Introducing HoodToken

Imagine a ….

On the grounds of the structure of Robin Hood Cooperative[1] we have been developing what we call the HoodToken.

HoodToken is a new kind of crypto-asset. It gives investors the means to invest in cryptocurrencies and the best companies in the US stock markets, while at the same time being liquid, anonymous and peer-to-peer like cryptotokens. Furthermore, the HoodToken gives access to a distributed crowdfunding economy irrigating the commons.

Purpose -- speculate together while creating commons

HoodToken is crypto-asset that is used as collaborative tool to produce commons[2] while speculating together. The “real value” of the HoodToken is speculative and can produce profits or losses for its holders when liquidated.

The HoodToken gets its liquidation value via a market maker against a managed investment portfolio. The portfolio is separate from the HoodToken. The investment portfolio is used as a reference point that guarantees a bounded liquidation value for the HoodTokens. The market maker buys HoodTokens from HoodToken holders at a price that corresponds to the investment portfolio minus a liquidation fee. HoodTokens can also be sold in after-markets, like other cryptoassets, with market participants setting the price of the HoodTokens.

Organisationally -- a human DPO

The owners of HoodTokens (together with relevant parts of the necessary support structure – the market maker, portfolio manager, exchanges and so on) make up a DPO – a distributed programmable organisation.[3] The DPO has its rules of governance, which can be amended. The development of the DPO is financed by a programmed percentage fee of the total sum of HoodToken value. The DPO also owns a number of HoodTokens, and when the value of the HoodTokens appreciates, a part of the profit will be used for supporting commons-building projects.

Technically -- cryptotoken

HoodToken is issued and functions as a token on the Ethereum blockchain. The owner of the token has access to the HoodToken via an Ethereum wallet. Transactions like buying and selling the tokens are technically facilitated by Ethereum smart contracts.  

Financially -- tied to a managed hybrid portfolio

HoodToken is backed by a hybrid portfolio. The backing happens via a market maker that quotes a daily ask and bid price for the HoodToken. The market maker follows in its pricing the performance of a portfolio, composed of three parts: 1) cryptocurrencies like Bitcoin (BTC) and Ether (ETH), 2) a stock portfolio managed with the help of an algorithm called “The Parasite2” and 3) shares in an index fund.[4] Consequently, the value of the HoodToken appreciates and depreciates with the portfolio.

Investing Instruments & Algorithms

In addition to deploying existing investment instruments, the HoodToken DPO will develop and introduce new investment tools. At the moment, the furthest in development are two shorting-related algorithms.

Functionally -- a new way to irrigate the commons

As per the Robin Hood principle, part of the appreciation of the value of the HoodToken is directed towards supporting commons-building projects[5] (if the value has not gone up, nothing will be allocated to projects). The holders of HoodToken curate and vote on which projects to support. They can also put forward projects themselves and crowdfinance projects via other means than voting with HoodTokens.

The funding of the projects happens so that a project launches an ICO[6] available to HoodToken owners. Projects who seek support from HoodToken DPO will make ICOs that are bought to the DPO´s portfolio according to token holders decision.

Commons projects will become a part of the HoodToken DPO’s ICO portfolio (which is separate from the hybrid portfolio). This makes the HoodToken a mechanism to extract capital from finance to commons and produce a commons based currency.

Opensourcially -- HoodToken as template for future projects

HoodToken is a pilot model for DPO-like co-operatives that can be run on top of blockchains and other distributed computing systems. In the near future, we aim to release HoodToken´s architecture in a form that is easily copyable, remixable and reusable for other use cases. This is one step in open sourcing finance.

Step by Step

First, HoodToken will be launched in a ICO-type event, where users can purchase HoodTokens with BTC and ETH.

Hood Note diagrams 1.png

Step 1. Launch

Second, after the launch, the cryptotokens used for purchasing HoodTokens will be converted into fiat currency, which in turn is used to build the hybrid fund. The value of this fund is published daily by an oracle, which gives the possibility for a market maker to publish daily ask an bid prices for HoodTokens. This establishes a market, where users can sell and buy HoodTokens from the market maker or from participating 3rd party crypto exchanges.

Hood Note diagrams 2.png

Step 2. On the market

Most crucially, when the HoodToken appreciates in value, part of the profit accured to the HoodToken DPO will be used to support commons-building projects. The projects will be vetted through commons criteria, and will make proposals of what they would accomplish with a given sum of support. HoodToken holders then vote through the HoodToken DPO over which projects to support. The elected projects will launch an ICO, and the HoodToken DPO will purchase the project tokens with HoodToken. The project tokens will be placed in a ICO-fund, offering further backing and possible appreciation to HoodTokens.

Hood Note diagrams 3 remix1.png

Step 3. Project funding


[1] www.robinhoodcoop.org

[2] In the tradition of Robin Hood Coop projects

[3] Similar to the concept of DAO, for the term DPO (Decentralized Programable Organization) see https://medium.com/@ecsa_team/programmed-decentralised-commons-production-2b1fac7cf9a8 

[4] The reason for combining stocks and crytocurrencies is risk diversification: in relation traditional asset classes, BTC is the lowest correlating new asset class CORRELATION TABLE

[5] Criteria for commons-oriented projects: http://wiki.p2pfoundation.net/Six_Characteristics_to_Define_Commons-Oriented_Entities and http://unisson.co/tableau-des-ingredient

[6]  With similarities with the concept of IPO but beyond in financial and organizational terms, for the term ICO (Initial Coin Offering) see http://www.investopedia.com/terms/i/initial-coin-offering-ico.asp