Despite the rapid growth of popularity and the obvious advantages of cryptocurrency, their spread as a medium of exchange encounters powerful resistance. The founders of the Swiss non-for-profit actor The Saga Foundation see the reasons for this state of affairs in the high volatility of virtual money, as well as in following the principle of anonymity, which was documented in the white paper by Satoshi Nakamoto. The fund team is ready not only to describe the main barriers for the development of cryptocurrency but also offer its own solution.
The organization has announced the launch of a unique Saga coin for the last quarter of 2018, a coin devoid of the main drawbacks of other digital money. It is designed to be the first stable cryptocurrency suitable for the role of a medium of exchange and a long-term investment protected from inflation.
What Makes Saga Different from Other Cryptocurrencies
The volatility of Bitcoin, Ether, and other coins is driven by the absence of the slightest hint of monetary policy, which supports the stability of the exchange rates of currencies. On the contrary, Saga will receive a real backing in the form of bank deposits in main national currencies. The price of the new coin will be protected from sudden surges by a specially developed reserve planning algorithm.
The refraining from anonymity, in the opinion of the creators of Saga, will help overcome the aversion of digital money by state authorities and credit institutions. This will facilitate the expansion of interaction with traditional institutions. With regard to buyers of coins, it is planned to follow the example of ordinary banks using the KYC (Know Your Customer) procedure and a set of AML (Anti-Money Laundering) measures. The basis for the organization of financial control will be the legislation of Switzerland.
Traditional Redundancy versus High Volatility
The issuance of secured virtual coins is by no means a novelty. Tether also created reserves for its tokenized dollar. In the case of Saga, however, it is a question of applying a mechanism that meets international standards and is similar to that used by banks. In addition, the reserves will be formed immediately from several national currencies, which excludes the binding of the coin to the rate of one of them and, as a consequence, makes the volatility of the cryptocurrency even lower.
National currencies deposited in regulated banks will serve the backing role. Reserves will be tied to SDR—special drawing rights issued by the IMF. The SDR rate is determined by a basket of currencies, which currently includes the US dollar, the British pound, the Euro, the Yuan, and the Yen.
Unlike USDT, it is planned to use not full, but partial backup for Saga. That is, not all coins issued will have collateral in real currencies. To manage reserves, the creators decided to use a flexible algorithm through a system of smart contracts. Their volume will vary with the number of coins in circulation and their actual value. Thus, the rate of the cryptocurrency will depend not only on reserves but also on the level of user confidence and the demand for coins.
The Saga Foundation Refrains from Conducting an ICO
Ido Sadeh, president and founder of Saga, said: "It's unreasonable to start a project that is characterized by low volatility and speculative exposure from the highly volatile and speculative process, which the ICO is." The Saga Foundation approaches the issue of raising funds from the traditional position, appealing to accredited investors. Mangrove Capital Partners, Singulariteam Technology Group, Lightspeed Venture Partners, and Initial Capital joined the project financing. At the moment, the fund has already collected $30 million.
The successful attraction of investors was caused by a very remarkable team working on the creation of the new cryptocurrency. The list of members of the advisory council includes the former head of the Bank of Israel Jacob Frenkel, Nobel Prize winner in economics Myron Scholes, and the chairman emeritus of CME Group Leo Melamed.