Sorry, I've tried to parse this several times and I'm just confused as to how the system actually functions. Like, I have a dollar. I buy a token at the ICO price of a dollar. I dont understand how you can guarantee no one can ever buy a token for less than a dollar. What happens if I need US currency today?
In the dollar:token pool lets say the ratio is initially set to 1.00 and nobody else owns the token, all the tokens are in the pool. The issuer put all their own dollars and their own tokens in the pool. If it helps to know, the issuer needed capital to do this and is not earning anything from people buying. The liquidity pool is owning all the assets.
When you buy with your dollar, you increase the number of dollars in the pool, and decrease the number of tokens in the pool. So the ratio cannot be 1.00 it must be 1.01 or something above 1.00.
When you want US currency today you sell it back and restore the ratio closer to 1.
It is not possible for anyone to restore further below the initial balance because the maximum tokens in existence could only be used to get the dollars other people put in, but not the issuer’s capital.
So the pool is an artificial entity with the rule of "I will buy or sell token X at the ratio current ratio of dollars to token X that I have" that initially owns 100% of token X?
As an aside, does this concept exist outside the crypto space? It seemed like you may have implied it was a standard object in finance.
Think of them as unincorporated orphaned general partnerships, similar to a trust
Have not seen them outside of the crypto space, it would be ideal if they did, they are great for enabling liquidity of fungible assets without needing to court a market maker or exchange
