Few cryptocurrencies can provide a long-term store of value. Some tokens are pegged to fiat, but the consistent inflation of national currencies means these are only stable for the short term.
The 2008 financial crisis showed that equities, and even ‘safe’ assets like bonds, are susceptible to downturns, explained Ken Lang, CTO at COSIMO Ventures. “You simply can’t guarantee value will be safe long-term,” Lang said.
COSIMO Ventures is a crypto-focused venture fund, and the principal backer of ndau.
“Blockchain gives us a new toolbox to create things uncorrelated to other assets,” Lang told Crypto Briefing. ndau leverages blockchain technology to create a decentralized way to steady its value. The token isn’t backed by any fiat currency, or pegged to any real-world asset, although it has a floor price supported by an endowment of assets that serves as liquidity source to purchase and burn excess currency in the event of a severe market crisis.
A combination of digital controls, evolving monetary policy and good governance protects holders from market downturns and enables value to increase during upswings.
Unlike other projects, no ndau were minted before the first sale. “It was not intended to be anything like an overhyped ICO,” Lang explained. Accredited investors can buy ndau directly in thousand-token tranches, and retail investors may acquire the tokens on BitMart.
As well as the reserve fund, there are also mechanisms to penalize sellers during downturns. “It’s not about seeing a rush of people, it’s about having a long-term store of value,” Lang said.
How ndau governance works
As with other companies in the blockchain space, decentralization lies at the heart of ndau. The project’s ultimate objective is to allow the community to assume control.
That’s more than an idle commitment; Lang says that decentralized governance is the only way an asset can be a long-term store of value. Since there is no active foundation, direction comes from the community itself, through elected delegates.
Any ndau holder can become a delegate, allowing them to set monetary policy, determine floor price, resolve disputes, and respond to any emergencies that threaten the project. The project recently held its first election, on May 22nd.
Of the nine elected delegates, three are elected by the general community, three by the earliest investors and another three by the original investors. Delegates are rewarded for their input but are required to stake ndau, which is forfeited if they abuse their positions.
That strikes a balance, Lang says, between providing the community with adequate representation and preserving continuity. New ideas can shape the project without jeopardizing the main objectives.
Why governance is important.
Although governance is hardly the sector’s main talking point, Lang takes it very seriously. Effective governance is considered key to ndau’s success as a long term store of value.
“Crypto is a stateless asset,” Lang explained, noting that people from different backgrounds and countries freely decide to join the ndau community. “[That] provides some level of autonomy but also resolve.”
Unlike equities or bonds, which are are tied to the country of issuance, the ndau community can formulate its own monetary policy.
“People don’t like how economics has a been used as a political weapon,” Lang added. Against a backdrop of an escalating trade war between the U.S. and China, ndau users can remain independent and protect their wealth from whatever comes to pass.
These aspects of autonomy, incentives for good behaviour and a new store of value help fulfill ndau’s vision. As mainstream society starts to accept cryptocurrencies as more than a passing fad, ndau may provide its users with a new way to shelter from events outside their control.