Popular Science丨Interpretation of Chia’s 21 million reserve

Chia's white paper describes a 21 million strategic reserve fund. Many people are not very clear about the role of the strategic reserve fund, and even many veteran miners are hearing the term reserve fund for the first time.

Let's tell a story first:

In July 1944, 44 countries held the United Nations and Allied Monetary and Financial Conference on the hillside of Mount Washington, the highest peak in the eastern United States, to discuss post-war international monetary arrangements.

Subsequently, the famous Bretton Woods system was formed under the agreement signed in Bretton Woods Park. Under this system, the US dollar was directly linked to gold, with one ounce of gold = 35 US dollars.

The United States promised that anyone, anywhere, at any time, could exchange $35 for real gold. The reason why the United States dared to be so tough was that the domestic gold reserves were enough to redeem all US dollars.

The role of Chia's 21 million reserves is similar to that of the U.S. national gold reserves, and its functions are as follows:

Provide guarantee for market cooperation and shareholder expansion: to governments, financial institutions, market makers and corporate finance, including but not limited to loans and settlements. In this context, the 21 million strategic reserve will be a guarantee for the benign stability of the currency price.

As internal rewards, including but not limited to adding additional farming rewards or otherwise incentivizing farmers and developers to verify and develop network software, etc.

Many people regard the strategic reserve fund as a pre-project, and thus have doubts about the Chia project.

Here, the author would like to explain: what is the 21 million strategic reserve fund? The biggest difference is whether the flow of this reserve fund is under supervision.

1. Is the flow regulated?

The pre-mined coins of traditional projects have always been in an opaque and unregulated state, and can be disposed of at will by the project party, and are often used to "cut leeks". This directly results in the fact that the higher the pre-mining ratio of the project, the less willing people are to participate!

However, this part of Chia's strategic reserve fund plays an important role and is strictly regulated. Chia must make financial disclosures to ensure transparency, and must also publicly declare in accordance with the US 1933 Act and 1394 Act, and is committed to listing on the Nasdaq and accepting supervision from the US SEC.

2. Internal or external

The pre-mined coins of traditional projects are mainly used to cope with the uses within the project ecosystem, including incentive uses, market stabilization uses, etc.

The main purpose of this part of Chia's strategic reserve fund is external, and it is used for the expansion of the Chia ecosystem, including market cooperation guarantees, shareholder expansion guarantees, government/institutional financial services, etc. The internal incentive effect is secondary.

An open, transparent and regulated reserve fund, whose main purpose is to expand the Chia ecosystem, is destined to be a benign "medicine" to promote the development of the project.

At least in the short term of 3 years. The 21 million Chia tokens controlled by the project party will not be circulated too much in the early stage due to the investment and supervision of large institutions, and the circulation quantity in the market is clearly visible.

At the same time, according to relevant data, the current market price of a Chia token has exceeded 30 USDT, and a small number of off-market prices have exceeded several hundred USDT. From the off-market sentiment, it can be inferred that the market holds a long-term bullish trend for the Chia project.

It is estimated that by September the total circulation of Chia will be around 2 million. With such a crazy and hot concept, it will only be a matter of time before the market value of Chia exceeds 100 million US dollars.

Today’s market price may still be a conservative estimate of the bottom price. With the opening of the secondary market in the future, I believe Chia will create a new encryption myth!