How CHSB Yield 2.0 will democratise wealth
As we prepare for the launch of CHSB Yield 2.0, we have been thinking about the path that led us to consider the changes to the program - shifting from a consistent yield for all tokens held within the CHSB yield wallet, to the tiered system that we outlined in our CHSB Yield 2.0 explainer earlier this year.
CHSB was one of the top-performing tokens of 2020, skyrocketing by 2,700% and reaching the top 70 tokens on CoinMarketCap. CHSB started the year at 26 cents and is still up by over 150%, and the community of users on the SwissBorg app has grown to over 500,000 (with over 115,000 of them holding CHSB).
We’re very grateful for this explosive growth, and to those who have supported us and our token over the past four years.
However, the challenge of this growth is that many of the benefits of our ecosystem became inaccessible to new users. At our all-time high, our Community Premium account cost over $3,000, while Genesis Premium cost over $75,000. To be eligible for SwissBorg Nation, a group of 200 members of our community who can influence the SwissBorg roadmap, community members need to hold at least 100,000 CHSB (worth over $150,000 at our all-time high), and only the very top token holders have guaranteed access to SwissBorg Ventures.
We are happy to offer these extra benefits to our large token holders, many of whom supported SwissBorg through the crypto winter and before we had a product. However, we also recognise that as the ecosystem grows, and as CHSB’s price increases, these benefits are becoming less accessible to many members of our community. And if there aren’t as many benefits for new crypto investors, how will the SwissBorg community and ecosystem continue to grow?
A healthy ecosystem is one that rewards all of its users. An ecosystem that benefits all users is one that will build loyalty, attract new investors, and grow everyone’s wealth.
The CHSB Yield Program is one of the utilities adding value to CHSB, one of the primary ways users can grow their wealth with SwissBorg, and one way they can move closer to experiencing the benefits listed above.
However, the way it is currently structured makes it difficult for smaller holders to grow their wealth in a meaningful way. This then has slowed down the growth and value of our ecosystem, while also leading to the increased concentration of wealth among a small number of large holders.
The current distribution of CHSB
Currently, the distribution of CHSB tokens among our community is very unequal. Of the holders who currently have CHSB in their yield wallets, 49,268 holders have less than 1,000 CHSB in their wallets, while there are only 40 users with over 1 million CHSB. In fact, the top 1% users in the CHSB yield wallet hold 64% of the staked CHSB.
This trend in distribution was accelerated by the original CHSB yield program, as all holders are given the same yield percentage, with the possibility to benefit from a Premium yield multiplier (1.5X for Community Premium, 2X for Genesis Premium).
For example, if a CHSB token holder has 1 million tokens in their yield wallet and is earning a 10% annual yield, after one year they would have earnt an additional 100,000 tokens. A holder with 1,000 tokens who is earning the same yield will have earnt an additional 100 tokens after one year. (For simplicity, we haven’t included daily compounding in this example.)
Over time, this means the distribution of CHSB will become increasingly concentrated, with a larger percentage of token supply going to a small group of community members.
Why is this a problem?
Wealth inequality is a challenge in the world’s largest economies.
In the US, the top 1% of households hold 15 times more wealth than the bottom 50% combined. In the UK, the top 1% hold a quarter of the country’s wealth. Even Switzerland, which is known for being more equal, has seen wealth distribution become more skewed to the top 1%, which saw its wealth increase by 43% from 2003 to 2015.
Across the board, the wealth gap is growing year after year, and from generation to generation. People who are born into wealth have access to opportunities, connections and funding that those born into lower socioeconomic areas don’t have. Over time, this means the rich get richer, while the poor get poorer.
Without innovation, the consequences for future generations will be disastrous. It is clear that our traditional systems do not have an answer to stop this vicious cycle.
In addition to the ramifications for the members of an unequal ecosystem or community, there are negative consequences for the system itself - as more wealth and power transitions into the hands of a few, that system becomes vulnerable to the desires of those few, rather than serving the needs of the wider community.
We can see this in politics, where corporations and wealthy families fund initiatives that serve them, rather than society as a whole. We can also see this in finance, where certain individuals and organisations have enough power to cause an asset’s price to spike or crash in a coordinated strike.
While many of us are aware of the problems associated with wealth inequality, there’s often a question about how to measure the inequality of a system in a concrete way, rather than relying on assumptions and anecdotal evidence. Enter Vitalik Buterin!
Measuring inequality in the cryptoverse
One of the most popular and well-known ways of measuring inequality is the Gini coefficient. It measures the area between a perfect distribution line (this is a straight, 45-degree line) and the wealth distribution curve in any system. In a system with perfect equality, this area would be equal to 0. In a system with perfect inequality, the area would be equal to 0.5.
The Gini coefficient is 2 times this area, with the most equal systems having a lower score, and the most unequal ones having a higher score (up to 100).
However, while the Gini coefficient is popular, it is not necessarily the best choice for non-geographic communities, like blockchain. A recent analysis by Vitalik Buterin, founder of Ethereum, explained that the Gini coefficient may not be able to capture certain aspects of the wealth distribution, especially when applied to cryptocurrencies.
After considering the alternatives proposed by Vitalik, we have applied the lost utility from inequality to CHSB Yield 2.0, which is a simple and yet powerful measurement of the health of the yield distribution. This metric is used to optimise yield rates and provide the best return possible for our users.
How CHSB Yield 2.0 addresses these challenges
CHSB Yield 2.0 introduces a tier system that is designed to reward every investor in the CHSB yield wallet while decreasing the wealth gap that divides us all.
By boosting the yield for smaller token holders, we give them the opportunity to accelerate the growth of their wealth. The faster they do this, the sooner they can go Community Premium, which has the twin benefits of further accelerating their wealth with the 1.5X yield multiplier while reducing the circulating supply of CHSB for all.
This approach will lead to more investors discovering CHSB, thereby putting even more pressure on supply and increasing the token’s value over time. Those investors will continue to discover the high yields for their first CHSB tiers, they will continue to qualify for Community Premium, and the levels of CHSB locked in Premium accounts and yield wallets will continue to climb with the growth of the SwissBorg community.
And this is where our larger token holders benefit - because growing the SwissBorg ecosystem will increase demand for CHSB while reducing supply, and will ultimately result in the value of their investments increasing.
Rather than replicating old economic models where the rich get richer and the poor get poorer - and where the gap between the two is constantly growing - CHSB Yield 2.0 not only aims to close the gap, but to allow everyone in the ecosystem to grow their wealth.
The new yield program will lower the risk of our token being highly concentrated, it will give smaller holders more opportunities to grow their wealth, and it will attract new users into the SwissBorg ecosystem.
Once again, a rising tide lifts all boats, and CHSB Yield 2.0 will raise the tide for CHSB!
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