Kabocha, long term, liquidity and price signals…
While Kabocha establishes the integration with Karura DEX, it’s not just a matter of switching it on. Of course it’s not the only piece of the jigsaw, let’s explore the other pieces, (and perhaps other jigsaws altogether).
In 3 to 8 years how do we want KAB price to look?
Like this…?
Or like this:
Given long term thinking and generally being different, is part of Kabocha values, let’s explore strategies to approach this.
Price discovery determined by volatile shallow market?
Finding price discovery in a real-time market (or “fast DEX)” is not the only option. Especially given these market conditions, and as many here know, DEX is not something that will insta solve liquidity. This is what has been mentioned by DEX providers. We would also need a nice pool of KSM.
Before we delve into the details of launching on a DEX, lets explore more widely:
Important to note:
- Not all currencies are floated on a market.
- Prices on exchanges rely on signals.
After speaking to the DEX’s in our wider ecosystem they all asked what price signal do we already have for Kabocha?
We had a clear price peg a few months with EDG, matching our market cap with EDG, through the EDG/KAB recoup model. However, relying on a volatile token to peg KAB price to over the longer term, is of course a volatile approach. So one would argue we are no longer pegged to EDG 1:1. The better neighbour to compare and peg price is KSM.
National Currencies
For perspective, there are many national currencies that are not floated on the market. Instead they are pegged. They decide their own prices, this is probably the most self-empowered approach.
IMF — Special Drawing Rights
In FOREX markets, prices only move within a fixed range, because the IMF determines the weightings between the main basket of currencies, with Special Drawing Rights, SDRs.
Establishing price through agreements
If through “paranotes” or other mechanisms, price is established through an agreement. And that agreement of funding is much larger than the market on a DEX, then the DEX would follow that price.
Private Equity Rounds
There are also many assets, not just currencies which are not floated publicly, such as pirvate companies which are valued based on equity rounds. Usually these stages of funding increase the value of the company in a way where the current shareholders and the investors are mutually happy. So it’s still a market, but one that only opens for a brief time and then closes until the next round. And usually one that typically gets buyers not sellers. Perhaps there may be a few sellers which are dealt with internally by the company.
Peg or float, or both?
Possibilities
Pre-determined price curve
One possibility is a stable linear year on year price curve can be established. Where price increases incrementally in a pre-determined way.
Rounds of funding
KAB raise funding from other buyers within a temporary round. Where price is set out and then KAB is bought.
Slow DEX
Settlement happens intermittently.
Fast DEX
Being on a DEX but pairing it with something that underpins the price more robustly.
Above was a short exploration in how Kabocha can approach KAB. Hopefully this helps to engage some subtle discussion.
All the best,
Ramsey(Decentration)
Kabocha Technical Steward
