CRYPTO STOCK FOUNDATION
The Crypto Stock Foundation is the first organization in the world that facilitates stock trading using ERC20 tokens. One of its goals is to help expand the use of cryptocurrencies and increase awareness of financial markets.
It caters not only to large investors but also to the unbanked, providing the possibility to trade Crypto Stocks at any time, even when the financial markets are closed, with the possibility to operate even only with fractions of Crypto Stocks.
It is an innovative ecosystem centered around a trading and investment product, Crypto Stocks, in a decentralized world that leverages the power, speed and security of blockchain technology.
Crypto Stocks are at the heart of this project. They are ERC20 tokens representing the shares of major publicly traded companies.
Crypto Stocks will initially be available for purchase using a stablecoin, USxD, pegged 1:1 to the US dollar. USxD will be widely used outside of the Foundation as well. As a currency pegged to a stable value, it can aspire to be a medium of exchange by tapping into the growing demand and use of stablecoins.
CSF wants to build a community that focuses on the culture and knowledge of blockchain. The community itself will be directly involved through voting systems in which it can directly influence decisions related to:
- The listing of new Crypto Stocks;
- The parameters to stabilize the market and mitigate risks;
- The future of the foundation itself.
WHAT IS A CRYPTO STOCK
The purpose of the Crypto Stock Foundation is to create an alternative market where users have full control of their assets that they hold in their own portfolios, with the ability to make investments in a liquid and profitable market.
To do this, the following Crypto Stocks have been introduced to the market:
|Stock Name||ERC20 Token||Qty|
|United Stock exchange Dollars||USxD||18,000,000|
|Alphabet Inc Class C||xGOOG||329,867|
|Alibaba Group Holding Ltd – ADR||xBABA||2,705,636|
|Facebook, Inc. Common Stock||xFB||2,403,969|
|Berkshire Hathaway Inc. Class B||xBRKB||1,370,952|
|Taiwan Semiconductor Mfg. Co. Ltd.||xTSM||5,186,076|
|Procter & Gamble Co||xPG||2,479,606|
|JPMorgan Chase & Co.||xJPM||3,048,203|
|Walt Disney Co||xDIS||1,810,485|
|Paypal Holdings Inc||xPYPL||1,171,692|
|Bank of America Corp||xBAC||8,650,790|
|American Express Company||xAXP||805,202|
|Toyota Motor Corp||xTM||1,631,499|
|SoftBank Group Corp – ADR||xSFTBY||4,179,628|
|Roche Holdings AG Basel ADR Common Stock||xRHHBY||5,620,504|
|Lloyds Banking Group PLC||xLYG||17,707,283|
|Industrial & Cmrcl Bnk f China Ltd||xIDCBY||4,339,703|
|China Mobile Ltd.||xCHL||4,095,096|
|IBM Common Stock||xIBM||891,057|
|S&P 500 Index||xSPY||954,182|
|Taiwan Semiconductor Mfg. Co. Ltd.||xTSM||5,186,076|
|Johnson & Johnson||xJNJ||2,632,543|
|UBS Group AG||xUBS||3,587,944|
|Credit Suisse Group AG||xCS||2,447,748|
|United Microelectronics Corp||xUMC||2,484,480|
|HSBC Holdings plc||xHSBC||4,073,648|
These are the first Crypto Stocks owned by CryptoStockFoundation.
Additional Crypto Stocks may later be created based on community demand.
These are ERC20 tokens representing one thousandth of the original market cap of the companies’ stocks as of December 1st, 2020.
The cryptocurrency market is significantly volatile. Those who are familiar with Bitcoin know that it is able to rise and fall in value very suddenly. It can gain 40% overnight, and it can lose 20% in just a few hours.
To protect against market volatility, Crypto Stock Foundation will allow trading with an innovative stablecoin: USxD.
A stablecoin is a special cryptocurrency pegged to a stable value, which in the case of USxD is that of the US dollar.
One USxD is equivalent to one US dollar, with a ratio that is 1:1.
USxD will initially be launched with three types of collateral, BTC, ETH and CryptoStocks. The value must never fall below a 150% ratio.
The initial 150% ratio will be influenced by the market risk parameters defined in the appropriate section of this whitepaper.
USxD, the origin of the name
USxD is an acronym that stands for United Stock exchange Dollars.
United Stock was chosen to represent the unification of different sectors, that of cryptocurrencies and stock indices, and the different platforms on which these different markets operate. United Stock emphasizes the very purpose of USxD which is to become a medium of exchange created to trade Crypto Stocks but which aims to become universal.
With the advantage of being a stablecoin anchored to the US dollar, USxD is a candidate for being listed on cryptocurrency exchanges, whether centralized or decentralized.
Its nature makes it perfect as a medium of exchange and also as a means of payment.
The letter X is used to abbreviate the word exchange in areas such as technology or communication, further trimming the more well-known abbreviation “ex“.
Exchange in the case of USxD is understood as a whole word. Exchange is not just the platform where cryptocurrencies are traded.
The primary meaning of the verb and noun “exchange”:
“The act of giving something to someone and them giving you something else”.
The word exchange does not have an adequate synonym to be able to express the same concepts.
USxD is intended to be a medium of exchange.
The act of exchanging is something inherent to the nature of man. Throughout the past millennia to the present day, exchanges have been taking place in markets, with material goods being passed from hand to hand in exchange for coins or other material goods.
USxD is the evolution of exchanging, towards something new, as USxD was envisioned by the Crypto Stock Foundation to be the first currency with which to enter the world of Crypto Stocks.
USxD is alternative and complementary to cryptocurrencies and Crypto Stocks because it shares their nature but is not affected by volatility. Which makes it innovative and secure.
The birth of USxD
USxD will be put into circulation on the market with an initial supply of 18,000,000 tokens.
The number is not random, as it corresponds to one thousandth of the market cap of the Crypto Stocks initially issued, and will always maintain a proportion derived from the following formula:
BTC + ETH + (Crypto Stock Market Cap * 0.001)
A special smart contract has been developed for the generation of USxD.
The supply of USxD may change with the launch of new Crypto Stocks or may be reduced in the event of token burns.
USxD will always be convertible to BTC, ETH and Crypto Stocks and can be deposited in any wallet supporting the ERC20 standard.
KEY EXTERNAL ACTORS
The market maker consults the oracle software and issues orders.
The oracles provide the market prices of the stock. When the market closes, these oracles reflect the price that was set at closing.
A Market Maker (MM) is in charge of establishing prices, supply and demand in a market and of providing liquidity.
Market makers may also make trades for their own accounts, which are known as principal trades.
The most common MMs are exchanges that provide trading services to investors and maintain liquidity in the market.
In the case of Crypto Stocks, the MM participates in the market, buys and sells Crypto Stocks with the intent of making a profit from the bid-ask spread that is created when the ask price exceeds the bid price of the stock.
In each case, the market maker shows buy and sell prices for a guaranteed number of stocks. Once the order is received, the market maker sells their stock position from their inventory to complete the order.
The market maker’s job is to update the buy and sell prices, determine the volumes at which they are ready to trade and the frequency of time at which they will update the best ask and bid prices.
Market makers must remain disciplined when the market becomes unstable and volatile. In fact, the main risk is to see a decline in asset value relative to the selling price and before it is sold to the buyer.
MM profit is generated based on the spread between the buying and selling prices of a Crypto Stock.
To initiate the system, Crypto Stock Foundation will always provide a price for buying and selling within -+5% of the real stock price on the authorized exchange during market opening hours and -+10% during market closing hours.
Unlike traditional markets, due to its cutting-edge technology, Crypto Stock Foundation is able to guarantee 24/7 trading opportunities.
Suppose Apple (XAAPL) has a value of 120 USD, Crypto Stock Foundation will always be a Market Maker selling at 126 USxD or buying at 114 USxD during standard market opening hours, while selling at 132 USxD and 108 USxD during market closing hours.
Arbitrage consists of buying and selling an asset in order to profit from the difference in price of the same asset across markets. It is a technique that exploits the inefficiency of markets: if all markets were perfectly equal, arbitrage would not exist. Arbitrage provides liquidity.
In the case of Crypto Stocks, their price will be different from the Stock they represent. Arbitrage occurs when a Crypto Stock is bought at one price and resold at a higher price almost immediately after the purchase. It is a technique that has zero risk to traders.
An example of arbitrage
Suppose the Apple stock is trading at $120 on the Nasdaq, while it is trading at $117 on the Crypto Stock market. A trader can buy the Crypto Stock and wait for the price to align with the Nasdaq price to sell it again: the trader can continue doing arbitrage until the price of APPLE on the Nasdaq and the Crypto Stock exchange is aligned.
The trading system can be connected via Crypto Stock’s Systematic Trading API.
THE PRICE FLUCTUATIONS OF BTC, ETH AND CRYPTO STOCKS & RISK MANAGEMENT
Being in a crypto ecosystem, the volatility of the prices of Bitcoin and Ethereum are also a risk parameter in the Crypto Stock market. Crypto Stock Foundation’s portfolio holds BTC, ETH and USxD leveraged by a risk adjustment factor that varies dynamically to ensure a USxD can always be traded for BTC/ETH.
USxD will always maintain a proportion derived from the following formula:
BTC + ETH + (Crypto Stock Market Cap * 0.001)
The Initial Hedge Ratio is 150% (1 USxD = 1.5 USD in BTC/ETH) and will move both up and down based on the Risk Adjustment Ratio (RAR) in accordance with the following factors that generate market risk:
- Stocks price movement (delta risk). It represents the variation of the price of the asset with respect to the variation of the underlying (in the case of Crypto Stocks, it is the stock itself). This value can be positive or negative. The overall performance of the entire market is a component of ecosystem risk. A collapse in stock prices promotes ecosystem stability but hurts the Crypto Stock investor.
- Money flow (Entry and exit of USxD from the ecosystem). This index indicates the incoming and outgoing amount of BTC and ETH. Too fast an outflow could cause a momentary drop in CS prices and thus damage the ecosystem.
- Fractional reserve at 100%. The ecosystem does not currently have fractional reserves below 100%, making it fully backed by crypto. This value could help expand the Crypto Stock ecosystem if below 100% but would generate a trustless problem. This factor is to be voted upon by the community and can be increased.
- Volatility of Crypto Stocks CSVIX. The CSVIX index measures volatility on the S&P 500 index. It indicates the variability that traders expect from the US stock index. The higher the VIX, the greater the expected volatility and risks in the market. The higher the volatility, the higher the probability that stocks will be affected in a positive way
- Volatility of BTC/ETH. Similar to the CSVIX index relating to US financial markets, the volatility index of Bitcoin and Ethereum indicates the fluctuations of their respective prices over a given period of time. The higher the volatility, the higher the risk.
- Market Making -+5% market opening hours-+10% market closing hours. The prices of Crypto Stocks are directly linked to those of the reference stocks. However, the financial markets follow fixed trading hours that coincide with the opening and closing hours of the stock markets, whereas Crypto Stocks are tradable 24 hours a day, 7 days a week. Therefore Crypto Stock Foundation will strive to maintain price fluctuations between -+5% during financial market opening hours, and -+10% during market closing hours, acting as a buyer or seller of last resort to ensure market fluidity and liquidity.
Market risks can be of several types and of different intensities:
- Liquidity. It indicates the volume of the market, which is necessary for the liquidation process to be implemented if someone wants to leave the market. An illiquid market is a risky market if there is a disparity between the price of the stock and the price of the corresponding Crypto Stock. A highly liquid market means that Crypto Stocks can gain real value relative to BTC/ETH.
- Volatility. Price fluctuations can negatively affect the collateral underlying Crypto Stocks. This risk can be mitigated through Loan-to-Value hedges. Volatility also affects the liquidation process, because there must be margins at all times to allow the liquidator to make profits
- Market Capitalization. Represents the market size and liquidity of collateral. This is a risk that can be mitigated through liquidity parameters. A reduced market cap provides greater incentives for the liquidator.
Crypto Stock Foundation is a DAO (Decentralized Autonomous Organization). As such, it has no controlling entities nor any entity that can claim rights and ownership.
There are no users in the Crypto Stock Foundation with greater power than others, who can impose their will on the foundation itself.
The governance of the Crypto Stock Foundation is delegated to the community and members who hold USxD. Through a special blockchain-based voting software, it is the community itself that expresses itself and can make proposals on the following topics, for which a minimum of 10,000 USxD is required
- Introduction of new CS
- Changing risk factors
- New implementations requested by the community
Crypto Stock Foundation supports itself through donations that come in from exchanges that agree to list Crypto Stocks. These donations are a percentage of the profits that the platforms themselves will make.
Since it is a non-profit organization, there are no earnings for the members of the foundation.
Donations are invested to fund research and development projects related to Crypto Stocks, aimed at expanding the ecosystem.
Crypto Stock Foundation is a global organization based in Panama that intends to operate in compliance with national laws and regulations. As such, it will work with regulators to obtain necessary licenses where they are required.
In countries where such licenses are not granted, Crypto Stock Foundation cannot guarantee its services, nor those offered by the cryptostockfoundation.com website nor any other Crypto Stock-related trading services.
Crypto Stock Foundation cannot provide any guarantee as to a time frame or deadline by which it will obtain all necessary authorizations to operate in a particular country. It is worth bearing in mind that such authorizations may never be granted.
Crypto Stock Foundation may revise its products and initiatives based on applicable laws.
No one outside the Crypto Stock Foundation is authorized to make any statements regarding the foundation’s relationship with the authorities and how this will affect the foundation and its products.
This whitepaper does not constitute investment advice
This document does not represent any investment advice, financial advice or trading advice, nor is it a recommendation by the Crypto Stock Foundation or its affiliates.
The whitepaper does not represent advice to purchase Crypto Stocks nor should it be relied upon for investment or purchase decisions.
Crypto Stock Foundation cannot provide any guarantee as to the completeness of this document or as to the accuracy of the information contained herein.
Crypto Stocks are a developing tool, their structure may change and technical features may be updated following their launch.
Crypto Stock Foundation is subject to changes with respect to its governance model.
Crypto Stock Foundation can make no guarantees about the achievement of its objectives or future projections.
Crypto Stock Foundation disclaims any liability for any loss or damage resulting from anyone acting on the basis of the information contained in this whitepaper.
Crypto Stocks are not securities
This whitepaper does not constitute a prospectus or an offer of financial services, it is not a sales document or a solicitation for the purchase of securities, investment products, regulated products or financial instruments, in any jurisdiction.
Crypto Stocks do not represent securities sold by Crypto Stock Foundation. Those who purchase Crypto Stocks have no rights over the Foundation, in particular in terms of capital, shares, units, royalties to capital, profit, returns or income at Cryptostockfoundation.com.
To participate in the governance of Crypto Stock Foundation it is necessary to hold a predetermined amount of USxD.
The governance rules can be viewed in the appropriate section of this whitepaper and on the appropriate voting platform.
Although management believes this data is accurate and reliable, it has not been submitted to an auditing firm or to legal, accounting, technical, or financial advisors.
All ERC20 tokens have been subject to Audits that can be verified in the appropriate section of Github.com. There is no guarantee as to the accuracy, reliability, or completeness of the data reported in this whitepaper.
This Whitepaper is published in English. Any translations into other languages are not certified by Crypto Stock Foundation and should not be relied upon. Please always refer to the original version.