The possibility of a fully functioning “stable coin” is something that has remained an ambition for many within the “cryptorati” for a few years now. A stable coin is a cryptocurrency that is immune to the wild price swings that are ubiquitous in the cryptocurrency market.
A general philosophy for this immunity has always been to fix the value of the coin to a stable asset like fiat currency (USD, EUR, GBP). According to an article from the Financial Times, a group of economists has come together to achieve such a feat.
Saga: The “Academic Cryptocurrency”
On Thursday, March 22, 2018, a team comprised of some of the best minds in the fields of economics and finance will announce plans to create a new stable coin called Saga (SGA). The Saga cryptocurrency is being designed to be a more amenable cryptocurrency option for banks and other players in mainstream finance, as well political establishments across the world who are, for the most part, averse to cryptocurrencies.
Tether, a cryptocurrency that is tied to the USD is an example of a so-called stable coin. Despite the fact that it has functioned as a stable coin, critics have pointed to the lack of transparency of the coin as a cause for concern. Tether was recently issued a subpoena by the CFTC. Speculations of foul play continue to trail Tether’s operations.
The Saga cryptocurrency is being developed by the Swiss-based Saga Foundation, a non-profit organization that was established in 2017. The primary goal of the Saga Foundation is to create open source software implementations. The advisory board that is overseeing the project is made up of an ensemble of the brightest minds in global economics and finance. These include Myron Scholes, the Nobel Prize-winning economist popularly known for the Black-Scholes formula, a paradigm-shifting approach to the pricing of options and derivatives.
Other members of the board include Jacob Frenkel, the chairman of JPMorgan Chase Int. and former Governor of the Israeli Central Bank and Leo Melamed, the chairman emeritus of the CME group. Also, on the board, is Dan Galai, the co-developer of the Vix volatility index. With such a stellar cast of advisory board members, no wonder Saga is being dubbed the “academic cryptocurrency.”
The Operating Philosophy
Saga is being designed to right a number of perceived wrongs in the way bitcoin and other cryptos work. Top on the agenda for its creators is the elimination of everything that makes cryptocurrencies unattractive to regulators, governments, central banks, and other skeptics. So, in essence, the creators wish to do away anonymity, volatility, and the ambiguous value of cryptos.
In order to combat volatility, Saga will be tethered to a reserve of fiat currencies known as the IMF’s Special Drawing Right (SDR) held in commercial bank and central banks. This reserve is predominantly denominated in USD and EUR. As for anonymity concerns and he need for robust anti-money laundering measures, Saga token holders will be made to go through a rigorous KYC/AML process as required by Swiss law. Speaking of the plans, Jacob Frenkel stated that he shared the concerns held by many about cryptos being highly volatile which and that he is confident the Saga token will be able to address those problems properly. The Sage tokens will become available in the fourth quarter of 2018 using ether or a bank account.
Not Going the ICO Route
As part of its commitment to a low volatility and speculation crypto environment, the development team is not going to fund the project via an ICO as is the norm in the cryptosphere. According to the founder and president of Saga, Ido Sadeh Man, launching the Saga tokens via an ICO is counterproductive to the lofty ambitions of the project. Instead, the team has raised funding from a group of investors up to the tune of $30 million. Some of the investors include Initial Capital, Mangrove Capital, and the Singulariteam Technology Group.