II. Never a binary companion of Ever

'In the presence of total Darkness, the mind finds it absolutely necessary to create light.'

— Isaac Asimov

Let’s consider an economic system of two interconnected native tokens on Everscale. EVER — the native cryptocurrency of Everscale blockchain and NEVER — a reverse native currency, with the opposite properties of its binary companion. EVER would be used as a store of value, or as an “asset” and NEVER as a stable currency, or “money”.

Let’s think of both EVER and NEVER as native tokens for two separate yet interconnected blockchains, where dynamics of user behavior in one can influence some parameters of another — much like in planetary binary systems.

EVER token security is ensured by validators submitting stakes which are locked for a period of time. The validators create, submit and come to a consensus about blocks on the Everscale blockchain. They are incentivized to do this work and put a stake because of the commissions and fees they earn from the network. Validators are also incentified to run DePools, which can earn them even more commissions for stakes other people add. Most important metric for a decision to stake with EVER is the gain users make on their investment. Usually they measure this gain in US Dollars.

Let’s imagine NEVER also having validators. Let’s call them “Never the Validators”. Instead of blocks, the Validators will create, submit and come to a consensus about prices of the Ever/USD pair in the outer world. Let’s call them “Never the blocks”. They will transfer their stake in EVER DePools to the Issuer smart contract (let’s call it Never the Elector, of course) for the duration of their stake in Everscale. Once submitted those stakes will participate in elections to become Never a Validator in Never the Elector smart contract. Much like the Elector smart contract, the stake they transfer to Never the Elector can be “slashed” if the validator is providing wrong data to Never the blocks. More on that later.

It is worth mentioning that while transferred to Never the Elector smart contract EVER stakes will continue earning rewards in Everscale blockchain. The motivation to become Never the Validator is that on top of these rewards Never the Validators will earn a commission on all NEVERs that will be issued. Thus the Validator of Everscale blockchain can now effortlessly become Never the Validator and earn additional rewards. Of course technically it means connecting their node to a data feed from some exchanges and supplying the correct data to Never the Elector. In fact we can not care less how the prices ending up in Never the Blocks, as long as this data is correct.

Now let’s consider a user which holds some EVERs and would like to exchange them for a stable coin on the EVER blockchain. In order to accommodate the user we will create a couple of special smart contracts called, Never the Auction and D’Auction respectfully. A user can go to one of them and demand NEVERs for their EVERs. We will discuss below the exact mechanism of issuing the NEVERs, but for now let’s just say that after a certain procedure NEVERs will be issued in exchange for EVERs using the precise exchange rate from the outside data feed provided by Never the Validators.

It is important to mention that when buying NEVERs, there will be no need for overcollaterization. Let’s stop here for a brief moment because this point is one of the most important illustrations of the proposed binary system. Usually when creating a completely separate stable coin with algorithmic design, such design requires a protection mechanism for the scenario when the prices for underlying cryptocurrency are rapidly and violently falling. In fact the same problem exists for stable coins backed by fiat currency reserves, such as USDT. But because of the untransparent nature of the latter it is impossible to say when and under which conditions such stable coins may become insolvent. Bottom line, all of the current designs require some assets overcollaterization because the assets they take as a collateral are not under their control. In the real world economy the stability of money (or at least the stability of inflation of money should we say) is ensured by the monetary policy of some authority which controls the supply of said money.

One of the reasons for proposed binary system designs is precisely the fact that here we do have control over Ever’s monetary policy and we intend to use it.

In order to achieve stability in case of a disaster we should share some of the “gravitational” force of EVER with its NEVER companion. Namely a large portion of EVERs should be provided to the NEVER system as a stabilization fund. Say, 1 bln tokens. One can remember that it does resemble the idea of Nikolai Durov expressed in his TON White Paper. Except this time the stabilization fund will not intervene in price stabilization per se, nor it will do it to stabilize the native EVER cryptocurrency, a very wrong idea as discussed above. Instead it will be used as a collateral to fulfil the obligations of NEVER in case of dramatic drop in the prices of EVER.

We argue that such use of EVER reserves is prudent and will not create a further pressure on EVER price in case of a catastrophe.

Let’s come back to the user which just exchanged his EVERs with NEVERs using a precise pricing mechanism of Never the Elector. EVERs that the user has exchanged for NEVERs will now be used to give back to the EVER by staking this in the DePool on behalf of Never the Elector. The rewards from staking will be split in half: one half distributed to Never the Validators proportionally to their stakes and another half will go to the EVER Reserve as a payment for providing collateral.

Additional points of interconnectivity between EVER and NEVER could be a use of some NEVER metrics within the EVER system. For example an increase in supply of NEVER indicates the need to increase the validator rewards. This will allow dynamic block reward adjustments, making it more attractive for users to stake EVERs in DePool, instead of holding NEVERs. This by itself will decrease the market supply and increase the price of EVERs on the open market. Such mechanisms will realize the main idea of the binary system design — to create two tokens with different use cases while measuring interactions between them to allow algorithmic monetary governance.

Let’s also view the proposed system from the standpoint of real market participants. Most of the stable coin designs recognise today three types of users: one that wants stabilization of its asset, aka risk-free, one that is looking for income with relatively low risk and the one which is looking to maximize its revenue potential with high risk investments. In this paper we mostly consider two users: one that is looking for stabilization for which they are buying NEVERs in exchange for EVERs, and the validator, who is looking for additional income on its capital. But of course it is easy to imagine that a derivatives market can be created on top of our Binary System which will accommodate most users' appetite for risk and high yield.

The derivatives market in its turn helps to adjust the gathered pricing contract utilizing the inversing of Black Scholes equation: $C = S_t N(d_1) - Ke^{-rt}N(d_2)$which can be considered as a relation for St and solved with respect to it. Feeding the system with correct (market) values of realized deals (strong data) and proposed prices (weak data) allows therefore to estimate the price estimation (which is smoothed by derivatives effect).