Saga in a nutshell: Monetary Model

In Insights

At the end of last year, we launched Saga (SGA) - a new, borderless global currency, unaffected by the national and political tensions which can weigh on the fiat currencies powering today’s world. But what is Saga? How does it work? How is it different?

In this blog we look to answer these important questions and will delve into the four pillars underpinning Saga’s offering: the Saga Monetary Model; Governance; Privacy; and Expertise. SGA draws on each of these pillars, to an end of being able to complement national currencies while being owned and democratically governed by SGA holders.

Exploring the economy of Saga

The purpose of Saga’s monetary model is to allow SGA to become a fully-fledged, standalone currency. In order to achieve this, there must be a sufficient degree of stability in the value of SGA; no one will accept SGA as a means of payment if its value fluctuates excessively. But at the same time, to become a fully-fledged currency, SGA must develop its own independent value. Therefore, Saga has developed an economy that aims to facilitate the development of SGAs independent value, hoping to fuel the growth and adoption of the currency.

How does it work?

The monetary model underpinning the Saga economy does not force the value of SGA to be static, but rather moderates price fluctuations so that they respond to the market’s long-term demand while fighting speculation. It will take time for Saga’s currency to gain credibility in the eyes of the public, so to this end, tokens are backed by a reserve kept in prominent fiat currencies. The ratio of the reserve to SGA in circulation, managed by mechanisms to stabilise value, is highest while SGA circulation is small. The ratio diminishes in a predetermined and predictable manner as the currency - and trust in it - grows.

 

The chart demonstrates the relationship between Saga's market price, the amount held in the reserve, and the ratio of the value of SGA in circulation to the value held in the reserve. Please note that this chart is a forecast and does not have an associated time frame.

All proceeds from the sale of SGA are kept in bank accounts. These proceeds, aka Saga’s reserves, are dedicated to enabling us to buy back SGA from the market. The price at which SGA are sold and bought back from the market depends on the amount of independent value SGA has achieved. At the beginning, SGA does not have independent value and all SGA in circulation could be bought back by the reserve at 100% of their current price. As trust in SGA grows, it develops an independent value and SGA’s price increases to represent this growing value.

 

This is not a new idea. In fact, a similar approach was used when paper money was first introduced. Initially, it was little more than a note of commitment from the payor, for the bearer to receive a certain amount of gold from a savings vault. We no longer exchange our notes for gold from a savings vault - but we accept that paper money has its own intrinsic value, and therefore it is trusted as a means of storing and exchanging value, and as a unit of account. SGA was built to mimic this exact evolution from being pegged to an existing asset to being a fully-fledged independent currency.

 

SGA price is stabilised as the monetary model sets both a bid and ask prices, letting market price fluctuate between them.

Saga was designed to become a truly global currency, overcoming the challenge of buying globally whilst only being able to pay nationally. With Saga the aim is to create a currency that isn’t influenced by national or political tensions. You can learn more about Saga here.

This content is not financial advice and should not form the basis of any financial investment decisions nor be seen as a recommendation to buy or sell any good or product. Trading cryptocurrency is complex and comes with a high risk of losing money, particularly if you trade on leverage. You should carefully consider whether trading cryptocurrencies is right for you and take the time to learn how trading works and decide how much money you are prepared to lose.

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