The week has arrived - time to finalize Silk’s peg composition !
If you plan to hodl/use Silk, voting on 1 of 3 options listed here is highly recommended and appreciated.
Since the earlier models proposed in Jan - July 2022, several improvements have been made, while the core concepts remained the same.
- Simplified - the makeup of Silk’s assets is now comprised of 6 assets (USD, EUR, JPY, CAD, Gold, Bitcoin) instead of 15 assets.
- Redeemable - because its simplified to include only liquid on-chain assets, in a worst case scenario, each asset within Silk will be redeemable 1:1 to its corresponding on-chain asset.
- Indexed - complexities requiring human interaction to periodically update Silk’s peg were drastically reduced to reflect a durable, predominantly static peg composition.
- Fundamental - 100% of Silk’s peg is driven by diversification requirements and fundamental GDP metrics; technical models used to predict outperforming assets are not used in any.
- Universal benchmarks - previously, we used a proprietary benchmark to measure success; To provide ease of clarity to users, Silk is now measured against DXY, USD, EUR, and CPI data to gauge performance.
- Purchasing Power - We applied additional focus towards purchasing power maintenance over long periods, in turn accepting marginally higher volatility when compared to single fiat currencies over short time intervals.
Changes allowed for more robust back testing of hypothesized models over 32 years using monthly data intervals.
Structure of the model:
Silk’s model summary: X%(basket part 1 fiat ) + X%(basket part 2 hard assets) = Silk 100%
Basket part 1 (fiat basket) = X%(fiat group A) + X%(fiat group B)
Fiat group A intent → equal allocation to each fiat available for Silk which increases diversification
Fiat group A = (X% allocated to fiat group A) / (sum of all fiats available to Silk)
Fiat group B intent → weight highly influential nations’ fiat greater than less powerful nations’ fiats.
Fiat group B = for each fiat available to Silk -->(GDP of country) / (GDP sum of all countries fiats
available to Silk)*X% allocation to fiat group B
Basket part 2 (hard assets) = Gold and Bitcion
- Basket part 2 (hard assets) intent → retain purchasing power over long time periods
- Basket part 2 (hard assets) = (basket part 2 X%).25(BTC) + (basket part 2 X%).75(Gold)
Within the parameters established form previous models, there remain three options to tweak the Silk basket and optimize for slightly different outcomes.
Option 1: Purchase Power Retention – over 32 years: 260% upside gain, 24.7% max drawdown, expected annual volatility of 6.7% vs USD
Option 2: High Fiat Diversification – over 32 years: 229% upside gain, 24.5% max drawdown, expected annual volatility of 6% vs USD
Option 3: Low Volatility vs USD – over 32 years: 195% upside gain, 24.0% max drawdown, expected annual volatility of 5% vs USD
For all addition details, please see references in the link below to compare and contrast models.
Silk peg details
Vote will be posted Friday in discord under Silk Peg channel.