Introduction
This whitepaper will touch upon the transformative potential of blockchain technology in
general of Bitazza’s products, including BTZ, a Bitazza utility token, USD Freedom (USDF), two-tier token structure, crypto payment solutions, and introduce what we believe to be a novel approach to governing the long-run supply of a utility token. The paper concludes with a discussion of our planned token allocation and expansion strategy.
Banking the Unbanked with Blockchain
Bitazza has the opportunity to deliver even more capable solutions through blockchain technology and innovations that facilitate its adoption in financial services including; Payment, Credits, Saving, and Insurance.
Problem 1: The inherent instability of stablecoins
The invention of stablecoins was proposed to solve the issue of volatility, in practice achieving stability has been demonstrated to be exceedingly difficult even amongst the largest and highest capitalized stablecoins.
Problem 2: The limited utility of exchange-issued utility tokens
If we look at the top ten centralized exchanges by market capitalization, their tokens generally have limited utility outside their respective exchange platforms.
Our Solutions
For the aforementioned problems, we have incorporated what we think are competent solutions into our token design and applications of pre-existing solutions in a new setting. Bitazza’s approach to tokeneconomics relies not on ground-breaking cryptographic innovations, but rather, on insights from empirically tested microeconomics and game theory, as well as recent theoretical advancements in auction theory.
Collateralization Evolution
The gradual evolution of USDF will allow for the build-up of goodwill amongst market participants who would come to accept USDF as a prudently managed stablecoin.
Phase 1: 100% Fiat-collateralization
Phase 2: >100% Crypto-collateralization
Phase 3: delayed partial swap and Constant Product Market Maker (CPMM).
The problem with LUNA/UST
- Terra’s market module enables atomic swaps between different Terra stablecoins and between LUNA and UST through an algorithmic market maker (AMM) and permits users to always trade $1 worth of LUNA for 1 UST and vice versa, this enabled arbitrage opportunities. For users to capitalize on said opportunity afforded by the market module to burn UST to mint LUNA, users need to have faith in a non-zero short-term value of LUNA – an expected collapse in LUNA price in the time it takes for the swap to be executed would stay the hands of would-be arbitrageurs. Moreover, persistent downward pressure on UST’s price would invariably lead to a deluge of LUNA entering the market via executed swaps, precipitating a fall in the latter’s price.
- The main driver of adoption for UST was not as a means of payment for goods/services via Chai’s mobile payment app (CHAI). The driver of the symbiotic relationship was not LUNA and the real economy revenues accrued to it, but rather, the exceptionally high yield accessible to UST holders, which was then used to prop up the value of LUNA through Terra’s market module.
- The yield is paid out in UST, which in turn, has its price secured by LUNA. In the long run, this mechanism could only be sustained through real growth in the Terra ecosystem – e.g., through Anchor distributing loans to projects that generated real economic value – and some would argue that the bearish turn in the cryptocurrency market was only a catalyst which hastened the inevitable collapse of a financial house of cards.
The BTZ/USDF distinction
The BTZ/USDF swap-stabilization model would employ a Constant Product Market Maker (CPMM), which allows the exchange rate between two tokens to adjust automatically so swaps get increasingly expensive as one moves further from the initial equilibrium/peg, mitigating the risk of either token’s pool/supply being drained entirely.
Firstly, The gradual evolution of USDF will allow for the build-up of goodwill amongst market participants who would come to accept USDF as a prudently managed stablecoin before the transition from fiat-collateralization to crypto-collateralization and then to the most sentiment-dependent model, algorithmic stabilization. The decision of when to transition between stages of collateralization would be subject to the management’s discretion, in turn, guided by key parameters reaching certain thresholds to ensure that by the time USDF takes on its most vulnerable incarnation, Freedom has both the financial and reputational capital to withstand scrutiny from the market.
Secondly, Freedom will cap the leverage of USDF to a modest 25%, to ensure that even in this potential third incarnation, the collective value of our fiat collateral supporting USDF is no less than 80% of the nominal value of USDF issued. The cap would provide USDF holders with a sense of security during times of extreme volatility, but also, afford Freedom an avenue to raise the necessary capital through pre-arranged credit lines.
Thirdly, and perhaps most important of all, BTZ and, in turn, USDF, would be supported by credible, exogenous real economy revenues.
Finally, the fourth important distinction between USDF and Terra’s UST is that during the Third phase, we will incorporate a delayed swap mechanism. USDF would be swappable with one dollar worth of BTZ, whereby the BTZ would be locked up to vest according to a pre-determined schedule. Should USDF move away from its peg, this compulsory vesting of BTZ received through the swap mechanism ensures that the circulating supply of USDF decreases and our reserves remain unchanged, and the short-term reserve ratio for USDF improves. Moreover, delayed vesting ensures BTZ does not fall victim to dumping by arbitrageurs and that Freedom would have ample time to raise the capital necessary to bolster long-term reserves for USDF.
Utility beyond the platform
Bitazza’s utility token will have one of the most comprehensive sets of utilities amongst exchange tokens including; Trading discounts, staking, Freedom Card, Freedom Wallet, and DAO (Q42022).
Bitazza Product Breakdown
The Bitazza utility token (BTZ) is an ERC-20 token, while USDF is issued as a 100% fiat-backed cryptocurrency with a 1:1 peg with USD on Bitazza’s blockchain solution – a decentralized Ethereum Virtual Machine (EVM)-compatible blockchain with a delegated Proof-of-Stake (dPoS) consensus mechanism.
Freedom Card is a prepaid card, which can be topped up with bank transfers or cryptocurrencies via our partnership with Visa. Qualifying for a card requires staking a minimum amount of BTZ. Membership is tiered, with larger stakes corresponding to higher membership levels and improved rebate rates and benefit pools. Moreover, the Bitazza Visa card will offer up to 10% cashback paid out in BTZ tokens, higher than the 8% maximum rate offered by Binance and Crypto.com
Freedom Wallet is our white-label iOS and Android-compatible community-based, blockchain-enabled mobile payments solution, for which transactions would be fuelled by BTZ. Specifically, merchants and retailers would be required to pay an initiation fee to set up the customizable solution for their customers and a monthly service fee thereafter, with both fees to be paid in BTZ.
About BTZ Token
Looking beyond token supply models
The Buyback and Burn model:
This model allows projects to buyback and burn tokens to reduce its supply, which theoretically increases its value. However, for the equities and cryptocurrency markets, reducing supply also boosts fundamental value/asset through improving participation ratios for outstanding stakeholders, not simply because of the increased scarcity as is the case with currencies that serve only as a medium of exchange. As “burning doesn’t create new value, (but) only redistributes current value among a smaller group of people”, if the burning process also results in slower platform growth due to reduced deployment of said capital asset, the overall value of the platform would have been reduced.
The Buyback and Make model:
A platform/network can have a circular token economy whereby income received by the network is automatically used to buy the network’s utility tokens and redistribute them to producers who work for the network. In such a model, the tokens are not burnt but redeployed to generate new value for the network. With this in mind, Bitazza proposes the ‘Buyback’/Redistribute and Signal model.
The Redistribute and Signal model takes BTZ utility tokens received as payment for Freedom Wallet subscriptions and redistributes them to those who would both create value for the network and credibly signal their confidence in it. As the exchange platform and related ecosystem grow, we would utilize a portion of trading commissions and transaction revenues to purchase BTZ for the same purpose. Thus, the model is one of redistribution and signaling which would eventually evolve to encompass a buyback element.
Credible Signaling
In Game Theory, a signal is credible if it can be correctly interpreted by observers to accurately convey the beliefs/preferences of a player in a dynamic game with incomplete information. Two credible channels will be utilized with BTZ.
For business partners, a portion will be earmarked for selling back to Freedom Wallet partners at discount. The tokens would be governed by legal and smart contracts to only be used for future Freedom Wallet subscriptions, thus such purchases would constitute costly signaling that would be economically justifiable only for players/companies with long-term confidence in our ecosystem and expectations of positive future earnings from it.
For investors/traders of the token, we will run a series of auctions amongst BTZ holders whereby each entrant submits a bid in terms of the amount of BTZ they are willing to stake, the winner of the auction receiving the BTZ which, along with the bidder’s winning bid, must be staked for a predetermined length of time. Submission of bids would be done via smart contracts to prevent reneging and to ensure the bidding/signaling is costlier for those who do not believe in the longevity of the token and platform. Over time, the length of time of the staking period may be decided through the DAO.
Combining such empirical evidence with the theoretical exposition provided in the Appendix leads us to be confident that our Redistribute and Signal model would provide an effective framework for regulating the long-term tokeneconomics of BTZ.
Candle Auction
Front-running opportunities naturally arise on blockchains as upcoming transactions are visible to network participants before their inclusion in new blocks. Bitazza will enact a candle auction via smart contract for the redistribution of BTZ. Recent research at the Web3 Foundation showed that the format mitigates two key issues inherent in auctions carried out on the blockchain, namely that of front-running and information dissemination via smart contracts.
Roles in Bitazza’s Token Economy
Bitazza Stakers
To help ensure price stability over the short-medium term, Bitazza plans to introduce within 2Q22 a portal for holders to stake their BTZ for a minimum lockup period of 30 days, in exchange for BTZ-denominated interest payments. Bitazza staking will last at least four years, with total interest payments constituting no more than 30% of the Ecosystem & Community Growth allocation. Moreover, the scheme is forecasted to provide market-competitive yields throughout its duration, and to conclude only after the Bitazza ecosystem has sufficiently developed to the point where other benefits such as discounted asset management fees would provide powerful standalone incentives for holding BTZ.
The staking model does not necessitate the continued depletion of BTZ supply.
Firstly, to the extent part of the staking rewards is paid out to partners and for business development incentives, a good portion of the BTZ would be paid back as Freedom Wallet subscriptions, to be redistributed per our signaling model.
Secondly, Bitazza staking could eventually switch to paying out exogeneous rewards as a means to preserve BTZ for growing the ecosystem.
Core Bitazza management
The CEO of Bitazza Global and the relevant upper management personnel are the first to identify and discuss key issues/proposals. Once the broader strategic vision and specific targets have been set, Bitazza will refer to DAO-based voting to establish secondary parameters.
Holders/Stakers
BTZ holders will be able to vote through the DAO on the particulars of certain proposals (e.g.how much BTZ to allocate to local partnerships in Vietnam). Key decisions will first be deliberated by Bitazza’s management before DAO-like decision-making is introduced to the community.
Allocation of BTZ
50% of BTZ is allocated towards global expansion, which includes community building and ecosystem incentives across all markets including Thailand. Expansion into markets beyond Thailand is led by Bitazza Global’s CEO and relevant management. The incentives would have to be in line with the larger personnel compensation framework. This would leave at least 38.5% of the total BTZ supply for the purposes of ecosystem and community expansion, as well as partnership and business development globally.
Expansion Plans
Bitazza’s global expansion is managed by Bitazza Global, with our exchange platform and BTZ token already available to international users. Going forward, Bitazza Global will set up local subsidiaries and joint ventures (JVs) to drive marketing efforts and foster business relationships in key expansionary targets. Once a market to be prioritized is confirmed, we would commence local hiring efforts and allocate a portion of the 1.5bn BTZ tokens for global expansion to the market.
Target markets/Regions
We examined various markets and regions with regard to factors pertaining to the competitive, demographic and regulatory environments and identified several high potential areas. Crypto-centric Developing Economies
Targets in this category represent lucrative, readily evident opportunities – elephants in the room – with high crypto adoption rates and inadequate traditional banking infrastructures including; Africa, Latin America, South Asia, and Southeast Asia.
Crypto-centric Developing Economies
Targets in this category represent the pioneering nations in the crypto space – top dogs in their geographic regions – with accommodating policies, high-income levels, and competitive market structures including; Europe and Oceania.
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