Agoric Economy

Overview

The Agoric Economy consists of three tightly-coupled components:

The Agoric Ecosystem is where consumers and producers exchange goods and services and where developers build decentralized finance dApps and other businesses.

The Local Currency Machine mints the native local currency, providing users with a stable medium of exchange and store of value for on-chain assets. The local currency machine reduces transactions costs to encourage adoption.

The Staking Market is where market participants in the Agoric ecosystem bid to have their transactions confirmed by validators. Stakers delegate their native staking token to validators to incentivize the correct execution of transactions, and are rewaded for securing the network.

A core design principle for the Agoric chain is to reduce transaction costs to encourage adoption and use. A stablecoin that provides users with a stable medium of exchange, a unit of account, and store of value is an essential component. Stablecoins provide a mechanism that helps ensure that the on-chain holdings one has converted from real-world assets retain their value until used. A stablecoin helps ensure that long-term contract costs are constant and used with greater confidence.

The Agoric Token System

The Agoric Token System Features two native tokens: a stable local currency pegged to the US dollar (USD) using a unique stabilization mechanism, and a staking token whose value derives from the economic activity within the Agoric ecosystem. The stablecoin ensures predictable pricing so that participants in the economy can transact in a stable and reliable manner. The staking token ensures that the security of the system grows in tandem with the economic activity on the network.

The Agoric Staking Token

The Agoric staking token represents capital in the Agoric cryptoeconomy, ensuring the chain’s ongoing operation and security. Stakers and validators provide security for the Agoric ecosystem, and earn rewards for providing this security. The following graphic describes how value from the global consumer economy flows in and through the Agoric cryptoeconomy, and how the decentralized transactions are secured.

The Agoric Stable Local Currency

In the Agoric economy, market participants provide collateral in the form of tokenized financial assets, brought via IBC and other mechanisms, which they exchange for the stable local currency. The value of that currency is kept stable and pegged to US dollars. The tokenized asset will trade close to a 1:1 exchange rate with its real-world counterpart. Any movements away from that rate can be traded at a profit to restore the balance.

The economy enables users to buy and sell the stable local currency on demand. Borrowers pay a stability fee, which flows to the stability pool. Demand for $Ag increases with the growth of economic activity on the chain, resulting in a corresponding increase in the stability pool. These fees ensure that network security and economic stability scale with economic activity. Onchain markets, including a system-provided AMM, support automated liquidation of collateral. Automated liquidation occurs if the collateral’s value falls below the required collateralization ratio. If this is not sufficient to cover defaults, additional mechanisms will be triggered.

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