Radix is a project working on a special DAG-like DLT. The team around the head of the project, CTO Dan Hughes, is based in London. In 2012 the project started as eMunie, towards the end of 2016 it was renamed Radix and in 2017 there was a major update of the consensus mechanism on “Tempo”, on which the project is based today.
When you want any currency to have a stable price, you need to decide against what it will be stable against. Governments use a consumer price index. The Index Token (XRI) is used in Radix .
The Index Token will be backed by a token container built on top of Radix. Initially this container will be filled with dollars, pounds, euros and other cryptocurrencies. However, the goal is to have, in the future, a reserve that does not need to be based on cryptocurrencies or external assets but only on the tokens produced within the platform.
The Index Token will assume a fractional value based on the total value of the reserve. So if, for example, the reserve is formed like this:
Reserve (B) = 50% (A1) + 25% (A2) + 25% (A3)
then the Index Token will be:
XRI = X / Reserve, where X represents the supply of the Index Tokens.
The RAD cryptocurrency will be created to have a 1 to 1 relationship with the Index Token and whenever the value of the RAD varies from the value of the Reserve the Economic Algorithm will go into action and do one of the following two things:
If the price of the RAD increases the system will automatically create new RADs which it will sell on the market to buy XRIs. Any Index Token bought will be deposited into the reserve.
If the price falls , however, the algorithm will automatically buy the RAD on the market using the funds contained in the Reserve. Any purchased RAD will subsequently be destroyed , thus creating a lower price limit for the RAD.
Therefore, on the Radix platform it will turn this Economic Algorithm programmed to bring the system towards a stable value while growing its Reserve. This process is expected to take up to 10 years to complete.
There are four important factors to consider:
1) The Decentralized Exchange
This exchange will be built on top of Radix and will allow something like 80,000 transactions per second for each currency pair.
It will also be the only Exchange where the Economic Algorithm will come into action and the prices of this exchange will be taken only, leaving, on the one hand, free way to possible arbitrage but, on the other, remaining decentralized not having to rely on third-party data. .
2) The Economic Algorithm
Its goal is to manage the supply of RAD in circulation and its price , being able to intervene independently on the market by creating walls (both for sale and for purchase), thus setting upper and lower price limits, and having full control over the Reserve.
3) The Reserve
At the heart of the Economic Algorithm is the Reserve. This is where the economic algorithm holds all the Index Tokens.
The Index Tokens held in the reserve are not controlled by any entity or organization , but only by the Economic Algorithm. All transactions entering and leaving the Reserve are public, verifiable and transparent.
4) The Price Ceiling and the Price Floor
The Economic Algorithm will create these two price barriers, one higher and one lower. The price ceiling, i.e. the upper limit, will always be set at 1.1 XRI per 1 RAD, while the price floor, which is the lower limit, will initially be set at 0 and will increase as the reserve fills up to a value of 0.9. .
In fact, the goal is to have a token that is between the value of 0.9 and 1.1 and which as soon as it exceeds one of these two values brings into play the economic algorithm.