In a recent investment thesis on Sora, the Cointelegraph Research team explored the current state of the decentralized finance, or DeFi, industry, highlighting the biggest challenges it faces right now. It found that the two largest problems are scalability and the segregation of multiple blockchains that exist independently and cannot share information. The Polkadot-based project tries to solve both of these bottlenecks by offering cross-blockchain transfers of any type of asset. It also provides transactional scalability by spreading transactions and validation across multiple parallel blockchains.
Download the full investment thesis on SORA (XOR) here.
Polkadot aims to ameliorate two pivotal elements of the DeFi economy, namely automated market makers and decentralized cryptocurrency exchanges. A connection to Polkadot through the Sora Network allows the new Polkaswap decentralized exchange, or DEX, to feature a much higher transaction output compared with its rivals, while also maintaining reasonable transaction fees. As of March 22, Uniswap, Ethereum’s largest DEX, had registered $1.08 billion in daily trading volume, while PancakeSwap, Binance Smart Chain’s largest DEX, registered $860 million. By comparison, Coinbase, one of the largest centralized exchanges, registered $1.7 billion. There is certainly a demand for trading infrastructure, and Polkaswap is likely to gain traction as Polkadot’s main DEX.
The Sora project is not limited to one blockchain in the Polkadot ecosystem, however. Rather, it has set up the ambitious goal of becoming a supranational monetary system that will compete with contemporary governmental monetary systems. For that to be possible though, Sora will require mainstream adoption of its XOR token as a means of payment. Instead of being a stablecoin that is pegged to a fiat currency’s value, XOR’s price is determined by an elastic supply that is controlled by a smart contract. This means that when the price of the XOR token goes up and reaches a critical level, buyers can purchase newly issued tokens directly from the “buy” smart contract, rather than through the secondary market from the circulating supply held by existing holders. Conversely, if the price drops, users can then sell the tokens to the “sell” smart contract. This algorithm regulates the number of tokens in circulation, reducing price volatility.
Furthermore, the XOR bonding curve is different from those used by other DeFi projects, as it is close to 100%, fully collateralized by the assets used to buy XOR from the smart contract. At the same time, it is not a loan because when XOR is purchased, the asset that served as payment is given away. Therefore, the XOR bonding curve smart contract does not inflate the money base, nor does an XOR buyer risk collateral depreciation or liquidations, as is the case with digital assets locked up in Dai collateralized debt positions.
To learn more about the Sora network, and the two other coins in this network — PSWAP and VAL — download the report and get the full scoop.