Charm: How to connect encrypted value with actual value using DMMS?
DMMS can develop the real economy by providing a mobile market for various products and services that did not previously exist.Source: Charm Blog
Compiled by: Hu Tao, Chain Catcher
Introduction
Innovation and invention are the most powerful determinants of human progress. For thousands of years, they have dictated the rise and fall of individuals, companies, nations, and empires. The best innovations, such as the telephone, steam engine, computer, and internet, have created substantial actual value in the real economy and improved the quality of life for billions of people worldwide.
The purpose of the financial economy (including cryptocurrencies) is to allocate resources to the most productive parts of the real economy so that innovation can obtain the funding it needs to develop. If this cannot be done effectively, the real economy will stop growing, and the financial economy will collapse, leading to devastating consequences.
The crypto economy is no different from other parts of the financial economy; it simply allows for easier transfer of crypto value due to the lack of centralized intermediaries. Therefore, a mechanism that connects crypto value to actual value would greatly benefit society, as it can transfer capital to the productive parts of the economy more quickly and efficiently.
This article will first explain the importance of actual value and conclude with Charm's plan to help anyone create actual value.
What is Actual Value
Actual value is the total market value of all products and services in the real economy that money can buy (i.e., GDP).
Innovation is a new way to create actual value. It is the most powerful determinant of human progress because it affects the types and quantities of goods or services that can be purchased. The importance of innovation is illustrated in the following image:
Since the Industrial Revolution, the world has experienced unprecedented economic growth driven by innovation.
What is Money
Money is often defined as a store of wealth, but it is actually credit created by centralized or decentralized entities.
Credit (e.g., dollars, bitcoins, ethers) can be used to generate more money (e.g., through purchasing investments, lending), but ultimately, all money must be exchanged for products and services in the real economy, because money itself has no value.
Once generated, funds will further be leveraged to create debt, allowing debtors to either purchase financial assets (e.g., stocks, tokens, bonds, options) with the funds they receive or use it to create more debt. The trading of financial assets creates the financial economy, of which a small part is the crypto economy.
What is Crypto Value
Crypto value is the total market value of digital assets created in the crypto economy.
The crypto economy is an extension of the financial economy, where paper or digital assets are created using today's actual value, so when they are traded, funds are allocated to parts of the real economy that can increase actual value in the future.
By eliminating intermediaries in the financial economy, the crypto economy provides a cheaper, more efficient, and fairer way to allocate capital, making it a better way to develop the real economy.
When Things Go Wrong
Problems arise because the financial economy has a tendency to generate debt, which means that when actual value cannot be used to repay debts, the financial economy contracts to match the scale of the real economy.
When this happens, debt holders (i.e., purchasers of financial assets) suffer significant losses, leading to economic recession, bankruptcies, unemployment, and the most vulnerable groups losing their livelihoods.
To avoid these disasters, the real economy must continue to grow to support the financial economy built upon it. This is the only way to create positive outcomes for everyone.
How to Develop the Real Economy
Connecting crypto value to actual value is a good way to develop the real economy, as the crypto economy is fundamentally a grassroots movement where money, credit, debt, and assets are created by individuals in the real economy rather than centralized intermediaries.
Since its establishment 16 months ago, the Charm community has been dedicated to connecting crypto value to actual value, and its efforts have created a new industry for decentralized market-making strategies (DMMS).
DMMS can develop the real economy by providing liquid markets for various products and services that previously did not exist. Below is a roadmap describing Charm's plan to develop the DMMS industry.
Charm's Roadmap
The Charm roadmap is divided into three phases. Phase 1 is for experimentation (completed), Phase 2 is for growth, and Phase 3 is for creating impact.
The first phase of the Charm roadmap is to try different methods to connect crypto value to actual value. A year of effort led to the launch of Alpha Vaults and created a new industry for DMMS.
Phase 2.1 is to develop the DMMS industry, starting with the launch of Alpha Pro.
Phase 2.2 is to create markets for all assets that can be tokenized, whether using Alpha Pro or by building new DMMS platforms.
Phase 3 is to help anyone create new ideas, products, and services; then use DMMS to bring their contributions to market.
The progress of these three phases is uncertain, and many things can happen, which is why there is a feedback loop from any phase to earlier phases so that Charm can pivot to different strategies when necessary. However, the goal of helping anyone create new ideas, products, and services; and connecting crypto value to actual value will not change.
Conclusion
Innovation is the most powerful determinant of human progress, and its rise and fall dictate the rise and fall of individuals, companies, nations, and empires.
Innovation drives growth in the real economy, the financial economy funds today's innovations and creates leverage for tomorrow's innovations. When innovation fails to materialize, things go wrong, and as the financial economy shrinks to match the scale of the real economy, it leads to recession.
This is why it is important to connect financial value with actual value so that the real economy will always have enough funding to sustain growth. Decentralized market-making strategies (DMMS) are one way to achieve this.
Charm is the first to use DMMS to increase liquidity in newly created markets and will soon be the first to use DMMS to create new markets. In the future, Charm will be committed to developing new solutions to help anyone create markets for ideas, products, and services, thereby bringing forth innovations that would otherwise be overlooked.
