Konstellation Network — Litepaper (Decentralized Indexes) — December 2020
Sharing the Konstellation Network Litepaper focused on decentralizing asset management via the creation, adoption, and use of decentralized indexes in partnership with VegaX Holdings. See below for more information on Konstellation’s perspectives on decentralized financial indexes and its importance for the advancement of blockchain based financial services solutions.
This document outlines the current and future developments of blockchain technologies and ecosystems by Konstellation Korea Ltd. (“Konstellation”, the “Company”) and its affiliates. This paper is for informational purposes only and is not a statement of future intent. Unless expressly specified otherwise, all features and technical capabilities are currently under development and not currently deployed.
Konstellation management, its employees, directors and/or affiliates make no representations or warranties with regards to the viability or the future of the blockchain industry, any affiliated or related industries. Exchange of a cryptocurrency for DARC in no way represents an ownership stake, investment contract and/or future contract between the Company and the contributors. Any future projections and anticipated roadmap are projections and should not be taken as fact.
This paper is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. This paper may not be redistributed, reproduced, or passed on to any other person or published, in part or in whole, for any purpose, without the prior written consent of Konstellation. The manner of distributing this paper may be restricted by law or regulation in certain countries.
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The Global Blockchain Ecosystem of Financial Services
Konstellation Korea Ltd (“Konstellation”) was formed by DarcMatter to exclusively focus on the furtherance of blockchain technology development, education, and consulting within the financial services industry. With an established user base of financial services professionals and investors from DarcMatter’s platform, Konstellation will have three primary focuses (i) blockchain protocol development (ii) blockchain based financial applications and (iii) blockchain education and consulting.
To further the usage and/or development of the Konstellation & The DARC Token and its native token DARC, in conjunction with the sister company VegaX Holdings, Konstellation is developing direct blockchain-based use cases that are above and beyond the current system of lending today.
Konstellation, through its venture studio, established VegaX Holdings, which is a digital asset management company innovating financial indexes and portfolio-based investment products for the blockchain industry. VegaX Holdings is also backed by one of the most active VCs in Asia, SOSV, and Artesian VC. The client facing solutions being created at VegaX Holdings will also directly drive the adoption and real-world use cases for the Konstellation and DARC, primarily through governance, fee payment functionality and the ability to create and maintain investment portfolio positions.
Decentralizing Asset Management
Indexes are one of the most critical elements of finance that are largely not present in the digital asset space today. In the traditional finance space, indexes serve as some of the most important barometers on the health of markets and even the health of the global economy. In the United States the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite are the three most broadly followed indexes by both the media and investors.
While these are some of the most important indexes in the market, the centralized nature of these indexes creates several issues:
1. Creation and maintenance of formulas and algorithms
The current market for global indexes is produced by a handful of companies that have been in the industry for decades. For various reasons, they have been deemed as the benchmark for many global market indicators, however, as the market continues to evolve and data analysis becomes more robust, there is continued debate over whether or not certain indexes are being calculated in a way that is correct. For example, many of the largest global indexes are benchmarking the largest companies by market capitalization. However, there are asset managers today that do not believe that the safest is the largest. In this case, the global community of investors are unable to influence or change these systems.
2. Centralization risk
Similarly, with the above problem, the production and maintenance of these indexes are created by centralized companies that have their own fixed agendas. In addition to potential moral hazards that arise, in a world where every micro-second can result in massive swings in the market, there are centralized points of failure for data feeds that are supplying information into these indexes.
Solution: Decentralized Financial Indexes
Indexes have the critical ability to be decentralized as it is the manifestation of an accepted set of rules and processes which in turn results in a figure that the entire investor community can trust and utilize broadly. Konstellation, in partnership with VegaX Holdings, is developing a decentralized index system which will be comprised of validator nodes that will allow for the creation, amendment, and maintenance of global decentralized financial indexes. DARC will act as the governance token for these decentralized indexes. The final parameters are still a work in progress and may continue to be modified, but we believe that the clear transformation of these types of benchmark indicators must be decentralized and must remove the inherent conflict of interests that exist today.
This is one of Konstellation’s first litepapers being shared with the Konstellation community covering the intersection of Konstellation Network and VegaX Holdings. We will share additional litepapers focused on this subject in 2021.
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