[Economic Model Suggestion] Hodler's Harvest - Introducing a Fair Price Model for Radix


Hodler’s Harvest
Introducing a fair price model for Radix

by Kai Hemme-Unger, @rotane

The author is convinced that Radix deserves an Economic Model (EM) that is in the same class as the underlying distributed ledger technology: Simple, fair, scalable, superior to peers and designed to foster adoption.
This EM suggestion leverages the ideas and feedback received for the earlier suggested [Economic Model Suggestion] Fiat engine and XRD gas. While there are similarities between both models, the effect of this EM is much different and more in line with the goals of the EM as published in the white paper draft v1. Especially with regards to the assumed high volatility of XRD in the before mentioned model [Economic Model Suggestion] Fiat engine and XRD gas the following suggestion is advantageous. The earlier model created an inherent price up-trend through scarcity. The side effect of which would be volatility. The current model creates an inherent price up-trend through maturity. Maturity is accompanied by predictability and stability as shown in this article.

From the author’s perspective the EM as suggested in the published white paper draft v1 has following issues:

  • Much friction in the process of minting XRI. As a result users will prefer paying with fiat tokens anyway. Why going through the process of minting when you just want to pay your lunch with it?
  • No simple narrative
  • Despite the fact that the price of XRD has a guaranteed price floor (pMin) and price ceiling (pMax) there is no way to tell the fair price of XRD at any point in time.
  • The price of XRD would certainly be very volatile within the range of pMin and pMax as it primarily depends on money inflow which again depends on the price trend. This feedback loop in the price model will inevitably lead to high volatility just like you find it with Bitcoin or Ether.
  • Mass market has no demand for a digital world currency. It will take another financial crisis like in 2008 to create demand for an alternative world currency as outlined in General Economic Theory of Radix – Radix DLT – Medium.


  • Fixing the feedback loop in the XRD price model
  • Make XRD approximate to 1 USDT in the long term, yet not pegged, i.e. “relative stability”
  • This EM takes into account that the DEX will not be ready yet when the Radix network will go live, though it works just the same if DEX was already live at day 1. There is no reason for phase 1 other than the fact, that the DEX will take more time to finish
  • Make fiat tokens the primary payment medium on the network and scrap the synthetic XRI basket token.
  • Introduce a fair price model for XRD
  • Give a simple answer to the question “What is XRD and why is it relatively stable”?


  • Approved Minters mint fiat tokens
  • Fiat tokens are backed by reserves
  • Phase 2 starts with launch of the DEX
  • Make XRD a fixed supply coin
  • Define an Economic Period (suggested duration: 1w)
  • Calculate a coin’s maturity (the time elapsed since an XRD coin has last been moved around)
  • Implement an algorithm that converts XRD to USDT at maturity
  • Two phases only
    ** Phase 1: XRD holders must hold at least until DEX goes live
    ** Phase 2: XRD holders can sell at DEX

The author assumes that the uptrend of network activity on Radix will be more sustainable than the money flowing onto the platform as this is the case for crypto platforms in general. For reference see The charts for Ethereum (Ether) Historical Prices and Ethereum Transaction Growth Chart in comparison. While the down trend for the Ethereum price chart is still unbroken, the number of daily transactions is now pretty stable at 500k.

How to:

  1. At golive: Genesis wallet holds ~70.000.000 XRD, no fiat tokens minted yet. XRD are ordered by maturity in a first-in-first-out queue. At genesis the XRD of early backers have greatest maturity, ordered by the timestamp of their contribution.
  2. Users ramp up: inflowing fiat tokens (USDT) backed by Approved Minter reserves
  3. Fiat tokens start to fluctuate. On creation of a fiat transaction a fraction of the fiat token goes into a conversion contract. At the end of every economic period the conversion contract converts the most mature XRD at a rate of 1XRD:1USDT.
  4. After conversion the XRD goes to the node runners that validated the transaction. Coin maturity is reset.


  • XRD holders have two exit options:
    ** They wait for conversion (1:1) at maturity
    ** They sell early on the DEX at a discount.
  • XRD will trade at the DEX with a price discount i.e. below the guaranteed conversion rate i.e. the fair price. The fair price is a function with 2 parameters: network activity (tps) and ROI expectation (%p.a.). See worked example.
  • As network adoption grows, the maturity duration of XRD gets shorter and as a result the fair price will increase. XRD price will approximate to 1 USDT in the long term
    Increasing Radix adoption = more network activity = more fees = increasing amount of XRD converted = shorter XRD maturity duration = increasing XRD fair price
  • XRD will have a de facto price cap at 1 USDT
  • Everybody must hold at least until DEX goes live
  • The longer someone holds the more incentive he has to hold further until maturity, since the maturity of the coin is not inherited when the coin is sold or sent
  • XRD circulation and fiat token circulation are untangled
  • Early supporters (2014, and so on) are rewarded such, that they will have their XRD converted earlier than late adopters

The suggested EM can redeem diverse stakeholders:

  • Joe the Plumber can do accounting in a familiar payment unit (fiat token)
  • On-ramping becomes more frictionless for end users without XRI
  • Radix becomes an easy-to-use fiat payment network for end users
  • Fee prices can remain stable with regards to fiat which is a benefit for businesses
  • XRD price can float and appreciate increasing network adoption which is a benefit for speculators
  • XRD conversion rate at maturity is fixed which is a benefit for hodlers
  • The Radix EM narrative becomes intuitive and simple enough for an elevator speech
  • Early XRD backers receive a time bonus over late adopters as reward for their patience
  • Radix can claim laurels for being the first DLT to implement a fair price model

Worked examples:

  • TTM := time to maturity
  • Max TTM := time to maturity for the last-in-queue XRD coin assuming a total of 70.000.000 XRD in the queue. This is a conservative way of calculating the max TTM as it does not take into account that a certain amount of XRD will fluctuate and never reach maturity (i.e. sold early on the DEX).

Q: How long does it take until my XRD gets converted at maximum?

Network activity / daily conversion amount / yearly conversion amount / max TTM
4 tps                  3.456                          1.261.440         55.5 years
10 tps                 8.640                          3.153.600         22.2 years
100 tps                86.400                         31.536.000        2.2 years
500 tps                432.000                        157.680.000       0.44 years = 5.3 months

Q: What does the fair price look like as a function of network activitiy (tps)?

The worked examples do not take into account that there are many more ways to raise fees which will speed up the overall maturity duration. E.g. fees for asset creation. We can assume that developers are willing to pay a rather huge fee, if Radix provides a simple, save and convenient process for asset creation. Lets say the fee was 500 USDT and there were 5 assets created every day within the first year. That makes 2500 USDT per day and would be a big contribution to the conversion contract.

The narrative uses an analogy from the world of finance: Discounted Securities.

Q: “What is XRD?”
A: “It is a discounted security with dynamic maturity. Think of zero bonds.”
Q: “How can XRD have a relatively stable price?
A: “Because users know the fair price of the coin and will most likely not buy or sell much higher or lower.”
Q: “How can XRD have a fair price?”
A: “Radix has a fixed face value. The conversion contract will convert 1 XRD at maturity for the fixed rate of 1 USDT. You can estimate the maturity date based on the network activity. With the maturity date and the current market price you can calculate the expected ROI. If current ROI meets your expectation, the market price is fair. If the ROI is above your expectation the market price is too low and you will likely buy. If the ROI is below your expectation the market price is too high and you will likely sell.”
Q: “Why would developers want to develop their applications on top of Radix?”
A: “Radix provides an unmatched platform to implement smart contracts. Most of the common features of decentralized applications can be implemented in a declerative way, which increases the quality of the code and speeds up the development. On top of that developers can directly create revenue from their contribution to the network activitiy by investing in XRD coins. As they bring more tps to the platform the fair price of the coin increases.”

Business Opportunities:

  • This EM creates an opportunity for institutional investors and asset managers. The predictable ROI of XRD investments will attract cheap external capital that is looking to leverage interest rates. E.g. An investor lends 1000 USDT (tokens) for 5% interest with 100 USD (fiat) collateral and buys 1000 XRD with expected ROI of 25%. At maturity his 100 USD investment creates revenue of 200%.
  • Developers who build on top of the Radix platform contribute to the growth of the overall network activity. This EM creates an opportunity for them to create revenue from their contribution.
  • XRD incentivises holding therefore hodlers will need to refund with external capital. This creates an opportunity for pawnshops. Pawnshops will lock immature XRD as collateral and lend USDT. They will be refunded once the XRD is mature.
  • This EM creates a market for swapping. Hodlers who want to speed up the maturity process of their coins can swap with coins that are closer to the top of the queue. “I want to swap 100 XRD with estimated maturity 15.04.2020 against 70 XRD on top of the queue.”

The success of any working EM is based on convention. Therefore it needs to be spread to change people’s mindset.

  • Include the narrative in every public communication
  • Creating a community process with bounties for “Burning down the TTMmax”
  • Add a feature to the network explorer that allows users to calculate the fair price of XRD given a) the estimated maturity date based on the average network activity (tps) of the Economic Period and b) an input parameter for the user’s ROI expectation (%p.a.)
  • Add a feature to the Radix Wallet that tells the user the estimated ROI (%p.a.) for his XRD based on the current average network activity

This proposal introduces a fair price model for XRD and clarifies what the nature of the XRD coin is. The value of the XRD coin is backed by collateral and has an inherent price uptrend driven by network activity. The onramping process for users is much simpler and more frictionless than in the whitepaper proposal. The long term effects of this EM are fairly predictable given a certain amount of network activity. It creates business opportunities that derive from its unique aspects and are hard to match.


Thanks for posting another interesting proposal. The idea of using the TPS to stabilize the price of XRD is an intriguiging one.

I have some questions:

  1. When an XRD is traded on the DEX, does the buyer inherit the current maturity of the XRD he’s buying? If so, how does he see the maturity when making a purchase?

  2. How do the node runners get paid during stage 1?

  3. How do node runners get paid for network activity on the DLT? For example, sending a message. Does he still wait for an XRD to mature?

  4. In general, this approach doesn’t seem very appealing from a node runner’s perspective. The node owner may have to wait months, or longer, for his XRD to mature. Perhaps that’s not much different than the current model where the XRD isn’t worth much in early stages, but it’s less predictable than Pmin.

  5. “After conversion the XRD changes hand and goes to the node runners that validated the transaction.”

    • Does this mean that the XRD will be split among 100 node runners since it took 100 transactions to generate the fees needed to mature 1 XRD?
  6. If I’m paying fees at a rate of 0.01 Yuan, but the node runners are cashing out 1 XRD at 1 USDT (worth 6.7 Yuan), do you need to handle more transactions in Yuan to make the XRD mature?

  7. If the fees are paid in a variety of fiat tokens (at 0.01 per token), but all XRD mature into USDT, then the AMs who hold the reserves may not have sufficient USD to cash out all of the USDT. Or if their local fiat is worth more than the dollar then they would have extra fiat in their reserves.

  8. 500 transactions per second is a very busy network. If we assume that for the first several years Radix will perform at around Ethereum’s tps (which is around 6 tps), then the average time to wait for maturity will be 18.5 years. That’s far too long for most people to wait, and would be unacceptable for a node runner since their XRDs go to the back of the line (37 years). They could sell on the market, but would only get the fair market price of $0.00025.


Hi @steve
very interesting questions, thanks!

  • No, maturity is not inherited. You could inherit maturity, but that would make things incredibly difficult. Think about it: You have 1 XRD with maturity 100d in your wallet and you receive another XRD with maturity 1000d. What is the balance of your wallet then? 2XRD with maturity 550d? In fact, the effect that mature coins become illiquid until they are converted creates another business opportunity, that I haven’t mentioned yet: pawnshops. I have 100 XRD close to maturity, you lend me 90 USDT and lock up my XRD as collateral. At maturity of my coins you receive 100 USDT from collateral. I will add that.
  • Node runners receive XRD fees. There are already most mature XRD (owned by early backers) to be converted at day 1.
  • I think I need to make it more clear in my proposal that all XRD are sitting in a FIFO (first-in-first-out) queue ordered by maturity. There is always a coin at the top of the queue waiting for conversion. Nobody ever needs to wait with a transaction. The duration of maturity is dynamic: the more transactions happen the quicker will a coin run upwards in the queue and become mature. It is the transaction that makes the coin mature, not the maturity of the coin that enables a transaction.
  • Node runners will need some patience. Since the hardware and also power requirements for Radix are very low the cost of running a node will not be extreme. They will have to wait until their XRD gets mature or the price on the DEX increases. If they need to refund quicker --> pawnshops.
  • No. Fees go only to the node runners who validated the current transaction.
  • This model does assume that the face value of XRD is in USDT. Thus USDT fees need to be payed, of course you could convert the Yuan tokens to USD. If the fee price for Yuan transactions was lower than for USD transaction than more transactions would be needed to mature coins.
  • The USDT will never be airdropped as they require backing. For the conversion of Yuan fees into USD fees you require YUANT and USDT to be exchanged on the DEX.
  • You can boost maturity duration with higher fees. From my gut feeling the assumed fee price of 0.01 USDT is too low. Especially if you compare it with fees of other networks. Bitcoin trx fee is around 0.40 USD currently.


Thanks for the response, @rotane

I went back and numbered the responses to make it easier to reference them. :slight_smile:

  1. Yes, you’re right. That would be a mess.

  2. I apologize, but it’s still not clear to me how the XRD are sent to the node runners. I think I need a very simple example:

  • On day 1, Person 1 buys 1 USDT token from an AM with $1.

  • They want to send some USDT to a friend.

  • Person 1 pays a $0.01 USDT fee and sends $0.99 to their friend.

  • Does the node runner who processed that transaction now get 0.01 XRD? Where did it come from? Is the 0.01 XRD now at the back of the line for maturity?

    • It doesn’t seem to make sense that the node runner would get a whole XRD when the fee is $0.01.
  • It seems like it will take 100 transactions at a fee of $0.01 to allow 1 XRD to mature.

  1. I would suggest that instead of giving the XRD to the Genesis backers in the order in which they donated, that a round-robin approach is used so that everyone has some XRD near the front of the FIFO and some near the back. The amount given in each round to each person can be proportional to their total holdings.

  2. 18 years for their first payment is a lot of patience. :slight_smile: If the Radix network has TPS at the level of Ethereum, I don’t think that pawnshops will want to take a risk on XRD that are so far from maturity.

  3. How much XRD does a node get for handling a transaction? (See point 2 above)

  4. When would the conversion from YuanT to USDT happen? Would the person originating the transaction have to do it before making the transaction?

  5. Do AMs only accept USD?

  6. While I do think that more complex transactions should cost more than $0.01, I don’t think that we want to raise fees on simple transactions to cause the maturity to grow faster. $0.40 that bitcoin charges is far too high for simple transactions like sending a message, for example. And $0.40 is too high for small payments too.

  • In fact, I feel that $0.01 is too high for simple transactions. A chat app that uses the Radix network will be either forced to charge users, or pay for the transactions via advertising, or some other method. Lower fees will help those kinds of apps.
  • In any case, even raising it to $0.40 will require that node runners wait months to get paid, when the network is at Ethereum-level TPS.


2.+4.+5. Yes, the node runner receives 0.01 XRD which is now sitting at the bottom of the maturity queue. The 0.01 XRD was coming from the top of the queue and belonging to early adopters. Yes it will take 100 transactions to mature 1 XRD. One can argue that a fee price of 0.01 USDT is too low. If you calculate with 0.10 USDT trx fee instead it looks better.
3. You could distribute the fees evenly across all holders. But than you will handle very small amounts of fees, I do not have the feeling, this is practical.
6. No it would happen at the time of the transaction. If at that time the market for USDT-YuanT is dead at that time the conversion to XRD will have to wait until the USDT has happened.
7. In the beginning: yes
8. I believe you cannot charge for messages at all. Messaging needs POW, independent which Economic Model you prefer.


I’m enjoying our discussion. Thanks for the response. It clarified several things for me.

  1. I was trying to avoid the case where the last genesis backer has to wait years for any payments.
  1. I’ve heard that PoW is used for the test network, but I haven’t heard that it would be used for the released network. How do we reimburse node runners for handling potentially huge numbers of messages? The PoW may prevent spam, but it wouldn’t seem to contribute any value to the network.

Even if we don’t charge for messages, I think that we want to keep fees low to make micro-transactions feasible (small payments of maybe $2 or less) . Plus, low fees will attract more businesses that have small margins that are currently hurt by Visa/MC fees.


This could be created as an editorial or blog post.

PS see message sent to you in discord


An intriguing suggestion. I hope you don’t mind my few questions/comments.

Even despite your answers to Steve, I’m not sure that I understand properly how it works. (Very happy to be corrected on the below.)

It looks to me that the xrd will not be fully fungible because the xrd at the front of the queue will have a higher value than that the xrd lower than the queue (because of the different maturities).

It looks to me that the interest rate (annualised ROI) will be higher, the more transactions per second on the network as the xrd converges to 1 USDT much faster.

If you buy xrd from an AM for 1 USD, you own an xrd which is now worth much less than 1 USDT and you have to wait for that xrd’s maturity for it to equal 1 USDT?

If exchange on the dex some xrd for 1 USDT, where can you redeem the 1 USDT for 1 USD? From any AM?


hi @eamonn
you are correct that there is a delta between the maturity value of the XRD and the fair price of it, since maturity is lost once you sell the coin. The delta grows, the longer you hold the coin, therefore the incentive to hold grows over time. I assume that there will be a certain amount of floating XRD and a certain amount of static XRD, that will remain static. Increasing amount of floating XRD will indicate growing economy on Radix.
The fair price of the coin will asymptotically move from 0 towards 1 USDT as the queue starts to move faster and the coins mature quicker. See here Hodler's Harvest - Google Sheets. But the fair price will never reach 1 USDT. So if you exchange XRD you will never buy or sell for 1 USDT but at the lower market price that moves around the fair price. If you want to realize 1 USDT for your XRD you need to hold until it converges. Besides that you could swap your coins for more mature coins. “100 XRD with estimated maturity in 1 year for 90 XRD with maturity tomorrow.”


@steve I admit that increasing transaction fees is controversial. Another way to speed up the maturity process is to increase fees for asset creation. I cannot remember that Dan had stated how much creation of an asset class should cost. But I can imagine that developers are willing to pay a rather huge fee, if Radix provides a simple, save and convenient process for asset creation. Lets say the fee was 500 USDT and there were 5 assets created every day within the first year. That makes 2500 USDT per day and would be a big contribution to the overall economy.


So either people will ignore this whole maturity issue and value all XRD the same, or no one will accept XRD since it means accepting XRD payment is equivalent to accepting it at the lowest price (since you receive it at zero maturity).

If we go away from the standard fixed-coin approach, I believe the concept should be a coin which people are incentivized to use and not hold for ever. If we want people to hold, why not use a fixed coin?


Do you mean “fixed coin” = fixed supply or pegged?

This suggestion envisions fiat tokens to be the primary medium for payments. I do not get the craze about alternative currencies. Payments work just fine with fiat or fiat tokens since you do not hold your small money long enough that inflation would hit you. One of the disadvantages of the whitepaper EM is that the process of minting XRI/XRD is inconvenient. That means people will prefer fiat tokens for payments anyway. Why going through the process of minting when you just want to pay with it? What I do understand is that people are looking for alternative investments and a good store of value. Bitcoin and other cryptos suck at that. This is what Radix could fix. And it is definitely something the mass market would embrace. But mass market does not have a demand for an alternative world currency. I am talking about Joe the Plumber and Granny Smith.

Granny: “How much for fixing my sink?”
Joe: “That’s 60 Rads.”
Granny: “60 rats?”
Joe: “No. That is 60 dollars.”
Granny: “Why didn’t you say so?”

LOL. That will happen only once to Joe and never again. :wink:

Regarding your reservation about maturity please see the section “Business Opportunities”. There is a whole economy built just to make illiquid assets more liquid. Think of mortgages. That is a very common process in the financial world and really not an argument against the concept of maturity but in favour for this concept.


fixed supply.

The issue with this concept is (1) it’s very complicated to comprehend - the current model is much easier to understand (and it is over-complicated in itself, and (2) Maturity needs to be a function of money flowing into the system and not transactions - if a fully matured coin is worth 1 XRI/USDT, you need to ensure the AMs have enough currency to satisfy this. If TPS is high buy no new money flowing in, it might lead to many mature coins which eventually empty the reserves after which mature coins are worthless (in this design).

Bottom line, if we want people to use it “KISS” Keep It Stupid Simple - like your previous proposal.


This proposal proposes XRD to become a fixed supply coin.

  1. As with most of our daily financial instruments this approach is sophisticated but it has a simple user interface (see paragraph “Actions”). Paper money? Very complex theory yet easy to use. Shares? Bonds? Futures? Even more complex but easy to use. In the end it is the user interface that counts. If I only have a wallet that tells me my ROI and an explorer to calculate my fair price I am happy with it. No matter if the math is complex.
  2. Maturity is a function of tps. Transaction fees take a fraction of the fiat tokens (USDT), which are backed. And therefore the maturity algorithm will always have backing. If you run out of USDT you will see a drop of tps.


So if it’s a fixed supply, why not use XRI for payments (fully backed weighted basket of fiat tokens, it’s not fixed thus the price is stable and not volatile) and have XRD as a fixed supply token which values the network?
How does this approach improve over your previous proposal?


I do not think that the synthetic XRI has any advantage over plain fiat tokens, but the process of minting XRI is cumbersome and users don’t want that. Therefore, no XRI in this proposal.

In Piers’ feedback on my first proposal his main concern was volatility. This approach has an advantage over the first one


XRI has two benefits
(1) When compared to XRD - it’s stable from day 1 by design.
(2) When compared to standard FIAT - it’s a more global currency. It isn’t pegged to a single country, it is less risky and more diverse.

Current process is cumbersome that’s correct. But it can be automated. I want to buy XRI for USD, we can calculate how much it costs and automate buying the other currencies.


The whitepaper does not state at what time other currencies would become part of the XRI basket. For foreseeable time it will only be USDT. So why not stick with USDT? What is the benefit of minting XRI and then buying XRD? Well, with XRD you can participate in the XRD inflation. But inflation will only happen if the market price hits pMax (1.10 USDT). Who will buy XRD at pMax with a market cap of 70mn XRD right from the start? pMax will be 1.10 USDT and pMin will be 0.00 USDT at the beginning. With a limited upside it is very likely that the price will rarely hit pMax and most likely drop. That would be a different story if there were an XRD economy right from the start that users have demand for. But in the beginning XRD will be a collector’s coin only. The market for collector’s coin is already saturated and I don’t see how this can raise user’s interest in XRD.