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For a coin that is backed up by real assets, how do we take that into consideration when setting a price? Should the price be driven by the community on the exchanges by offer and demand? any ideas to include in the price the back up valuation?

closed as primarily opinion-based by Achala Dissanayake, ivicaa, Richard Horrocks, eth Mar 11 '18 at 8:53

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If the coin is backed up by real assets, the exchange value of the coin should equal the value of the assets backing the coin, minus the difficulty of getting those assets in exchange for the coin, times the probability that the assets are in truth backing the coin (that is, the issuer is not lying).

If the exchange value of the coin were lower, someone could profit buy buying the cheap coin and demanding the assets that back it. If the exchange value of the coin were significantly higher for a sustained period, someone could profit by buying those same assets elsewhere and selling an equivalent coin (for more than the cost of the assets).

  • Yes the theory sounds good. But how do we make sure that "the exchange value of the coin should equal the value of the assets backing the coin"? I thought maybe adding a function to the smart contract to set a min price to ensure it prices in the goods, but I am also afraid it sounds too risky for investors. any ideas?. if its lower and you buy the coin cheap you cant demand the assets that back it. they belong to the company as a backup resource but they will not be available to the public – Bravoblade Mar 10 '18 at 6:10
  • Then do the assets really back the coins? In what cases are the "backup resources" used? That needs to be a lot clearer. The "exchange value of the coin" I referred to is what token-holders will likely wind up exchanging the token for if there is a sufficiently liquid market for the token, and therefore a reasonable choice of what you (like any other token-holder) could sell them for. – WBT Mar 10 '18 at 12:13
  • the backup resources are assets that the company will hold to back up the coin. the company will continuously buy assets to keep growing that backup. Think of it as the US dollar. In theory it is backed up by gold. but you can't go to the fed and ask for gold in return of your dollars. does it make sense? investors will be able to buy coins with eth and bonds and they could exchange them back in the exchanges if they wanted to – Bravoblade Mar 10 '18 at 15:17
  • I'm just trying to understand how it works in this case. Maybe at the end of the day I dont need to make any changes. Think of it as tether. Even if all coins go up or down it stays around $1, in theory 1tether = 1usd – Bravoblade Mar 10 '18 at 15:20
  • @Bravoblade If an asset is backing the coin, you should be able to exchange the coin for the asset. You should be able to get 1USD per tethered coin if the issuer is making that claim. – WBT Mar 11 '18 at 0:07

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