide crucial data on how ndau holders best like using it in practice.
Do you think that a VC-backed digital currency is in conflict with the cryptocurrency ethos at all?
To build and launch an innovative cryptocurrency today means a lot of work and resources must be deployed in developing it, rather than just doing a few tweaks to an existing software fork. We think it’s much better to use a traditional equity investment from professional investors for the purpose of bringing to bear these resources. We prefer to use proceeds from currency sales to support stable monetary policy.
As far as the ethos of cryptocurrency, we don’t see there being only one ethos, nor agreement on what that one would be if there were one. The ethos of ndau is to disrupt the existing status quo for long-term store of value, but not to throw out the baby with the bathwater either. There is a middle path that balances what’s good about the current ways of doing things with new approaches, and allows both existing and new players to achieve a win from the transition.
What’s next on your to-do list?
We would like ndau to be easily purchasable from as many platforms as possible, and accessible to everyone, along with selling it. Connecting ndau into exchanges, gateways, and other systems will be huge step for us we’re looking forward to soon.
Anything else that you would like our readers to know?
The crypto industry is still in the early innings. If you missed out on the early opportunities, it’s prudent to keeping an eye on developments. Virtually all of the legitimate criticisms of the industry are being worked on diligently by us and others, and as they all get resolved, perception of what cryptocurrency and blockchain will mean in the fabric of society will prove to be bigger than that of smartphones or even the internet itself.
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Author: Alex Moskov