How DarcMatter and Konstellation Work Together
When we initiated our token-based capital raise, the idea was to integrate the entire DarcMatter fund marketplace for alternative investments seamlessly into a NEM-powered permissioned blockchain. However, we quickly realized that Sang’s vision went beyond just improving the paperwork-intensive process of vetting and curating a set of premium investment opportunities from private equity, venture capital and hedge funds. As a result, we didn’t so much as pivot from a blockchain-based back-end for our existing platform product as expand our project to not only include those improvements but also create an entire token-based economic system.
Konstellation aims to create a blockchain-agnostic ecosystem that, in the long run, is much more accretive to DarcMatter and the global blockchain community as a whole. It is a brand enhancement that aims to bring DarcMatter as well as a variety of other financial institutions and service providers into a transparent and efficient interactive ecosystem powered by the blockchain.
As such, DarcMatter will serve as a paragon for those institutions that might consider taking advantage of the DARC token economy. The DarcMatter ecosystem will automatically be migrated onto the blockchain. That itself comprises a growing global consortium of accredited investors from over 60 countries. Hundreds of respected investment funds will gain exposure to the potential of digital assets. Other early adopters will run Singularity Nodes within the ecosystem, bringing vast new partners and clients in contact with the DARC community directly.
Thus, when DarcMatter or any constituent node operator expands its business in any way it is good for the ecosystem as a whole. For example, DarcMatter recently signed a partnership with one of the biggest financial services institution in South Korea. With billions in assets under management, if DarcMatter can help allocate, place, facilitate and otherwise manage just 1% of the assets of even one similarly large financial institution in the future, the fees alone from this one partnership would be approximately equal to the total capital raise for DARC tokens.
Since fees for transactions associated with capital raises and advisement can be paid with a discount if DARC tokens are used, DarcMatter’s successful business development, as a service provider using the Konstellation Network, can significantly increase the velocity of the token as it moves through the ecosystem. And this is just with one service provider in the Konstellation Network with one single engagement of a large financial institution!
As DarcMatter builds more relationships with more financial institutions, token velocity within the DARC ecosystem should continue to pick up speed. As other Singularity Node operators and service providers conduct business within the ecosystem, token velocity should be further accelerated. According to an old Vitalik Buterin blog post, token velocity serves as an accurate proxy for the efficiency of a utility token in a closed ecosystem. This method is based on a simple Irving Fisher equivalence of exchange equation from basic macroeconomics known as the quantity theory of money.
It is unclear if Buterin, the founder of Ethereum, currently believes in this model. After all, it is but one explanation of a complex theory seeking to describe bleeding-edge cryptoeconomics. Luckily, we can also turn to another prominent member of the crypto cognoscenti to explain these matters in a much more recent post. This one was not written at the cusp of an historic crypto bull market as was Buterin’s. In fact, this article was written and published in the depths of the recent bear market (which, knock on wood, we seem to be emerging from this week). Scott Locklin, one of the lead blockchain engineers at Brave Software, the creators of the Basic Attention Token (BAT) ecosystem, disagreed with Buterin’s arguments for medium-of-exchange tokens.
In his recent publication titled “Token Economics: Considering Token Velocity,” Locklin imagines a fictional desert island with an economy existing solely of seashells, eggs, turtles and coconuts. There is an existing monthly monetary flow of 1500 seashells, which serve as the currency of the island. No matter what amazing new technology you use to tokenize that ecosystem, it is still quite readily apparent that “the only thing that will increase the velocity of a fixed supply of money is if you increase the economic output of the island.” In his example, he suggests that the entity tasked with expanding the economy of that fictional island figure out a way to “lure more turtles.”
Konstellation’s job is simply to make it easier to “lure more turtles.” As Konstellation technology enables the seamless exchange of fiat into DARC tokens, ecosystem participants are those turtles, earning discounts by paying with DARC. Any entity that economically participates in the DARC ecosystem, not just DarcMatter, is another turtle that contributes to the increase in token velocity.
As you can see, the recent pivot of the DARC token economy from one that exclusively serves DarcMatter to one that serves an entire constellation of financial institutions, not only DarcMatter, is an extremely positive development for token velocity. Moreover, as we will soon release details about our Singularity Node program for participating financial institutions, DARC token holders should see that token velocity will be further enhanced by the required lockup of DARC to service these nodes. At full development, the ecosystem will require that a significant portion of the total token supply be locked for a participating institution to maintain their Singularity Node status.
We hope this explanation clears up the confusion regarding the relationship between DarcMatter’s business development growth and how it benefits Konstellation as the blockchain division. It also clarifies the larger vision we have for the DARC token economy and how our partners will play a role in this growing nexus we are building at Konstellation.
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