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linear or exponential? effect of Reserve Ratio I #3

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flyon opened this issue Nov 14, 2020 · 1 comment
Open

linear or exponential? effect of Reserve Ratio I #3

flyon opened this issue Nov 14, 2020 · 1 comment

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@flyon
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flyon commented Nov 14, 2020

Forgive me if this is not the place to post this.

I'm fascinated by the ideas presented in this whitepaper but fail to understand something very crucial.

Following this:

The function B defines the price at which FAIRs can be bought from the DAT. 
B is a linear function and has a positive slope b such that B(x)=b*x where  and b>0.

Does this mean the price of the FAIRs increase linearly? Or is speed of increase based on the fraction of the incoming investments I that's kept in the reserve? (and thus potentially exponential)

As suggested here the Reserve Ratio = Price Sensitivity. But I'm not finding much back about that in the whitepaper.

However the paper suggests to use a relatively low value for I:

The investors buying FAIRs are doing so to invest money in the underlying organization. Investors don't want their 
money to be held in reserve by the DAT, they want their money to be put to good use by the organization. 
Consequently, the value of s must be an order of magnitude lower than b, which means that I should ideally be low. 

As I understand it now, an 'I' of 10% would lead to a exponential price increase as the number of tokens grow. And I'm wondering what the full ramifications of that would be for sustained growth for later-stage investors and contributors (assuming an organisation wants to keep giving its employees & users FAIRs for example).

@flyon
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flyon commented May 1, 2021

@thibauld after reading through things again and studying the formulas, Im convinced the buy price follows a linear function. In fact since B(x) = b * x, and b is constant, am I correct in concluding that the relative buy price increase is always the same, however you configure the other variables?

That is, when 10 times as many tokens are sold the buy price will always be 10 times higher. Is this correct?

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