TradeStars Whitepaper
TradeStars is a Fantasy Stocks trading platform powered by the Ethereum + Matic Layer 2 blockchains where users can trade digital assets that represent real-life events' statistics. Itās a decentralized social gaming experience in which people can express their passion for sports, compete against each other, and show āHow much your sports knowledge is worthā.
Sports are one of the driving forces of the global economy (+90 USD billion in 2017). People spend hours, every day, consuming sports through TV, online media, live matches and even travel to see sports' events! TradeStars provides users a new way to use their sports knowledge for their own joy and benefit. We envision a massive opportunity to gather sports fans, gamers and sports bettors in a revolutionary platform where they can not only socially interact but also compete against each other in a transparent and decentralized way.
Built on the blockchain, TradeStars' platform is not controlled by an individual organization. There is no single agent with the power to modify the rules of the software, the economics of the assets, or prevent others from accessing the platform. Each digital asset is permanently owned by the community and lies in a blockchain-based digital registry, giving the owner full control over it.
This document lays out the philosophical underpinnings, technical foundations, and economic mechanisms of TradeStars.
2017 was an exceptional year for the blockchain community. Lots of great companies with disruptive ideas were born out of the great success of the Initial Coin Offerings (ICOs). TradeStars is strongly influenced by two of the most distinguished of those new ideas: The release of the Bancor Protocol and the creation of the ERC-721 token standard.
Ideas about continuous token models were out there for long before the Bancor public launch in early 2017; Theoretically explored to be applied on different scenarios such as continuous ICOs, Token Curated Registries (TCR), Prediction Markets, and many others where users would have economic incentives to engage in the creation of value around a specific community.
The Smart Tokens concept of the Bancor protocol was a leap forward in the crypto community though. With the release of their platform, they suddenly enabled decentralized conversion of any ERC20 token helping to resolve the illiquidity problem that existed within the cryptocurrency market.
The liquidity of a token is determined by the consistent presence of buyers and sellers. This means that token with high liquidity is one that you can easily acquire or sell at any particular moment in time, and the opposite is true for tokens with low liquidity. But, with no need for matching buy and sell orders between users like in a traditional exchange, they created decentralized transparent markets with automated token liquidity based on a set of rules supported on Smart Contracts.
The second idea TradeStars was born out of is related to a new type of digital token standard that many companies started researching around later that year.
After the great success of the fungible ERC-20 standard and the great hype for the ICOs in 2017, several initiatives started working on a new proposal that could represent something unique and scarce on a public digital ledger. This digital asset, a non-fungible asset, univocally owned, non-interchangeable and capable of holding intrinsic value took form with the ERC-721 token standard the first months of 2018.
A Non-Fungible Token, or NFT, is a special type of cryptographic token which represents something unique, not interchangeable and with verifiable digital scarcity.
The great success of this type of tokens came with the public release of CryptoKitties in December 2017. Their non-fungible digital kitties gathered a lot of attention from the industry, generating a huge amount of transactions and millions of dollars in revenue. This event sort of changed the blockchain gaming industry and paved the way for many other companies who would later try to capitalize great ideas based on the ERC-721 standard.
The digital scarcity nature of this token would soon lead these assets to become more popular and costlier, increasing difficulty for ordinary investors to own them. It seemed natural that the need for owning fractions of these non-fungible digital assets would soon arise.
So, what if a non-fungible token could be partially owned?; How would the representation of this idea be on a blockchain?, and more interesting; What if these non-fungible digital assets could set the price and sell amount of its own fractions with automated liquidity by itself?
This would be a new type of Non-Fungible Token (NFT). A "Fractionable NFT".
We came out with the idea of using the ERC-20 standard to represent the NFT fractions, and provide the capability for the NFT to set the price and circulating supply of these shares as a function of the market supply and demand. This could potentially have many interesting uses among the blockchain ecosystem, for example, real or virtual assets tokenization.
On top of the exclusive ownership of digital assets that has led to the popularity of blockchain as a secure way of storing value, the tokenization of real-world assets (represented by tokens on the blockchain) is another breakthrough and disruptive use case for this technology.
This arrangement enables anyone, anywhere, to buy or invest on virtually illiquid assets as if you were buying groceries from your favourite e-commerce store.
By tracking and representing through a Fractionable NFT the real life performance of any given event, we can set up Fractional NFT markets and economic incentives for investing or holding shares of that NFT. This is, with rewards based on real life eventsā outcomes!.
The TradeStars platform can be considered to be a Decentralized Exchange (DEX) for Fractional NFTs, where economic incentives for users to stake in the game are connected to real life statistical data.
Leveraging our team past experience in the Fantasy Sports and Gaming industries, we created a crypto-economic game based on the trading of virtual assets that would represent real-life statistical performance.
Real life statistics are tokenized with our Fractional NFT implementation where users can trade shares from. We call this shares āSmart Tokensā
The tokens supply for each Fractional NFT Market is managed by a bonding curve that sets the share price seamlessly as per market supply and demand.
When Smart Tokens are purchased, the payment gets added to the reserve balance and new Smart Tokens are issued to the buyer. Since both the reserve balance and the supply are increasing, the purchase of a smart token will cause its price to increase. Similarly, when Smart Tokens are liquidated, they are removed from the supply, reserve tokens are transferred to the seller, and the token price decreases.
To ensure that the price fluctuation of the reserve does not affect the market price of the smart tokens, stable coin is used as the common reserve token.
Tracking real-time and historic statistics for these NFTs added another component to the formula that would be a factor of influence while determining it shares' final price. Much like in the real-world stock exchange, hard data would influence the perceived dividends for the stockholders (more on this later) helping determine the new price for the trading shares and setting the incentive on the opportunity to spot and buy early those assets that promises the most upside to your investment.
As new prices gets validated there will be users willing to buy or sell to make profit out of their holdings, and these actions would then result on setting new prices for the traded assets.
Also, if for each purchase transaction a small fee is accrued for the NFT owner, users would be encouraged in holding the ownership of the Fractional NFTs and try to increase the transaction volume of its shares.
All this would result in the creation of a hyper liquid market around the real-life, tokenized asset, represented by the Fractional NFT.
TradeStars' core focus is to enable sports fans around the globe to be able to use the platform in a friendly and natural way. Hereās how the simplest use case for a user interacting with the platform works:
Once registered on the platform, the user can fund their account with any of the supported payment methods, or use an external web3 compatible wallet to fund it using any supported ERC20 token.
Users can now purchase or liquidate Smart Tokens of any of the unlocked Fractional NFT markets .
While holding Smart Tokens in their portfolio, and according to the scoring rules, users will receive dividends in the platform main token (TSX).
Users can stake TSX to unlock new Fractional NFT markets, participate voting in platform Governance decisions, and entitle a percentage of the generated platform transaction fees.
Fractional NFT markets are the main items on the TradeStars platform and can be compared to the liquidity pools seen on conventional decentralized exchanges.
A Fractional NFT market is composed by the real-life performance of a sport player tokenized through the Fractionable NFT and its circulating supply of shares or "Smart Tokens". It provides automated liquidity managing its shares' supply and price validation using a parameterized bonding curve.
Users can purchase and liquidate Smart Tokens at these markets and, by using a common reserve as medium of exchange (stable coin), all of these tokens are interchangeable inside the TradeStars platform.
As we defined earlier, these tokens are transferable ERC-20 compatible tokens that are created and destroyed by the holding Fractionable NFT, providing automated liquidity.
Each of these tokens represents a fraction, or a share, of the emitting Fractionable NFT, and users can trade, hold, purchase or liquidate these tokens at anytime against the TradeStars smart contracts in exchange for the reserve token. (more on this later)
Much like the Bancor's implementation, we use a method based on a āConstant Reserve Ratioā (CRR) for setting the relation between price and supply for these tokens. The CRR is set by TradeStars and can be later changed by TSX holders' voting decisions.
The CRR is used in price calculation, along with the Smart Tokenās current supply and reserve balance, in the following way:
A constant ratio is kept between the reserve token balance and the smart tokenās market capitalization (supply * price). Dividing the market cap by the supply produces the price according to which the smart token can be purchased and liquidated through the smart contract.
The smart tokenās price is denominated in the reserve token and readjusted by the smart contract per each creation or destroy operation, which increases or decreases the reserve balance and the smart token supply (and thus the price).
When smart tokens are purchased, the payment for the purchase is added to the reserve balance, and based on the calculated price, new smart tokens are issued to the buyer.
Due to the calculation above, a purchase of a smart token will cause its price to increase, since both the reserve balance and the supply are increasing, while the latter is multiplied by a fraction. Similarly, when smart tokens are liquidated, they are removed from the supply (destroyed), and based on the current price, reserve tokens are transferred to the liquidator. In this case, any liquidation will trigger a price decrease.
The following image shows a simplified scenario of how this mechanism works:
The actual price of a smart token is calculated as a function of the transaction amount.
R - Reserve Token Balance
S - Smart Token Supply
F - Constant Reserve Ratio (CRR)
T = Smart tokens received in exchange for E (reserve tokens), given R, S.
E = Reserve tokens received in exchange for T (smart tokens), given R, S.
Smart Tokens are first created by depositing an initial reserve and issuing the initial token supply.
As all the Performance Smart Tokens use the same reserve token, they form a network of tokens. The common reserve token can be described as a network token which captures the combined value of the network of smart tokens which hold it in reserve.
The network token also functions as a ātoken for tokensā, rendering all the smart tokens in the network interchangeable.
Since increased demand for any of the smart tokens in the network would increase demand for the network token (because it is required for purchasing these tokens and held in their reserves), and the price of network token is directly related (to maintain the CRR) to the value of the Smart Tokens, we will use a stable coin (USDT) for the common reserve token.
This will allow us to make sure that the market price of the smart tokens wonāt be affected by the price fluctuations of the reserve token.
The native digital utility token of the TradeStars Platform (TradeStars Token) is a major component of the TradeStars' ecosystem.
TradeStars Token will be issued as ERC-20 standard compliant digital token on the Ethereum blockchain, and it is designed to reward participants who interact within the TradeStars Platform.
TSX is the vehicle to drive alignment and participation in the platform, and TSX holders should be people who interact with the it in some way, are committed to its future development, and want a seat at the governance table.
We expect TSX holders to help guide the platform to its fullest potential through experimentation and active participation. Adding new Fractional NFT markets, changes in the platform transaction fees, NFT markets pricing formula, and anything contentious will certainly go to the TSX token holders for review.
The TradeStars platform allows any Ethereum account to purchase Smart Tokens of any of the existing Fractional NFT markets, or even create their own markets in the future.
This process can be seen as adding liquidity to the these NFT markets (in the form of reserve tokens). Liquidity attracts traders, trading generates fees, and ultimately Fractional NFT markets' profitability attracts more liquidity.
In this process early liquidity providers take on more risk and opportunity cost. We believe that these platform users should get to participate early on in deciding how the platform evolves.
We propose then a "liquidity mining scheme" for the TSX distribution that rewards proportionally these, and future users of the platform. In other words, in exchange for providing liquidity, (by purchasing smart tokens), TSX will be mined and distributed to these users.
The total supply of TSX tokens will be capped at 100.000.000. This does not mean that this cap will ever be reached. It will be up to governance (controlled by TSX token holders) to decide if the distribution should end before this cap is reached.
21,000,000 TSX will be allocated to investors, all subject to lockup and vesting periods.
17,500,000 TSX will be initially allocated to founders, stock options and advisors, all subject to lockup and vesting periods.
9,500,000 TSX will be allocated to the TradeStars Reserve. This fund will be used to attract and incentivize strategic partners that will help the TradeStars ecosystem grow and thrive, as well as for future fundraising rounds to support TradeStarsā operations and growth.
The remaining 52M tokens are intended to be mostly distributed to users of the platform (liquidity providers) in the coming years.
Every week 150,000 TSX will be distributed to users. This represents a supply inflation rate for the first year of 15% from the initial supply of 48M tokens. This high rate of supply inflation is meant to kickstart the distribution of governance rights of the protocol to those who earn it.
At the rate of 150,000 TSX per week, it would take almost 6,6 years to distribute the whole 52M TSX remaining before reaching the 100M cap. The schedule of TSX distribution over the next few years - and whether it should stop before the 100M cap is reached - will be extensively discussed within the TradeStars community and will ultimately be decided by TSX holders.
To make the token distribution as fair as possible and reward the initial users (first liquidity providers of the Fractional NFT markets), we propose that the first 10 weeks TSX tokens be distributed proportionally to the amount of liquidity each address contributed, relative to the total liquidity on TradeStars.
After the initial liquidity mining phase, we propose to influence, and modify the rate amount at which users (liquidity providers) "farm" and receive TSX with the real-life tokenized statistics for each Fractional NFT market. Transitioning to a Fantasy Stocks game, where users perceive "dividends" according not only to their stake in different Fractional NFT markets, but also influenced by their Smart Tokens portfolio real life performance.
Along with mentioned incentives for users, such as staking and TSX āfarmingā dynamics, our platform contains an impressive list of outstanding features that pushes the state of the art forward for current blockchain products.
Almost instant + gasless transactions
Liquid, fractional NFT markets
AMM for seamless assets price discovery
Multi deposit, FIAT onramp ready
APY influenced by real-life event outcomes
Community governed
User friendly, API + UI
Multiple assets, cross blockchain support (Ethereum + Matic Layer2)
When users purchase Performance Smart Tokens of any of the available Fractional NFT markets, a small fee of the total purchase transaction will be collected by TradeStars Smart Contracts and distributed to platform liquidity providers.
Only a handful of Fractional NFT markets will be unlocked at the platform launch for users to purchase Smart Tokens from. All the other Fractional NFT markets (cricket and soccer at first stage) would be able to be āunlockedā by staking a proportionate amount of TSX while purchasing a minimum amount of Smart Tokens for that market.
The amount of TSX to stake and the initial price of the Smart Tokens for unlocking a new market will be proportional to the past average statistical performance represented by the Fractionable NFT. Thus, better real-life performances will have a higher initial price and stake requirements..
By the executing the unlock operation, the user will set the Smart Tokens initial price and supply on that Fractional NFT market. Internally the user is setting the base bonding curve parameters that will govern the price and supply of the Smart Tokens for the Fractional NFT market.
After this initial 'unlock' the Smart Tokens price will fluctuate with the supply and demand, setting an incentive for users to unlock new markets and purchase the first Smart Tokens.
Following the game adoption, our team will focus on the development of new platform features that will allow users to use their Smart Tokens, and TSX holdings in engaging and entertaining ways.
We also expect to develop various additional features based on topics proposed by the community, including but not limited to:
Alliances with Professional Leagues & Players
Verified Profiles and Special Collections of distinguish sports icons / teams.
Derivatives Gamification features (Loans, Auctions, etc)
More gamification and social competition features. Such as creation of leaderboards to influence further the TSX yield rate perceived or competing agains other users in different fantasy tournaments.
Fractional NFT markets (ERC-721) could be bid by any user once unlocked. The owner of the market could also set a minimum price at which the transaction, if thereās a bid meeting the price, will be executed in an automated way.
Collection markets would represent a group two or more Fractional NFT markets. (thus representing a team of tokenized real-life stats) other users are able to buy and trade Smart Tokens of these collections.
Transparent use of technology for users mass adoption.
Scalability of transactions.
Create, grow, engage the community.
Legal / Fantasy Regulation.
TradeStars takes Fantasy Sports to a next level providing users with an exciting alternative to the traditional Fantasy / Betting markets.
Our vision is disruptive: We are creating the First Decentralized Fantasy Stocks Decentralized Trading Market that ever existed.
Blockchain technology provides decentralization and full transparency to the TradeStars Platform. Userās funds, fantasy stock prices, trade execution and athleteās real performances are all entirely managed by Smart Contracts on the Ethereum and Matic Layer 2 Blockchains, providing users absolute certainty and reliability of what is happening real time with their holdings.
Being sports one of the world's economy drivers (+90 USD billion in 2017) and greatest human passion, we see there is a massive opportunity to gather sports fans, gamers and sport bettors in this revolutionary platform where they can socially interact and also compete against each other.
āChristian Hentschel. B.E. Software Engineering. Founder and Chief Technology Officer. Previously Payments lead at Decentraland.
āGaston Maluendez. B.A. Economics. Co-founder and Chief Executive Officer. Previously CEO of Mundo Descuento, leading e-commerce aggregator APP in Argentina.
āEsteban Ordano. Co-Founder and CTO Decentraland.
āSebastien Borget. Co-Founder and COO Pixowl Inc. / Animoca Brands.
āAriel Arrieta. Co-founder & Managing Partner NXTP Ventures.
āSam Li. Head of International at Sina Sports / Former NBA VP.
āJames Haft. CEO PAL Capital / Co-Founder CryptoMonday NYC & CryptoOracle.
