ndau is a digital currency uniquely designed to serve as a long-term store of value. In addition to the features available in traditional digital currencies, ndau supports sophisticated monetary policy and governance mechanisms.
This currency specification document describes the user-visible features of ndau and serves as an introduction for developers.
Since you can’t use a credit card or fiat to directly purchase ndau (XND) on BitMart, you’ll first need to purchase some Bitcoin (BTC). Then you’ll need to use that Bitcoin (BTC) to purchase some Tether (USDT), which you’ll then use to purchase ndau (XND).
Don’t worry if that sounds confusing. Below is a step-by-step walk-through with helpful links:
And a unique feature of ndau called EAI lets you earn additional ndau whenever you are holding ndau in an account in your ndau Wallet app. For example, you could be earning +13% ndau on 1-year locked account in your wallet.
ndau is governed in accordance with the ndau monetary policy, the ndau digital governance policy and the ndau principles. The BPC is responsible for implementing the ndau monetary policy. The ndau monetary policy may be changed from time to time by the BPC.
ndau was not sold pursuant to an initial coin or token offering. ndau is generated and sold over time. The release of ndau into the marketplace occurs gradually following a well-defined technology growth pattern. This growth occurs naturally along an S-curve (the “Target Price Curve”) as modeled in the Diffusion of Innovations theory – a theory which seeks to explain how, why, and at what rate new ideas and technologies spread. New ndau are released into the market when demand pushes the market price of ndau upward along the Target Price Curve. The Target Price Curve identifies fixed prices at which ndau is released (each being a “Target Price”). There is a finite amount of ndau (1,000) at each Target Price level on the Target Price Curve, each level higher than previous one.
The Axiom Foundation holds 30,000,000 ndau in an endowment that it maintains (the “Endowment”). All proceeds received from the release of new ndau are also deposited into the Endowment for the purpose of managing ndau’s monetary policies and implementing open market operations, similar to the way reserves are used by a central bank. The Axiom Foundation invests the assets held in the Endowment according to rules and limits set forth by the BPC. The ndau Digital Governance Policy and the ndau Principles require that the BPC implement such rules and limits in a manner that supports a balance of growth and long-term market liquidity.
As ndau trades in the secondary market, price stability mechanisms are triggered if selling pressure pushes the market price down too much. One such mechanism during these times is that sellers must forfeit a portion of the ndau they want to sell as a “sales fee” (SIB) that must be paid to the Axiom Foundation. This disincentive during down markets also eliminates gradually the excess supply of ndau from circulation permanently until market prices are “buoyed” back up towards the then applicable Target Price. Any such sales fee paid to the Axiom Foundation can be used by the Foundation for ongoing operating expenses.
ndau monetary policy further incentivizes holders to keep ndau on a long-term basis. ndau holders are given the opportunity to earn extra ndau (subject to a service fee) through an ecosystem alignment incentives system (“EAI”). Under the EAI, ndau held for longer than 30 days may accrue additional ndau at a rate of 2 percent per annum. As ndau is held longer, the EAI rate increases in 1 percent increments each additional month held up to 10 percent when held for 9 months.
Further, ndau holders can take advantage of the ndau equivalent of a certificate of deposit, holding ndau over a specified period of time, to accrue a predetermined rate of additional awarded ndau. In the ndau ecosystem, this is called “locking ndau.” By locking, the holder accrues ndau at a higher rate. Locking ndau for 90 days adds an additional 1 percent to the above EAI. Further increases occur at 6, 12, and 24 months of locking ndau until at 36 months a maximum of an additional 5 percent annualized rate is earned.
All service fees incurred pursuant to the EAI system accrue to the benefit of the Axiom Foundation and can be used by the Foundation for its ongoing operating expenses. The ndau Digital Governance Policy also gives the BPC the ability to impose other fees for the benefit of the Axiom Foundation.
The Axiom Foundation is also able to support liquidity by using the Endowment for repurchasing ndau from the open market at a price that is intended to create resiliency from currency attacks and that serves to induce long-term dependability and liquidity (the “Floor Price”). The Floor Price is calculated dynamically by dividing the total current value of assets held in the Endowment by the total number of ndau outstanding and multiplying that quotient by 50 percent. That is, the Floor Price is equal to 1/2 the value of the Endowment, divided by the number of ndau in circulation. This repurchased ndau is removed permanently or burned.
ndau’s monetary policy requires that the Axiom Foundation manage the Endowment to assure that the Axiom Foundation can provide liquidity within a set of reasonably staggered time periods. The Axiom Foundation operates in a manner similar to a central bank and uses the assets and ndau held in the Endowment in a fashion comparable to how the reserves held by a central bank are used to stabilize a currency. A central bank’s governing body (similar to the BPC) sets policy for management of the reserves (similar to the Endowment) and the rules by which those reserves (or the Endowment) may be used to support currency stability targets. Central banks use an annual target inflation rate to guide the value of their currency, while the BPC uses the current point on the Target Price Curve to set the target value of ndau. However, the BPC is more accountable to holders of ndau than would typically be the case with a central bank because ndau holders directly elect BPC delegates and thus play a role in future changes to ndau monetary policy.
The Axiom Foundation has the authority to release new ndau from the reserve and to permanently remove ndau from circulation. It is contractually obligated to take these actions as directed by BPC in implementing the ndau monetary policy.
When ndau demand rises beyond the limit of what’s available in the market below the current Target Price, the Axiom Foundation is required to sell new ndau from ndau reserves held in the Endowment into the market at that Target Price, which increments higher every 1,000 ndau sold from the reserve. The net proceeds of those sales then flow to the Endowment. Conversely, when the ndau Market Price falls to the Floor Price, the Axiom Foundation is required to buy ndau through purchase orders it has placed at the Floor Price (subject to practical rates of liquidity) and permanently removes the repurchased ndau from circulation.
The Axiom Foundation also acts as a liquidity provider for ndau and maintains stability and liquidity through its ability to buy and sell currency according to the ndau monetary policy as directed by the BPC. It stands ready to buy and sell ndau on a continual basis at prices specified by the pre-established and transparent rules rules of the ndau monetary policy, subject to practical volume per unit time limitations.
The release of reserve ndau into the marketplace follows a well-defined technology growth pattern. This growth occurs naturally along an S-curve as modeled in the Diffusion of Innovations theory – a theory which seeks to explain how, why, and at what rate new ideas and technologies spread. Individuals have different levels of readiness for adopting new innovations; the average rate of this adoption is, of course, influenced by the characteristics of the product itself. The theory classifies individuals into five tiers: Innovators, Early Adopters, Early Majority, Late Majority, and Laggards.
Innovators occupy the first 2.5 percent of the S-curve, while Early Adopters represent 13.5 percent. Early Majority Adopters and Late Majority represent 34 percent each while Laggards make up the final 16 percent of the curve. The adoption rate of ndau drives the release of the 30 million reserve ndau into the market: the S-curve illustrates the total amount of ndau in circulation as adoption moves from 0 percent to 100 percent.
ndau uses the Diffusion of Innovations theory in its release of ndau and its pricing schedule. To facilitate the adoption rate of the currency in an orderly, efficient, and transparent manner, the 30 million reserve ndau originally held in the Endowment will be sold into the market according to a transparent, pre-determined Target Price schedule. The Axiom Foundation’s distribution of new ndau at a higher price occurs only when market demand exceeds supply – i.e. when there is a willingness to buy at a new target price that’s greater than anyone is willing to sell. Hence, movement up the price curve reflects that market demand is ready to support a higher price. This is in contrast to many proof-of-work cryptocurrencies that steadily increase supply at a regular frequency irrespective of the demand or price at any given time. As network effects naturally increase the value of ndau and as the total number of reserve ndau released follows the S-curve, the Target Price rises as market participants demonstrate demand at those levels.
The Target Price Curve can be broken into three phases in which ndau will be released: Early Adoption, Middle Market, and Equilibrium. Ten million reserve ndau are scheduled for release throughout each individual phase along the S-curve for a total of 30 million ndau. As the market accepts and adopts the currency along the S-curve, increasing the value due to positive network effects, the Target Price at which the Axiom Foundation sells ndau rises. The Target Price rises most rapidly in the Early Adoption phase and more slowly as adoption approaches 100 percent on the S-curve.
The first 10 million reserve ndau are scheduled for sale during the high growth phase as Innovators and Early Adopters begin using the currency as a long-term store of value. The goal of this phase is to encourage such innovators and early adopters to commit towards the ndau ecosystem, aggressively competing for a position of leadership for ndau in the digital currency marketplace.
As ndau evolves toward wider market adoption, the transitional Middle Market growth phase occurs and 10 million more reserve ndau are scheduled to enter the market at more moderate price increments, as demand warrants. Growth in Target Price then slows further in the final Equilibrium phase during which the last 10 million reserve ndau enter the market. Network effects grow the value of ndau more modestly since the value of those effects diminishes on the margin. This is indicative of the currency reaching full acceptance in its addressable market as it begins to reach the natural limits of market desire to store value in such a long-term form.
The Axiom Foundation is tasked by the BPC with executing the release of reserve ndau into the market place according to ndau monetary policy. Currency float expands supply when necessary based on the S-curve and the Target Price schedule.
At any given time, there are five defined ndau price points:
The Target Price: The current price at which reserve ndau is sold according to the Target Price schedule. The release of ndau into the marketplace occurs gradually following a well-defined technology growth pattern. This growth occurs naturally along an S-curve (the “Target Price Curve”) as modeled in the Diffusion of Innovations theory – a theory which seeks to explain how, why, and at what rate new ideas and technologies spread. New ndau are released into the market when demand pushes the market price of ndau upward along the Target Price Curve. The Target Price Curve identifies fixed prices at which ndau is released (each being a “Target Price”). There is a finite amount of ndau (1,000) at each Target Price level on the Target Price Curve, each level higher than previous one.
The Sell (or ask) Price: The lowest price a seller is willing to sell ndau in the market (may vary across exchanges).
The Market Price: The Axiom Foundation is required to take into account observable Buy and Sell Prices and filled orders across the ecosystem and combines them into a single published Market Price.
The Buy (or bid) Price: The highest price a buyer is willing to pay for ndau in the market (may vary across exchanges).
The Floor Price: The Floor Price is derived in a way that enables resiliency from currency attacks and serves to induce long-term dependability and liquidity. The Floor Price is calculated dynamically by dividing the Endowment’s total current value by the total number of ndau outstanding and multiplying it by 50 percent.
This dynamic pricing strategy functions to increase supply as demand warrants (due to network effects) while providing a pre-defined mechanism for permanently reducing supply when all other means of volatility mitigation have proven insufficient.
Ownership of ndau in no way confers pro-rata ownership of any of the assets or reserve ndau in the Endowment. Rather, it is similar to the ownership of a central bank’s currency. The reserves held by a central bank are used to stabilize the currency. A central bank’s governing body (similar to the BPC) sets policy for management of the reserves (similar to reserves held in the the Endowment) and the rules by which those reserves (or the Endowment) may be used to support currency stability targets. Central banks use an annual target inflation rate to guide the value of their currency, while the BPC uses the current point on the defined S-curve as its target value. However, the BPC is more accountable to holders of the currency because it is directly electable by them, whereas a holder of U.S. dollars, for example, does not wield any influence over who governs the Federal Reserve Board. In either case, policy may be adapted over time according to the respective governing body as needs warrant. As a result, any attempt by the BPC to change the ndau monetary policy in a manner that would negatively impact ndau would be subject to being overruled by the vote of ndau holders.
BUYING AT FLOOR PRICE
The Axiom Foundation is contractually obligated to buy back ndau at a known and continuously published Floor Price. This obligation is subject to the liquidity policy managed by the BPC and implemented using the assets in the Endowment. In a Floor Price transaction, the Axiom Foundation has put an offer to buy ndau on an exchange, and an ndau seller has accepted that offer. The Endowment decreases by the purchase amount and the number of outstanding ndau decreases as the repurchased ndau are permanently removed from circulation. Each Floor Price purchase increases the subsequent Floor Price for the outstanding ndau and provides a stabilizing force for existing ndau holders. Consequently, should further Floor Price transactions continue, the mathematical mechanism will drive the Floor Price up until it reaches the Target Price.
THE FLOOR PRICE
The floor price is quoted and made available by the Axiom Foundation.
This buying mechanism ensures that the Endowment will always have reserves to purchase ndau in the event the market should require large reductions in ndau supply. The BPC is tasked with continuously reviewing liquidity policy and its consequent rate of liquefaction. The goal being that the Axiom Foundation needs to preserve its purchasing power to buyback over long periods of time to best ensure its ability to stabilize ndau during such conditions.
Any blockchain operates by achieving consensus on which transactions to add to the chain, and in what order. Different blockchains have different mechanisms for achieving that consensus, but key to all of them is the idea that the consensus mechanism should have a diverse array of participants — if a broad group agrees, then the consensus is probably pretty robust. These participating entities are called nodes.
In the ndau blockchain, not every node is part of the consensus — only some of them are validator nodes. Nodes compete for the right to become validator nodes.
Let’s look at some of the models used by other blockchains:
Proof of Work (PoW) is a mechanism where nodes are not differentiated — all nodes compete in what is effectively a race to pick a winning lottery ticket. Every few minutes, someone wins, and the faster you are at picking tickets, the more likely you are to be the winner. Winners are heavily rewarded. This process uses massive amounts of energy; the waste and cost inherent in the process makes the system secure because it makes it very expensive to attack it. PoW combines consensus and security and node rewards into one system.
Proof of Stake (PoS) is a system where operating a node requires stake, which is effectively a bond that the node operator posts in order to guarantee that they will run the node in a way that benefits the network as a whole. If the node operator is found to be cheating or unreliable with respect to uptime, voting, and otherwise failing to run the node responsibly, some or all of the stake may be forfeited. In a PoS system, the stake is used to impose a potentially high cost on nodes for bad behavior, but the actual cost for well-behaved node operators is the cost of capital — they must commit the stake and it cannot be used for other things. PoS systems usually use the stake as a way of selecting node operators.
Delegated Proof of Stake (DPoS) is a variant of PoS systems where the users of the system can contribute capital in some way that can add to the stake of a node operator. This allows a broader range of participation in selecting node operators. A user can offer capital without being required to run a full node.
ndau’s consensus mechanism is a variant of DPoS. It works like this:
Staking an ndau account commits the balance of the account and specifies a stake target, which is an account address. This is a way of expressing a belief that the owner of the target account is going to operate a node well.
Someone who wants to be a node operator creates an ndau account and stakes the value in that account to the node registration stake rules account. This locks up that account balance and is known as self-stake. There is a minimum self-stake required in order to operate a node.
Anyone else who wants to support the operations of that node can stake an account and specify the stake target to be the node operator’s account. This is known as co-staking.
Once a node has met the minimum requirements, it can become an active node.
Nodes are ranked according to a variety of factors using a published metric. This metric includes stake, but it also includes many other factors. Examples might include, but are not limited to:
Amount of self-stake and co-stake (to promote broad support of nodes)
Age of the node and duration of commitment (to promote long-term support of the ndau system)
Various measures of node distribution (to promote decentralization)
Various measures of uptime performance (to promote nodes being run well)
The key result is that more highly ranked nodes are more likely to be selected as validator nodes and are more likely to be rewarded for their participation in the network.
The rewards and ranking rules will change over time to promote the best behavior from node operators, and to make sure that running nodes in a way that’s good for the ndau network is profitable — and that running nodes badly is not.
Staking is used as a way to place amounts at risk against future performance. It is used in node operations, but stakes can be placed for multiple purposes. A given amount of ndau can only be staked once, and that amount is unspendable while staked. A single account can contain stakes for more than one purpose, as long as the total staked is not more than the balance of the account.