In a recent investment thesis on the Sora Coin (XOR), the team at TBEN Research explored the current state of the DeFi industry, highlighting the biggest challenges facing the industry today. The two biggest issues are the scalability and segregation of multiple blockchains that exist independently and cannot share information between them. The Polkadot project attempts to resolve these two bottlenecks by offering inter-blockchain transfers of any type of asset. They also provide transactional scalability by distributing transactions and validation across multiple parallel blockchains.
Download the full investment thesis on SORA (XOR) here.
Polkadot aims to improve two key elements of the DeFi economy, namely automated market makers and decentralized cryptocurrency exchanges. A connection to Polkadot through the SORA network allows the new decentralized exchange Polkaswap (DEX) to offer much higher transaction output than its competitors while maintaining reasonable transaction fees. As of March 22, Ethereum’s largest DEX Uniswap registered a daily trading volume of $ 1.08 billion, while Binance Smart Chain’s largest DEX Pancake swap registered $ 860 million. One of the largest centralized exchanges, Coinbase, registered $ 1.7 billion. There is certainly a demand for the trading infrastructure, and Polkaswap is likely to gain traction as Polkadot’s primary DEX.
The Sora project is not limited to another blockchain in the Polkadot ecosystem, however. Rather, it sets the ambitious goal of becoming a supranational monetary system that will compete with contemporary government monetary systems. For this to be possible, Sora will demand the general adoption of its XOR coin as a payment method. Instead of being a stable coin tied to the value of a fiat currency, Sora’s price is determined by an elastic supply controlled by a smart contract. This means that when the price of the XOR token rises and reaches a certain critical level, buyers can purchase newly issued tokens directly from the “Buy” smart contract rather than through the secondary market from the outstanding supply held by existing holders. Conversely, if the price drops, users can sell the tokens to the “Sell” smart contract. This algorithm regulates the number of tokens in circulation, and therefore reduces price volatility.
Also, the XOR binding curve is different from those used by other DeFi projects, because instead of over-collateralization, such as 150%, the XOR binding curve is close to 100%; it is fully secured by the assets used to purchase the smart contract’s XOR. At the same time, it is not a loan, because when XOR is bought, the asset that served as payment is given. Therefore, the XOR bond curve smart contract does not inflate the monetary base and the XOR buyer does not risk depreciation or liquidation of collateral, as is the case with digital assets locked in debt positions. DAI guarantees.
To learn more about the SORA network and the other two pieces in that network, PSWAP and VAL, download the report for the full scoop.