What kind of digital assets are worth holding?
An in-depth analysis of the MATRIX economic ecosystem
By Owen Tao, MATRIX CEO
With the advent of the digital economy, more and more digital assets are brought into the market and in a variety of ways. With this year’s ICO boom, various types of assets and tokens have emerged, but what are the factors affecting the value of these assets? What kind of digital assets are worth holding? This is a problem that every investor pays close attention to. Here, we will use MATRIX as an example to explain the inner logic that assigns value to digital assets.
In general, the value of digital assets (relative price) is determined by three major aspects: value anchoring, liquidity, and consensus value.
1. Value anchoring
The anchoring effect is when a person needs to make a quantitative estimate of an event and certain, specific values are used to set the starting value, and the starting value will serve as the anchor to restrict the estimated value. When making decisions, we will unconsciously give too much emphasis to the information that was initially obtained. Value anchoring refers to the criterion that when a person estimates the value of an asset, he or she will choose a value or reference as an estimate, based on objective conditions.
In the current market, the most representative value anchors are bitcoin and gold. The current cost of mining a bitcoin has exceeded 10,000 yuan, and the cost of producing 1 gram of 24 karat gold is only about 280 yuan. In this case, the overwhelming majority of people would naturally think that no matter the price of bitcoin and gold, their transaction value should never be lower than the cost of production. So the price of bitcoin or gold will fluctuate above the cost of production.
When reviewing the mechanism for the development of bitcoin, Satoshi Nakamoto designed the system to control the total circulation of bitcoin; (in the simulation of gold, the mining rate will be slower due to limited reserves). Bitcoin production, also known as mining, stipulates that after producing 210,000 blocks, the production of bitcoin will be halved. At the beginning, each block will produce 50 bitcoins, and then the rate is gradually halved until it approaches zero. As bitcoin’s mining difficulty gradually increases, the cost of producing bitcoin becomes higher and higher, which has become an important reason for the gradual increase in the price of bitcoin.
Therefore, when choosing to hold digital assets, whether or not there is a value anchor should be used as an important reference factor. The digital assets that are generated by mining with a gradual increase in production costs, will have better value support than other digital assets.
MATRIX has innovatively introduced charity mining methods. Unlike mining methods such as bitcoin that simply calculate the data for bookkeeping purposes, mining in the MATRIX system involves participating in calculations that are meaningful to useful projects, such as the sequencing of the human genome. Participating in MATRIX’s mining plan, you can either obtain a MATRIX token, MAN (MATRIX AI Network), or use the mining power and energy to make a tangible contribution to society. Like bitcoin, the difficulty of mining MATRIX will also gradually increase with time. In addition to the mining costs which can anchor the initial price of MATRIX, gradually increasing the cost of mining will become an important factor to promote the value of MATRIX.
The essence of liquidity is, in fact, the relationship between supply and demand in economics. Let’s see the supply-demand curve below:
When the supply is greater than demand, the price of the commodity will decline, when the supply is less than demand, the price of the commodity will naturally rise. It is also true for circulating assets. The relationship between supply and demand determines the liquidity of assets — when supply is greater than demand, liquidity declines, and when supply is less than demand and liquidity rises, it also directly determines the value of assets.
We can also use this classic macroeconomic formula to calculate the price of general equivalents:
M — total money
V — Currency turnover, i.e. liquidity
P — Currency price level, i.e. currency value
T — Currency trading volume, the economic value of daily transactions
P (monetary value) = M*N/T
That is to say, with a certain amount of money and a certain amount of market economy, liquidity directly determines the price of currency. For us, it is the value of the asset.
MATRIX has designed a perfect system to guarantee MAN’s efficient and high-speed circulation in this system:
A. MAN’s circulation in MATRIX
Transactions and Fees: MAN can be used to make payments for any transactions performed by users on MATRIX. When a transaction is packaged, a small MAN-based processing fee will be charged as a miner’s fee, similar to Ethereum’s Gas.
Purchase services: You can use MAN to freely access any application and service published on the main chain of MATRIX. For example, you can use MATRIX Cancer Aid System to determine if you have thyroid cancer. Of course, the core of MATRIX is to provide artificial intelligence services. All artificial intelligence services purchased on MATRIX will require MAN-based payments.
Payment channels: In the future, MAN will be used as a payment method similar to Alipay. With support online and offline, you can use MAN as a token to buy coffee at a coffee shop, or buy daily necessities at a supermarket. MAN’s functionality in the daily life will greatly increase MAN’s demand and circulation. MATRIX also has an excellent team to promote MAN to people from all walks of life.
Buying hashrate: If you have a professional computing challenge, (for instance, if you own a big data company and you don’t know how to handle your massive amounts of data), we can process the data for you when you use MAN to purchase hashrate in the MATRIX network, you will be rewarded according to your contribution.
In summary, it is easy to see that once users have access to the MATRIX network, it will be impossible to avoid obtaining or spending MAN. Therefore, MAN will quickly circulate throughout the world and have many diverse users.
B. Rich Application System
Application is the most important factor affecting the liquidity and value of assets in a blockchain network. For example, Ethereum, (an open source public chain with the largest number of accessible applications), has led to high-speed circulation and soaring prices of ETH tokens. The same is true of MATRIX. From the very beginning, it has gained a large number of high-quality application scenarios and partners:
Auxiliary diagnosis and treatment: MATRIX has started in-depth cooperation with Beijing Cancer Hospital and 302 other domestic, Grade III Level A hospitals, to develop a cancer-assisted diagnosis and treatment system, starting with thyroid cancer and liver cancer.
Credit Information Service: The 21st century will be the era of credit. MATRIX will cooperate with China Securities Credit Investment and China Youth Credit to fully spread out the application of blockchain to corporate credit information and personal credit information.
Distributed computing power: Unlike general mining chains, MATRIX will provide a distributed rental system. Apart from mining, all of the network’s accessible computing power can be rented out on-demand to obtain MAN.
The Belt and Road Initiative: MATRIX has entered into strategic cooperation with the China Belt and Road Development Research Center and will become the only partner in the Chinese Belt and Road for artificial intelligence and blockchain solutions.
It can be seen that, MATRIX’s early landing applications are highly demanding, and at the same time, the market ceiling is extremely high. This will bring endless opportunity for MAN’s circulation and value to grow. Just take the cancer-assisted diagnosis and treatment system as an example, as the saying goes “one token buys one modelesque lover” or “one token buys one villa”, after MATRIX’s cancer-assisted diagnosis and treatment system is launched, “one token can save one life” will become a reality. Is this not more significant.
3. Value consensus
The consensus mechanism is the cornerstone of the entire blockchain industry, and of course, the value of many tangible assets in the market. The best example of value consensus is diamonds. The high value of diamonds is based on the marketing and guidance of vested interests, long-standing value anchors, and the formation of a consensus on the value of diamonds in society, making diamonds one of the most expensive luxury items in the world today. The history of the diamond can be seen as a legend in value development.
How to make digital assets obtain this consensus of high-value has become an important issue in promoting the value of blockchain networks and assets. Bitcoin, for example, is considered a model for value consensus in the digital asset industry today. Compared with the latest blockchain technology, bitcoin’s network can no longer support large-scale commercial application access, and the transaction speed is not very satisfactory. But through the value of consensus, bitcoin is far ahead of other cryptocurrencies, firmly sitting at the top of the pyramid of digital assets in the blockchain kingdom.
As such, MATRIX has made extensive preparations to achieve value consensus:
First-rate applications and partners: As mentioned above, MATRIX’s initial applications are within lucrative and widely trafficked industries. In addition, MATRIX’s partners are heavyweight organizations: whether it be Beijing Cancer Hospital or China Youth Credit Group of Tsinghua Unigroup, (each very influential enterprises and institutions in mainland China), not to mention the China Belt and Road Development Research Center for strategic cooperation. These partnerships form our core, long-term strategy and direction and create a good foundation of MATRIX’s core values.
ABCD Alliance: The AI Block-Chain and Cloud-Computing Development (ABCD) is a coalition created by the MATRIX project as a core sponsor and is the world’s top production, research and development alliance. These world-class experts and scholars, as well as enterprises and public institutions, provide the MATRIX project with strong academic and technical support and good industrial cooperation channels, and at the same time, they provide an important endorsement for MATRIX’s influence in the world.
MATRIX FOUNDING LIMITED: The main body of the MATRIX project is a foundation legally established in Hong Kong. The establishment of the foundation was led by some of the world’s top lawyers. The MATRIX Foundation’s core team of lawyers has hosted several world-class ICO projects. The MATRIX Foundation will also fully supervise the implementation of the MATRIX project and its promotion and cooperation on a global scale.
Overseas marketing team: Unlike other blockchain projects in mainland China, MATRIX has an experienced overseas project promotion team. The core members of the team have rich experience in promoting Chinese products and projects to global market. Members of the team have worked in advertising, entertainment, e-commerce, and with internet giants such as Facebook, Google, LINE, etc.
In summary, value anchoring, liquidity, and value consensus have become three important dimensions in the selection of high-quality digital assets, and MATRIX is an outstanding representative in all three areas. When investors choose digital assets, selecting target assets in strict accordance with these three important considerations will enable them to earn more than what is commonly expected.
By Owen Tao
CEO of MATRIX AI Network