The Saga Foundation will develop the “the first non-anonymous blockchain-based digital currency,” which aims to follow government regulations and the volatility of the cryptocurrency market.
The volatility of cryptocurrency keeps many investors away from the market, because it makes them believe it is too risky as an investment.
However, a group of world renowned economists and finance magnates are developing a blockchain that can solve the major concern regarding the volatility of cryptocurrencies. The blockchain-based project is called Saga (SGA).
This Swiss foundation is a non-profit organization and was originally created to work on developing new technologies in open-source and decentralized software. The board of advisors of Saga have many years of combined relevant experience.
According to Quartz, the team “includes Jacob Frenkel, the former Governor of the Bank of Israel and chairman of JPMorgan Chase International; economics Nobel laureate Myron Scholes, known for creating the Black-Scholes formula, the most well-known model for pricing options and derivatives; Dan Galai, a co-developer of VIX, the leading measure of financial market volatility; and Leo Melamed, the chairman emeritus of CME Group and pioneer in financial futures.”
The Saga token could bring solutions to the regulations that governments from countries such as the United States, Canada and the UK are preparing to put in place.
Effectively, rather than being like most cryptocurrencies, where the volatile price makes them difficult to use as a payment method, this currency has a mechanism designed to cope with the large volatility of a newer market.
According to Saga’s website, the “price volatility is moderated by the interplay between the money supply and the reserve. By buying and selling SGA, Saga’s smart contract adjusts the money supply to meet market demand. Therefore, the reserve acts as a buffer, limiting the impact of market fluctuations.”
Basically, the Saga smart contract will slow down price appreciation by increasing the SGA token supply. It will also reduce the circulating supply to stabilize the price when the market crashes.
Saga’s Website also explains what is the fractional reserve feature of the token. The price of the SGA tokens is composed of “its variable reserve backing of conventional currencies and its inherent value.”
The reserve ratio is described as the fraction of value that depends only on the reserve.
“The reserve ratio can also be viewed as a measure of market trust in Saga. Here we observe an inverse relationship: the higher the trust, the lower the reserve ratio. Saga’s reserve-based value is a stabilizing factor. While stability is prized, the limitation is clear: in a fully backed currency there can be no price appreciation.”