Blockchain Weekly | Interpreting Algorand: A Crowdfunding for Five Years

Guide

On June 19th, Beijing time, the eye-catching star public chain project Algorand main network officially launched, the first round of Algorand pass auction also started at 18:00 on the same day. This week's feature will introduce Algorand's Dutch auction rules and analyze its investment value and strategy.

Summary

Special Topics: The ALGO Pass is auctioned at a frequency of 2 per month. Each issue sells 25 million passes. It is estimated that 600 million ALGOs will be sold each year. A total of 3 billion ALGOs will be sold through Dutch auctions. The ALGO Pass also has a unique repurchase mechanism. Investors participating in the auction not only purchased the ALGO Pass, but also obtained a one-year US put option with an execution price of 90% of the current transaction price. In addition to options, Algorand's POS mechanism gives ALGO Pass holders the right to earn staking revenue. If you want to invest in Algorand, the better option is to participate in the Dutch-style pass auction twice a month. The total amount of ALGO passes is relatively large, with a market capitalization of nearly US$7 billion and a high valuation. There are many competitors in the public chain, and there are also many high-quality projects. Investors should pay attention to the related risks.

Quotes: BTC ushered in the third round of the main rising wave. This week, the total market value of digital certificates was 308.80 billion US dollars, an increase of about 13.1%; the average daily turnover was 60.58 billion US dollars, down 3.7%. The average daily turnover rate was 21.0%, down 3.4% from last week. The current price of BTC is 10144.6 US dollars, the weekly increase is 16.7%, the monthly increase is 32.1%, the average daily turnover is 18.2 billion US dollars, and the average daily turnover rate is 11.0%. The current price of ETH is 294.9 US dollars, the weekly increase is 11.7%, the monthly increase is 20.5%, the average daily turnover is 7.33 billion US dollars, and the average daily turnover rate is 25.1%. This week's exchange BTC balance was 813,500, an increase of 0.97 million from last week. The exchange's ETH balance was 8.09 million, an increase of 131,000 from last week. In the BICS secondary industry, the market value of the wallet & trading industry increased significantly, and the growth rate of the supply chain industry led.

Output and heat: The difficulty in computing and mining has dropped slightly, and public attention has increased significantly. The difficulty of mining this week is 7.411T. The average daily power of this week is 53.99EH/s, which is 0.09EH/s lower than last week. The difficulty of mining this week is 2021, which is 17th higher than last week. The average daily power is 161.0TH/ S, down 0.1TH/S from last week.

Industry: Traditional industry giants are accelerating the layout of the blockchain industry, and regulation is becoming clearer. The world's largest trader and broker plans to trade BTC derivatives; the FATF issues new regulatory regulations that allow for proper use, but does not tolerate virtual assets for illegal activities; the US Senate will hold questions on Libra's user data privacy issues on July 16th. Hearing; Coin Ann announced the launch of the BTCB for anchoring BTC on the currency chain.

Risk warning: regulatory policy risk, market volatility risk

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1

Special Topic: Interpreting Algorand's Dutch Auction

1.1 Introduction to the Algorand Project

This week, the eye-catching star public chain project Algorand main network officially launched, the previous week, Algorand nodes have been tested in the Pre-Launch environment. The first round of the Algorand Pass was also auctioned at 18:00 on June 19th, Beijing time.

Algorand is another "academic" public chain in the blockchain industry. It was launched in 2017 by Turing Award winner and MIT professor Silvio Micali to solve the Byzantine class with a verifiable random function (VRF) combined with a Pure PoS consensus algorithm. (BFT) The scalability problem of the consensus algorithm, trying to break through the "impossible triangle" of the blockchain.

Professor Micali has made outstanding achievements in the field of modern cryptography such as public key cryptography, pseudo-random function, secure multi-party computing, and is also one of the co-inventors of zero-knowledge proof, the 2012 Turing Award winner. Based on its deep theoretical foundation, the Algorand team proposed a safe and reliable “encrypted lottery” VRF algorithm, Algorand, which can randomly select a small number of “verifiers” from the many nodes of the network to use the BFT mechanism to produce blocks. This improves scalability while ensuring consensus certainty.

But what makes investors most interested is Algorand's unique way of selling – Dutch auctions.

1.2 What is a Dutch auction

Dutch Auction is a special auction method, which takes the form of “price reduction auction”, which sets a higher starting price and a lower reserve price in advance, and the bidders have high to low auction targets. The offer is decremented in turn until the first bidder is priced, or the price is reduced to the reserve price. When the auction target is an equity, a pass, a financial derivative, etc., which has a non-unique number and the same qualification, all bidders shall report their bids and purchase quantities in a black box. The auctioneer shall sort the purchase amount according to the price from high to low. After the cumulative purchase amount exceeds the target supply amount, all the traders will be traded at the lowest price of all successful purchases . Algorand used this improved Dutch auction method.

In the traditional financial field, the Dutch auction method is not new. Google did not adopt the traditional investment bank underwriting method in the IPO, but directly used the Dutch auction method for individual investors. Dutch auctions allow market forces to price listed companies, and listed companies can maximize capital to avoid investment banks lowering corporate IPO prices for their own and institutional partners. Dutch auctions also give individual investors the opportunity to buy the original shares of listed companies, avoiding buying after excessive speculation in the secondary market. The blockchain projects Gnosis, Polkadot, etc. all use Dutch auctions for crowdfunding.

1.3 Algorand's five-year auction plan

With the launch of Algorand's main network on June 19th, a five-year ALGO Pass Dutch auction will also be launched, with an auction frequency of 2 per month, with a sale of 25 million passes per issue, which is expected to be sold 6 per year. A total of 3 billion pieces of ALGO will be sold through Dutch auctions . Algorand's auction was conducted on the compliance platform Coinlist, a financing platform for certifying investors and high-quality blockchain projects that meet US securities law regulatory requirements, and was launched by AngelList and Protocol Labs. Users who wish to participate in the auction need to be verified by KYC, and investors do not have to worry about Algorand's compliance issues.

The specific rules of the ALGO Pass Dutch auction are as follows: At the beginning of the auction, the price of the ALGO Pass will decrease linearly from time to time at a higher starting price (for example, $10) until the price reaches the clearing price or reserve price , as shown below. Show.

Participants in the auction can wait for the ALGO price to drop to their expected price and bid to report the amount of ALGO they wish to purchase. The demand for a certain time at the ALGO Pass is defined as the sum of the amounts quoted by all previous bidders and the current ALGO Pass. As the total amount increases over time, and ALGO quotes decrease over time, total demand is a function of monotonous growth over time, as shown in the following figure.

The auction ends when the total demand reaches the total supply of the auction or the price decreases to the bottom price. If the total demand exceeds the supply, it is allocated on a first-come, first-served basis. The ALGO price at the end of the auction is the transaction price of all bidders for this time, called the clearing price. The bidder can obtain an ALGO certificate equivalent to the previously subscribed subscription amount.

1.4 Algorand's unique repo refund policy

ALGO Pass also has a unique repurchase mechanism. If the investors participating in the auction are dissatisfied with their transaction price after successful transaction, they can sell these certificates to the Algorand project at the discounted price of the original transaction price within the window period of one year and seven days. Investors do not need to lock the ALGO pass obtained before the repurchase, but need to keep the account used in the auction. If the investor trades for more than $1, the Algorand Foundation will buy back ALGO at a 90% discount. If the investor's price is less than $1, the Algorand Foundation will buy back at a price lower than the transaction price of $0.10.

This kind of repurchase mechanism not only "over the bottom" for investors participating in the auction, but also derived a series of new investment strategies. First, the investors who participated in the auction not only bought the ALGO Pass, but also obtained a one- year American put option with an execution price of 90% of the current transaction price. Investors can buy ALGO Parallel Rights in the secondary market on any day prior to the expiration of this “option” as long as the price of the ALGO Pass is less than 90% of the auction price. However, investors who did not participate in the auction and bought through the secondary market did not enjoy this right.

In addition to the options, Algorand's POS mechanism gives the ALGO Pass holder the right to earn staking revenue. It is estimated that the current annualized lock-up yield of the Algorand network is about 14.8%.

1.5 Algorand's prospects and investment value

ALGO Certified has a unique price mechanism. From the perspective of the trading strategies of two different investors, if you want to invest in Algorand, the better choice is to participate in the Dutch-style pass auction twice a month.

Investors who purchase the certificate through the auction have an additional one-year refund right compared to the investor who purchases through the secondary market, and the refund right does not require the investor to lock the position, so there is more in the secondary market. More operating space. By buying ALGO through the auction, you get not only the ALGO Pass, but also an account with a refund right, which represents a one-year ALGO American put option with an execution price of 90% of the auction price. The liquidation price of $2.40 for the first auction is actually the package price of ALGO plus puts, and they are separable. The ALGO Pass is sold on the exchange and the option is tied to the account participating in the auction. Algorand's Dutch auction has 120 times, lasting five years, and the certificate of sale accounts for 30% of the total circulation. At the same time, the participation in the auction needs to pass the Coinlist's KYC. There is a certain investment threshold, and qualified investors will participate in the auction through Coinlist. Is a better choice.

On the other hand, the total amount of ALGO passes is 10 billion, of which 3 billion are sold through auction within five years. The total number of teams, foundations and private offerings is 2.75 billion, and the rest is the node staking income. output. According to the current average price of the secondary market of 2.45 US dollars, the price of the private placement round is 49 times of 0.05 US dollars, the total market value has reached 24.5 billion US dollars, and the market capitalization value is also nearly 7 billion US dollars, the valuation is high. If the short-term increase of ALGO is too large, it will face selling pressure from auction participants. In the long run, the secondary market price of ALGO Pass should be relatively stable. If the price falls by a large margin, the auction participants with the right of refund will purchase the ALGO exercise from the secondary market. The price of ALGO is supported by 90% of the average transaction price of the recent auction, unless there is an unexpected situation or systemic risk. The solvency of Algorand cannot be guaranteed.

In addition, Algorand said that the team and the foundation held a certificate without a lock-up plan, but promised that this part of the pass is only used to participate in the Staking vote, will not sell, and the team's participation in the lock will not exceed the circulation of 49 % to eliminate community concerns about 51% of attacks.

Algorand belongs to the basic public chain. It mainly solves the problem of blockchain scalability and network efficiency. There are many competitors, including high-quality projects such as Polkadot and Cosmos. Investors should understand the distribution and circulation of ALGO Pass, the development of Algorand and its competing products, and prevent related risks.

2

Quote: BTC welcomes the third round of the main rally

2.1 Overall market: supervision is not as strong as expected, BTC is pulling up

The total market value of digital certificates this week was 308.80 billion US dollars, an increase of 35.9 billion US dollars last week, an increase of about 13.1%. In the early morning of June 22, Beijing time, the FATF (Anti-Money Laundering Financial Action Task Force) issued a guide to the certification of encryption and certification, requiring countries to encrypt customer service providers to send customer information when transferring funds. The supervision opinion was less than expected, and BTC took advantage of the situation to break through the $10,000 mark and lead the total market value of digital certificates to exceed 300 billion US dollars.

The average daily trading volume of the digital pass market was US$60.58 billion, down 3.31 billion USD from the previous week, down 3.7%. The average daily turnover rate was 21.0%, down 3.4% from last week.

The market share of the top ten passes accounted for 87.1%, of which BTC accounted for 58.4%, up 1.8% from last week, BTC continued to maintain a relatively strong.

This week's exchange BTC balance was 813,500, an increase of 0.97 million from last week. The exchange's ETH balance was 8.09 million, an increase of 131,000 from last week. While the BTC continued to rise, the selling pressure on the market also increased slightly.

The USDT market value was $3.57 billion, an increase of $120 million from last week and the USDT premium rate was 0.3%. The USDT continued to issue additional shares, indicating that the trading on the market was active and the demand for stable certification increased.

2.2 Core Pass: BTC welcomes the main wave

The current price of BTC is 10144.6 US dollars, with a weekly increase of 16.7%, and the monthly increase is 32.1%. The average daily turnover of BTC this week was 18.2 billion US dollars, and the average daily turnover rate was 11.0%. After the BTC broke through before the high of 9,000 US dollars, the storage capacity will be consolidated. After breaking through 10,000 US dollars, it is expected to open the third wave of the main wave of the year.

The current price of ETH is 294.9 US dollars, with a weekly increase of 11.7% and a monthly increase of 20.5%. The average daily trading volume of ETH this week was 7.33 billion US dollars, and the average daily turnover rate was 25.1%. ETH has turned stronger this week and is expected to maintain a strong linkage with the broader market.

The EOS is priced at $7.09, a weekly increase of 7.5%, and a monthly increase of 18.7%. The average daily trading volume of EOS this week was 2.12 billion US dollars, and the average daily turnover rate was 33.1%. The pressure above the EOS is relatively large, and the recent contraction is relatively obvious. The market may be ushered in to make up the market, but the previous high is difficult to break through.

The current price of XRP is 0.443 US dollars, with a weekly increase of 9.2% and a monthly increase of 17.7%. The average daily volume of XRP this week was $1.59 billion, with an average daily turnover of 8.7%. The correlation between XRP and BTC is relatively low, and it is not very good in this round of upswing. Like EOS, there may be a compensatory increase.

The monthly volatility of the main pass this week continued to fall. BTC monthly volatility was 17.8%, down 4.6% from last week; ETH monthly volatility was 19.4%, down 4.6% from last week; EOS monthly volatility was 32.6%, down 2.3% from last week; XRP monthly volatility 18.5%, down 6.3% from last week. This week, the volatility of the market's main circulation certificate continued to decline, with a slow shock and upward movement.

2.3 BICS industry: the market value of the wallet & trading industry has increased significantly, and the growth rate of the supply chain industry is leading.

Based on the top 500 market capitalizations in this week's market capitalization, the market value of the payment and settlement industry rose from 68.2% to the top five BICS (Blockchain Industry Classification Standard) secondary industries with a total market capitalization. 69.2%. From the perspective of the change rate of market value, the market value of wallet & transaction and supply chain industry has a higher growth rate, which is 29.7% and 14.7% higher than that of last week. The market share of health care and leisure and entertainment is more obvious. Last week, it dropped by 22.4% and 14.0% respectively.

The BICS secondary industry with more obvious increase in the number of passes this week is the supply chain and non-bank finance, which is an increase of 2 compared with last week. The BICS secondary industry with a significant decline in the number of passes this week is the pass-through asset, reducing Three.

2.4 Market View: The long-term uptrend of BTC has not changed, and the main circulation certificate has a compensatory demand

After BTC broke through the $10,000 mark, market sentiment turned to greed again, and there may be FOMO sentiment. The BTC showed signs of accelerating rise on Saturday. It was the emotional outburst that was suppressed by the regulatory authorities after the bad news. The BTC is expected to continue to rise, but first of all, it needs to stand at the $10,000 mark in the next two days.

A quality master circulation certificate will usher in a surge. After the BTC hit a new high in the year, the main circulation certificates such as EOS and LTC did not break through the previous highs. In the long run, high-quality digital assets have a certain investment value, and the future increase will not lose or even exceed BTC. In addition, there were expectations for the trading platform to announce results in early July, and the exchange profit in the second quarter is expected to double compared to the first quarter. The market value of BTC is already 60% higher than the previous one. The main circulation certificate has a certain increase demand. Investors can combine their own situation to do asset allocation and seize the opportunity of market rotation.

3

Output and heat: the power of calculation and mining is slightly reduced, and public attention has increased significantly.

The daily average power of BTC and the difficulty of mining decreased slightly. The average daily computing power of ETH decreased slightly, while the computing power rebounded slightly. The difficulty of mining this week is 7.411T. The average daily power of this week is 53.99EH/s, which is 0.09EH/s lower than last week. The difficulty of mining this week is 2021, which is 17th higher than last week. The average daily power is 161.0TH/ S, down 0.1TH/S from last week.

This week, Google Trends's Bitcoin entry search fever was 15, which was 50% higher than last week, and the Ethereum entry search heat was 10, which was slightly lower than BTC.

4

Industry Highlights: Traditional industry giants are accelerating their layout and regulation is becoming clearer

4.1 The world's largest trader and broker plans to trade BTC derivatives

According to Bloomberg News, TP ICAP, the world's largest trader and broker, announced that it has entered the encryption and certification industry as an intermediary between customers who want to buy and sell BTC futures. The company's new joint venture, operated by Simon Forster and Duncan Trenholme in London, is expected to increase BTC-related non-deliverable forward contracts and plans to open trading desks in Asia and the US. TPICAP will begin with a cash-settled futures contract that is traded on a regulated public market managed by CME. Frits Vogels, CEO of TP ICAP's Europe, Middle East and Africa, said customers who want to access digital assets through the company must pass their identity and anti-money laundering checks. It is understood that ICAP is still exploring various digital assets, including encryption certificates and tokenized assets.

4.2 The US Senate will hold a hearing on Libra on July 16th

The US Senate Banking, Housing and Urban Affairs Committee will hold a hearing on Facebook on July 16th for Facebook's new stable certification Libra. The hearing will examine Facebook’s digital pass and data privacy issues. Maxine Waters, chairman of the US House Financial Services Committee, asked Facebook to suspend the development of the Libra Encryption Pass until after the hearing.

4.3 Coin Announces the Launch of BTCB for Anchoring BTC on the Currency Chain

Coin Ann announced today on the official website that it announced the launch of the anchor BTC (BTCB) on the currency chain, which can be used for the currency security transaction, and is also planned to be used for trading on the currency decentralized exchange in the future. It is reported that BTCB will be 100% supported by the BTC in the reserve. Subsequently, the currency security will launch a series of certificates to anchor different main circulation certificates.

4.4 FATF new regulations allow for proper use, but do not tolerate virtual assets for illegal activities

US Treasury Secretary Steven T. Mnuchin said in a speech at the FAO Financial Action Task Force (FATF) Plenary Meeting today that virtual asset service providers will be required to implement traditional financial institutions in accordance with the latest measures. The same AML/CFT (anti-money laundering/anti-terrorist financing) requirements. Specific requirements include: Identifying senders and receivers of funds; Developing processes to share information with other providers and law enforcement agencies of virtual assets; understanding customers and conducting appropriate due diligence to ensure that they do not engage in illegal activities; Program to explain the risks in its particular business type.

Roger Wilkins, former chairman of the FATF and former secretary of the Australian Department of Justice, believes that the new rules may have the opposite effect as expected, forcing digital pass transactions out of the controlled platform, which is one of the best platforms for financial crimes. .