I have explained why Stablecin is a misnomer when I began unveiling facts about money and the world economy in the introductory article about Sögur. Stablecoins are built to mirror fiats which are basically on a steep slope to declining value. Because of the economic nature of the world and recent crises, many countries are in huge debts, some are in a recession. Stablecoins built to mirror them will also never be stable in this sense. What $1 bought decades ago, $1000 may struggle to buy it right now. What changed? Many things, you know them.
But Sögur is built with an entirely new foundation. Its monetary model has revealed a definite path to a stabilized currency instead of a “stablecoin”. With Sögur developers have shown that they can do what governments will never be able to achieve. This article showcases a few differentiators that set Sögur on a whole new level.
Stabilized vs Stable?
Sögur is built not to mirror the value of any fiat currency. Though backed by fractional-reserve, it is built with a different model that rests on a model that stabilizes it. It is not controlled by the market conditions but by smart contracts and the rate at which people adopt it. Smart contracts set and control its price. Though there are other determining factors, the reality has shown that the price is not too deviated from what the model stated.
Smart contracts sell and purchase SGR tokens to and from users at a price range set by the monetary model. Tradeable on secondary markets, SGR prices may go above or below the prices set by the smart contracts. But, the fact is that when the prices go higher or lower, it will stabilize as users will be inclined to buy or sell from/to the smart contract.
Stablecoins do not have this kind of model, so they fluctuate as the fiats they back and can easily be manipulated. When stable coins go from 0.9999 to 1 there are traders making a lot of gains.
Sögur is backed fractionally by fiats and crypto. It is hard for it to mirror just a fiat or crypto. The development team gives a frequent update of the reserves. Stablecoins are backed by single currencies. The fact is just that if there is an economic crisis with the fiat the stablecoin mirrors, holders of the tokens also suffer the same fate. Some stablecoins are shady, past news from SEC has proven that some are not transparent and they may not be 100% backed by reserve as they claim. SGR has a transparent monetary policy and model that reveals how many of the tokens in circulation is backed and can be bought back without lowering the price.
Sögur Monetary Model
Sögur’s monetary model has revealed the fate of a stabilized currency and that of a stablecoin. The model has shown that SGR has the potential to be a standalone currency while other stablecoins will continue to be dependent on the fiats they mirror. I explained the monetary model Sögur presented in the last article, do well to check it out. As SGR reaches a particular market cap milestone and unique holders, its reserve ratio begins to decline steadily. Ultimately, it means that SGR will progress on the path to becoming a standalone currency as the number of demands (unique holders) increases. So also its stabilized price. In the case of a reversal, the SGR price will follow a similar curve (not the same curve as explained in the previous article).
There are no stablecoins with this kind of interesting model.
Governance Model DAO
SGR is not just controlled by smart contracts and left alone. It is designed to be managed and controlled by the community. Via votes, holders of SGR delegates leaders to push proposals and work to increase the adoption of the token. Stablecoins today are entirely controlled by centralized bodies that determine fees and charges.
Everyone buying or selling SGR from/to the smart contracts must pass KYC and AML procedures for the obvious reasons of compliance. There are stablecoins that are still battling with SEC since they deal with fiats. The problem is that Banks must be able to verify where funds originate before they can allow accounts with huge transactions to operate seamlessly and avoid account closure. With Sögur’s KYC/AML countermeasures in place, they can escape challenges with banks.