Ido Sadeh Man: Sögur – The Digital Coin Changing Global Currency for the Better

Transcript

[Music] hi i'm sebastien quijero and you're listening to epicenter aftershock these aftershock podcasts are wholly sponsored which means that everyone you hear on this edition of the show paid to be here but that's okay because we have some amazing sponsors if you're looking for the regular weekly edition of epicenter just look for the numbered episodes in your podcast player and of course none of what we discuss here should be considered as investment advice today our guest is ido sademan he's the chairman of the board and founder of sagar

which until recently was known as saga sagar is a very ambitious project to create a global currency that acts as a store of value a unit of account and a medium of exchange and the goal is to create a currency that is a source of stability in an increasingly unstable world economy especially in the context of the global pandemic the project is live on ethereum mainnet and it's attracted an impressive team and an advisory board that includes nobel laureate economists sogar is interesting because it starts off looking like a stable coin but as the market grows it departs from its peg to become a free-floating currency so in the beginning and right now it's pegged to the imf's special drawing

rights or sdr which is a basket of the five most widely used fiat currencies in the world so us dollar euro chinese juan japanese yen and the pound to buy the sogger token which is called the sgr a user deposits eth in a smart contract that eath is converted into those currencies representative of the basket and it's held in fiat reserves so it's backed by fiat and as the demand for the sauger token increases the sgr that is the reserve ratio decreases and what that does is it causes the price relative to the eth usd value to go up what you get is a currency that's

deterministic in price relative to the size of the market so the smart contract deterministically determines the issuance curve for the token and the price of the token at any point on that curve in our conversation we discussed edo's background as a jazz musician in paris and how he transitioned into tech startups we talked about sagar what it is who it's for and what problem it solves we compared it to other attempts at creating asset reference tokens or stable coins in the ecosystem we discussed some of the philosophies and thinking that went into designing sauger we talked about the current political context and how relevant

this currency is within it we discussed at length the token economics and how they work we talked about the interesting mechanism that governs the sauger token and also the organization that houses the soccer team we discussed the technical aspects of the sauger token and the smart contract and finally the regulatory context and long-term vision for the project i hope you'll enjoy this conversation i really think this is an interesting project because it attempts to create a much more populist version of libra which for all intents and purposes if ever if it ever sees the light of day will be governed by a small group of

elites and more generally i think the cryptocurrency space benefits from experimentation in the space of stable currencies that act as a store of value unit of account and unit of exchange so with that here's my conversation with ido sademan [Music] so i'm here with ido sademan he is the chairman of the board and founder of sogor and we're going to talk all about sogor and how it aims to become a world currency we've heard this a lot in the crypto space over the years but sogore i think has a pretty good base to uh to do just that so thanks for joining me today thank you for having me it's a pleasure

so before the show we were talking a little bit about your background and how you used to live here in paris and used to be a jazz musician yeah tell us a bit about you know where you came from and uh how you got involved in crypto yeah so it seems like uh you know a prior life up until 15 years ago i i was i studied music in paris and was playing jazz happily and then got back to israel where i'm from uh and where i am now in in quarantine and and realized that there is not much of a jazz scene here and i crossed to the dark side of the startup industry where the scene is very developed here in israel mostly managed um product organizations and

later on methods startups whether b2b or consumer startups sold the company and three years ago i was ready to leave the space feeling that i'm doing more of the same and i was a part of an early stage vc and as a farewell to the vc i suggested to take an analyst with me and write a thesis explore a bit and write that is about investing in blockchain it was early 2017 before the craze started and i think it took me less than two weeks to realize that i'm not going anywhere that my plan was to go and study political science because i felt that what really interests me is the where societies are functioning

or rather dysfunctioning as of late and i think that what i found in blockchain is the realization that technology and politics not not in the partisan way but in in the societal way are getting as close as close as they're ever been and that possibly the solutions are not within the campuses but rather within uh new technologies uh that can reshape our social contracts and and this is really how soccer began saga back then we should mention that this project used to be called saga and it's not it's now called sogar so we'll try to keep the because the the brand change just happened so we'll

try to keep it straight on sogar throughout the interview what is it about the current social and political uh climate that makes you think that sogar is uh that the time is sort of ripe for uh sogar to emerge so when it comes to sauger the the the premise of sauger is that we need a complementary uh global currency one that is not necessarily competing with fiat currencies but rather complementing them so fiat currencies were designed for a reality where our economies are mostly national right where prices are determined within a nation state where trading mostly take effect uh in a nation state and where it is

enough to set fiscal agenda by governments and monetary agenda by a central bank in order to maintain a monetary stability and for the fiat currency to perform its role go tell that to a british citizen uh who after brexit saw the pound value decreased by 25 over the last few years and actually when they're purchasing within britain they're fine the british economy is reacting to the same brexit but when they go on amazon or when they go abroad which happens a lot especially before kovid then the prices there are remaining unaffected by her majesty's parliament they are remained exposed to a market that they are

purchasing and trading with but their store of value is not reacting to and this is exactly what saga wants to solution now obviously with with the instabilities that kovid demonstrated because i don't think that the the inherent instabilities is due to kovid i think that covet is just you know the small illness that is coming to an already sclerotic system and demonstrating just how fragile it is with all that covid brings along with the fluctuations of the dollar for example i think that the need to find centers of stability that are not only dependent by national of national governments is becoming ever

so evident and if it was you know one of the struggles we had three years ago was to explain this to my mother for whom all is well and functioning fine one had to really be in deep in the rabbit hole to understand where our financial and monetary systems are non-functioning now i think that is quite uh it is quite common knowledge and quite common sentiment uh that our traditional organizations are not able to to react on their own with the challenges of of the data global data era this concept of centers of stability is one that i've been thinking a lot about especially in you know since covid as

we've seen sort of local communities solidify and i've seen it here in my own local community you know just the sort of solidarity between people and sort of like local bonds solidifying and i i see that as sort of a center of stability in my own personal life you know knowing that i have like neighbors that i can rely on if i need something or that there are like some local businesses around where i can buy things that i need from you know essential goods to non-essential goods what are the sort of centers of stability as you call them that people rely on that you know are able to scale at a global scale is is this something that's achievable in your view

i i think so so this is going down a very deep rabbit hole but i i like to call it super global and super local eventually we need to we need to remember that the premise of the state if we go back to uso and montesquieu and the rest of them uh was to provide security and is still to provide security we are willing to surrender some of our liberties and some of our money in order to gain back security whether it's physical traditional educational or or medical security and i think that we're realizing more and more that nation states are struggling to provide the security now i don't think that it is because we have lesser

leaders this might be the case but but i don't think that this is the root cause the root cause is that when communication changes identities changes along with it for a very long time a french citizen created his or her uh identity by watching france the in the evening an american by watching walter cronkite a british by watching the bbc it allowed the sort of unity and national unity that allows for a national community to really exist this is no longer the case i think that what we're experiencing is not very new right probably about three or four hundred years ago

in toulouse someone got the first newspaper and was no longer because of the cheap printing revolution and was no longer restrained to forging their identity to trading to exchanging ideas with the teacher in the village or with his parents and and this is what really gave birth to the nation state to this new community that can agree on things together and create a social infrastructure and an economic infrastructure i think that we've had our share of our of of our cheap printing revolution with with our data era that is no longer restrained only to the nation nation state we're no longer consuming

our news from main source of information and it might be that you and i have more in common than myself and my geographical neighbor and therefore we need the ability to exchange views but also to create those solidarity circles and what i believe would happen uh is that we would see those solidarity circles going both ways as you've mentioned the community the size of the community is one that allows to create more understanding more common ground than the national size on the other side we have technology enabling us to create common ground with people that are not that are remote geographically and to create

those networks of support as well so i don't think this is dichotomic i think this is going this is going hand by hand yeah this is such a profound topic and it is a rabbit hole that we could spend a lot of time on i mean i think that in in the last recent years i've realized that i have more in common say with someone in a different country that lives also in a big city than say someone from like my you know my hometown where it's like a very small city right and like i think that this is the kind of dichotomy that is more prevalent today in terms of people's ability to identify with those

around them is like whether or not you're like a cosmopolitan or not and i i mean some some would probably call that a little bit controversial but i i think that that this is the um the sort of uh uh uh the the stakes that that are at stake here is like being able to consolidate you know the interests of like everyone whether um you live in a very sort of affluent uh society or or city or not you know and and between secular approaches and religious approaches uh there are so many fragments and i think that there comes a time where society is no longer sustainable if it

doesn't share a critical mass of common ground a critical mass of narrative and ethos i'm pretty pessimistic when it comes to this to be honest so when i want to go back to optimism i look at switzerland that's a good point yeah switzerland is a good model i think for this but it's also very small and and uh and quite rural right but you know we're we're used to look at switzerland and to say well they have great chocolates and everything is green of course everything is so peaceful there but but it is rather the contrary switzerland is a small country divided to into three languages three different ethnicities or or uh nationalities at least

and surrounded by by countries that up until 50 years ago wanted to devour it and devour everything else uh and yet it is managing to uh to be a sort of token of stability and a lot of it has to do with with the fractal nature of of switzerland with the fact that the federation is agreeing on on really a very very lean layer of solidarity but then each commune and each canton is allowed to have their own views and their own common ground that is shaped differently than others so i think that this is a model that we can definitely look into a stark contract to france and how things are being run here in france

very topical at the moment okay we're gonna get away from all this philosophical political stuff and start talking a little bit more about sogra which is why you're here um so like can you describe sogar i i realize we haven't really got into into detail about what sugar is but let's let's describe sugar and what is it for like what problem does it solve specifically so as i mentioned soccer aims to to provide a global currency that is not impacted by any single nation state agenda and that is complementing national currencies and obviously our inspiration our first inspiration is bitcoin the first non-governmental attempt to create a currency uh in in the modern age but then we've

uh identified several pitfalls that we think would prevent bitcoin so we believe that bitcoin is a is definitely in any parameter a better alternative to gold in the sense of an uncorrelated asset but when it comes to currency we believe that volatility needs to be tamed chaotic volatility does not allow anyone to use a currency as a medium of exchange and that the deterministic features that are so appealing in bitcoin are problematic when it comes to running a medium of exchange the fact that it takes so long to change the contract in the face of a new reality and these are the two elements that sogar is

tackling you can imagine sogger to be a bridge between a stablecoin and bitcoin because it starts as a stablecoin it is pegged uh uh by a basket of currencies and as it evolves and grows the contract the the smart contract it's an ethereum contract and and the smart contract uh protocol is detaching from this peg gradually towards independence while using the reserve uh as and the peg as as a kind of crotches right as a stabilization element to um to be able to tame volatility on the way to independence

so it starts as a stable coin which means that it is it what is it what is it backed by or what stability is it attached to and as it detaches from that where does it go from there so it starts as a as a stable coin it's a sort of a hybrid between a stable coin and a crypto volatile commodity so it starts by being fully pegged and fully stable to the sdr the sdr is a basket of the five most traded currencies dollar euro pound yen and remnb and it is uh it is being defined the basket is defined by the imf the international monetary fund and it is actually being used since 1969 by central banks to hold their reserves

obviously just like we do in in sauger no central bank want to hold one their own reserve in one currency that is subject to fluctuation and this is why the imf invented the sdr so we we are using the same composition we are holding to the composition of the sdr and we're not allowed to change the basket unless the imf changes the composition of the sdr which happens every five years or so so let's talk a little bit more about this monetary policy so you mentioned the the sdr of course that's the the special drawing rights asset uh that you know i think a lot of people in the crypto space kind of discovered uh the sdr when when libra uh came out

because it was kind of um somewhat compared uh to to the sdr in some in some circles and so this this is a basket of currencies and you you've decided to peg it to this basket of currencies uh because uh of the sort of inherent stability that it gets from being a basket of these national currencies because of two main reasons one is the diversification gives stability and we're witnessing it since march uh where the dollar is uh is depreciating and the sdr went from 1.36 to 1.42 and consequently we did too not because we did anything but because the dollar depreciated

but also because it gives inherent protection from one single state taking monetary actions and impacting the value of our currency actions such as quantitative easing or money printing as one would call it more simply so let's talk about the mechanism that goes into defining what the reserves of uh of sgr should be so you mentioned that at the beginning it is pegged to this basket of assets that represents the sdr where does money come from and where is this money like is there money sitting in a bank somewhere sure a great question

so first of all when we started when we launched saga at the time in sga at the time what is now sgr there was zero money in reserve there were zero sgrs in the world the only way to create an sgr is for someone to buy it with ether from the smart contract so the mechanism is a mechanism of an elastic supply of one more of money the market determines the supply of money when one buys sgr from the contract with ether sgr is created when one sells sgr back to the contract they would get back their ether and this sgr would be when we get the ether when the contract gets the ether we are converting the ether into the sdr

currencies and depositing them in regulated banks the oracling very recently just a month ago we have announced an integration already in place with chain link so that the price of ether sgr is based on a chain-link oracle those banks that are holding the funds for sgr for the reserve are providing a daily attestation signed by them that could be read on our website as to how much money they are holding in reserve this is one of the critical elements for any peg based currency is to know how many funds are there really in reserve we don't want anyone to have to trust us and therefore one of our conditions for the working

with the bank is for the bank to be able to provide such a daily at the station let's look at it from a user perspective i want to buy some of this sgr i i go to your website i go somewhere i send ether to a smart contract address i'll get some amount of sgr in return we'll go into like what amount that is and what determines the price of the sgr in the back end you're using that ether to purchase the basket of currencies that are in the sdr the special drawing rights uh in in proportion to the amount of currency that i've purchased and that goes into a bank account so let's say i have a hundred dollars in ether i don't know what the proportions are but let's say they're just 20 you know

for each currency you're buying 20 of usd 20 of euro 20 of etc um for that 100 of ether and that goes into a deposit into into a bank right that's that's almost true just two small changes to to what you've just described the first one is that obviously the sdr is heavily leaning on on euro and dollar 40 and some percent uh dollar and 30 and some percent euro the second one is the 2 of it are being left in the smart contract as ether as a liquidity buffer so that if you want to come and resell your sgr to the contract

you can redeem your ether and you will not have to wait uh for two days for the money to be withdrew from uh from the bank accounts so there is an algorithm that calculates how much of a liquidity buffer to keep in the contract for a zero time within one block redeemability without at the same time being exposed to the price of ether so it's it's constantly a sort of uh equilibrium that the contract uh the contract determines okay let's now discuss maybe the price because there you use a token bonding curve to determine the price of the sgr and also the reserves that should be

held based on the amount of reserve or sorry on the market size right so can you describe the mechanism by which when i deposit say a hundred dollars worth of each of ether i get x amount of sgr uh in return of course so the the premise of a bonding curve is is an implementation of a principle that i think that we want to see in every cryptocurrency which is that a currency's value should be a function of the size of its economy and community right i think that this is true for for any currency um not only cryptocurrencies right we know what happens when countries are

deciding for their themselves of the value of their currency you can ask carlos menomin in argentina in a natural way for a currency to be inherently strong its value should be a function of of the size of its economy and community the way a bonding curve implements it is the following because we're not pre-issuing and we have no right to print money only the market can determine how many sgrs there are in the market then the the algorithm can consider that the number of sgrs is a quantifier of the size of the economy and of the trust that that we enjoy when this number is low um the the contract leans on a 100

reserve ratio meaning really that sgr is only worth what it has in reserve this is the case now when the economy grows meaning more people are buying sgr from the contract than selling then the value of sgr grows with it because that's how currencies work their value is a derivative of the size of their economy and the way the bonding curve implements it is that the reserve ratio the percentage out of the value of sgr that needs to be deposited in reserve can lower in favor of an appreciation of the price of sgr which means that if you come to the contract today and you want to buy an sgr

it will cost you one sgr would cost you the price of one sdr which is currently 1.42 and it's determined by the imf again by us but when the supply grows the contract will tell you how much would the dense gr cost you and it's fully deterministic if you tell me how many sgrs there would be at that time in the market or if you tell that to the contract the contract today can tell you how what would be the cost of nsgr now obviously this goes both ways because trust can not only be earned it can be lost and economies can not only expend they can shrink so if more people sell their sgrs to the contract and the econ size of the sdr economy shrinks

the reserve ratio goes back up the price of sgr goes back up back down to reflect the state of the the community and the economy at the same time as we believe any price of currency should okay so so this bonding curve is this function is created in such a way that as the economy grows the amount of reserves necessary to back the size of the economy well will be decreasing proportionately to the size of the economy which means that by by consequence the the price of the sgr would go up so as i as the economy is growing when i'm sending 100 worth of ether i'm

getting less and less sgr for that 100 worth of ether right at the same time if you're holding as the economy is growing if you're holding your sgr uh they are worth more and more as the economy is growing okay how do you ensure the redeemability of the reserves and the ability for someone to sort of redeem the equivalent amount of eth that they put into the system so so again the the the bonding curve does not ensure that you receive the same amount of if you have put into the system it ensures that the contract can always redeem at the prevailing price according to the number of

sgrs at the time of redemption or of buying so again if if you hold 100 sgr i cannot tell you what they would be worth tomorrow i can tell you that if there are a million sgrs in the market they would be worth x if there are 10 million sgrs there would be a worth 1.2 weeks i'm don't take my numbers seriously and and that if the economy reduces back to 1 million sgrs they would again be worth x okay so i think a good way to look at this is or to describe this is that sgr is deterministic in its price as a function of the market size exactly in the price

and in the reserve ratio okay and so you're you're if you're a speculator you're speculating on the size of the s of the sgr market to grow and so therefore the price of your sdr to grow with it but but it's solely based on that function and nothing else yeah this is the base function on top of it so that it is not it does not become too boring we've added another layer which is the layer of the price bend because one of the fragilities you know when we started sgr and soccer i didn't understand much of monetary theory i'm coming from the technology side of things and so very quickly we surrounded

ourselves by by monetary experts we realized that the technology aspect while fascinating cannot account for all the knowledge needed to build the currency eventually one has to know something about monetary theory and one of the fragilities that they were indicating in the model that we just described is the lack of price discovery because really the contract sets the price of sgr according to the number of sdrs in the market and in an ideal world you would like the market to set the price not only the quantity but the price but how to do that without being exposed to too much volatility so what we've developed on top of the contract is a price band being that

as the economy grows again based on as a function of the number of sgrs there is a bid offer spread that is opened by the contract okay so buying from the contract would be more expensive than selling to the contract and the reasoning behind it is that we want to drive holders of sgr to buy it in the secondary market and to determine the price of sgr within within the limits of of the bonding curve this is very similar to the the way that the japanese central bank or the israeli central bank liberated the exchange rate of their currencies while ensuring from volatility so the contract is always here to buy from

you or to sell to you if you cannot find within the curve the ability to buy in the market but while in the curve you still have a range of an increasingly growing range of price discovery uh in secondary market so that markets can discover the price and not only the smart contracts when i was reading about this i was just thinking of uniswap and it seems to me like sogar is is like it it sort of resembles swap but rather than swapping your ether for another cryptocurrency you're swapping your ether for something that is worth the value of an sdr but with like some additional

pricing mechanism that we don't see in units like it's sort of like an automated market maker for sdr but with a bonding curve that sets the price for that token i don't think that we ever considered saga to be a market maker for sdr because for that to be the case the reserve ratio would have always been 100 this whole mechanism is not required we are using sdr again as crotches as a means of stabilizing again the base principle is that the value of saga should be a derivative of the size of its economy and and its usage right but we've seen that currencies

that are starting by issuing a certain amount of currency sending it to the market and letting the market estimate the value of the currency are resulting in high volatility not to say if not to say chaotic that are preventing the very essence of becoming a currency in a medium of exchange no one will be willing to sell me their tomatoes if tomorrow the currency i pay with would be worth half for or or double yeah that makes sense so the sdr is really a means of supporting a volatility taming mechanism on the way of growing the saga currency and in this regard i think it's very different than the uni swap target so let's talk about the uh

technical aspect here you built sauger on ethereum as an ethereum smart contract why did you choose to build an ethereum and why not it's its own chain because it's as such an ambitious project it feels like it could it could warrant having its own blockchain so i i think that just because of the fact that it is such an ambitious project and tackling so many challenges of its own i think that it is important for a project to ask to ask itself where does its special source or knowledge lies and i think that ours is in the combination between monetary theory and and technology uh it is not in

building scalable blockchains there are teams dedicated teams in ethereum in other projects that are dealing with all the challenges of building a blockchain what are really the chances that we would do a better job at it when it is not our core profession our core profession uh and our core resources are all invested in what would be in in solving the question of what would be the ideal global complement as a currency not in solving scalability issues now i'm not dispensing them they exist we're suffering from them like anyone else but i think that the chances that projects that are infrastructure projects that are dedicated only to solving those

those problems would have more chances of resolving those problems than we would as much as we would have more chances of resolving monetary projects than they would so i think that this is what led our choice to use to use an existing blockchain how are you dealing with some of the limitations of ethereum for example the number of transactions per second or things like gas fees that you know have been quite high lately so the short answer would be that we are suffering like anyone else uh and we're finding our bypasses so many of them most of the transactions in in sgr currently are not taking place

directly with the contract but rather in exchanges such as liquid and bitamb and exmo where sgr is listed and and a part of it is because of the high gas fees in in the past few weeks yeah i can tell you that just deploying our recent uh change to the contract following the first vote that took place in in sauger and i guess we'll get to that later on instead of costing two thousand dollars cost us thirty thousand dollars just to deploy the contracts right those challenges exist there are many endeavors that are working to resolve them and quite frankly i don't think that these are the main challenges of the industry we have with bigger fishes to fry and challenges of scale

are always escorting new technologies and they're always resolved eventually i think that part of it would be to compromise on complete decentralization side chains things of of the nature of lightning in other ecosystems as well i think that this would be a part of the solution do you think that it's necessary like if sgr is to become a global currency do you think it's necessary for sgr to have you know all the bridges to other cryptocurrency networks uh so that it can be used sort of interoperably between different networks so at this stage i'm not sure that this is the case

eventually yes the architecture of sgr is built so that it can be supported on as many networks as there are serving by using the reserve as a sort of relay between the networks so one would always be able to burn their sgr on one network only to find them on reissued on another by their own uh desire to do so but quite frankly you know sgr is is facing the challenge that any currency is facing which is the two-sided market challenge why would i hold the currency that no merchant accept and why would any merchant accept the currency that no one holds or that a few old i think that bitcoin is still

suffering from from this so sgr being as young as it is definitely suffers from it and i think that therefore it is more reasonable to expect for people to hold sgr initially as a store of value because they want to hold an asset that is stabilized by a basket of currencies and not by one currency uh as opposed to stable coins um that we know on one end and on the other end not to be limited to an asset that is just a stable coin and is replacing holding the the actual fiat it is backed by but but by partaking in in this endeavor to create a currency that would

eventually uh have its own independent value in a transparent and expectable way um that's an interesting point when when talking about the like the two-sided market problem and bitcoin has achieved some level of accepted acceptability with merchants but it's you know it's practically nothing compared to you know visa and mastercard and other forms of payment like cash there are other stable coin uh projects not like to sort of put you in that category but say something like tara for example have a go to market strategy where they're you know partnering with e-commerce merchants in south korea and trying to establish themselves as a you know a medium of exchange in that

ecosystem what do you see for sauger as the go-to-market strategy as one might say in order to gain adoption so so for us the most interesting element and the problem we're trying to solve is the base of money i really don't think that most of the problems that our day-to-day lives are facing are having to do anything with payment at least not in a way that only blockchain can solve right to be able next month is probably solving payment issues better than blockchain projects or or pioneer or the rest of them for us the interesting thing is how we

can we can can we create a monetary center of security that doesn't exist now how can we solution it for this british citizen that wants to be exposed not only to their own prices but to the merchandise they are going to be buying on amazon how can we solution the problem for an argentinian or a turkish citizen or a brazilian citizen for whom their local currency is no longer providing the security it needs to provide that the peso decreased by 70 in three years the turkish clear in more than 40 percent the brazilian real is is following very quickly these are hundreds of millions of people

that are holding a currency that fails to provide the main feature of a store of value which is to store value i think that for us the main the main goal is is to solve this problem and and to leverage existing payment networks we we're looking to partner with payment networks but realistically the feature of store of value is probably one that we're solving better now than the feature of medium of exchange and we're very content with it for the meanwhile and store value that if you fulfill your vision that store of value could in fact appreciate in value if there is more adoption of of sugar and an interesting thing would would be

to to associate it to the way you see the world evolving if you think that everything that has been will continue to be it makes sense for you to hold the stable coin right if you think that the dollar is the reserve currency of the world we don't need any other solution for a global economy than old tether or usdc forever it's fine if you think that the world is a shitshow and that it's going to collapse tomorrow and that you want a fully uncorrelated asset hold bitcoin it's fully not correlated just as much as you would hold gold but bitcoin is better it's more scalable easier to hold easier to transfer etc so why bother hold bitcoin if you think

that the world is changing but that this change is taking time that it won't happen at once that earning the trust of people that creating an economy and a community takes time then soccer makes sense because it goes all the way from being the stable coin that uh holding a stable coin on the dollar would be all the way to becoming a bitcoin but for for soccer to adopt the mechanisms of bitcoin of deterministic supply free float price appreciation etc the size of the solar economy needs to reach five trillion dollars okay we believe that this endeavor needs to be slow

very similar to the debasement of gold done in fiat central banks i i hope this you know analogy helps to to clarify to some extent our approach at least let's talk about the governance a little bit because there's a there's this entire mechanism behind sogar to uh to manage the the organization and the the nonprofit that is um creating this uh this currency so can you describe the governance structure that exists uh within solar sure so ideally sogger wouldn't have been a company we don't believe that private companies

are can legitimately issue currency because private companies by design are catering to the needs and to the wheels of their shareholders not to the currents in their currency holders unfortunately for us in the uk where we are incorporated there isn't a structure that allows us not to be a company so what we did instead is to incorporate the company but to deny the members of the company i'm the single member of the company but i'm denied of any rights i cannot vote on my own i cannot grow dividends we took a company and we turned it into a foundation of sorts and this is all in the premise of giving

all surrendering the power and the sovereignty of sagar to the currency holder which we believe is the only way to create legitimately a money issuer uh just to give you an example in november less than two months from now uh the orders of sauger would be able to vote to dismiss the entire board of the company including myself send me home and i'll have nothing to do and nothing to say about the way soccer is managed i'm very happy with it i i wouldn't be happy living this is definitely a baby that i'm nurturing but i'm very happy with this possibility with the fact that the project is not mine if this was my project it was doomed to begin with i

believe and this is this is how we build the entire governance of of sogger so when you say that you you built this in the uk and in the uk there isn't a structure that allows you to do this so you built it as a company are you saying that there's there's no like non-profit structure in the uk or that you couldn't find a non-profit structure that's suitable for this i mean like the swiss foundations there's cayman foundations the swiss foundation is ideal in the sense that it is owned by its purpose so instead of having shareholders it has a purpose to be owned to and it is supervised so that management of the foundation or the council of the foundation is supervised to serve the purpose uh by

by swiss supervisors in the uk the situation is different there is a cic um but this is a charity organization so a foundation in in the uk needs to be charitable and it needs to have an interest that is broader than just itself in our case we would have had to serve the entirety of the uk population instead of having to serve the holder of the currency which is uh what determines so so we built a company and then we went back to principles uh drawn from blockchain but also from montesquieu and and and the way a state is built and built our own governance framework and when it comes to

the governing uh the the token and the smart contract you mentioned there's a governance vote uh coming up can you talk about the the governance mechanism that exists within uh the smart contract itself and how it can impact uh the governance of this company and also what types of things that governance vote can do within the smart contract on the conceptual level we are separating between between two major occurrences one is of executing a known protocol and this is something that in sogger is always done by the smart contract the second thing is changing the protocol and we're not a fully

decentralized entity right we all reserve in banks um i we we don't know yet of banks that are willing to open fiat accounts for smart contracts so we we are a semi-partial entity and so uh where we are centralized we are delegating the power to take decisions or we we are aspiring this power from votes by our holders uh for changing the contract for example so to to give a concrete example just a bit short of a month ago we came to the conclusion that the decay ratio of the reserve was way too conservative preventing the project from allowing the

opportunity to early adopters to be incentivized to join and we wanted to change this curve so the process was that our monetary expert our economy team suggested a change the board of directors approved it the stepping committee which is two independent people that can hijack the company from us if we are not respecting our own constitution and to approve it and only then was it published on our website and on the blockchain for the vote of all the holders of saga happily it was ratified along with the change of name from from saga to sagar so this is the way we're doing things we have four main branches the smart

contract is one of them but there is an assembly where anyone can vote and starting three weeks from now delegate their vote to others as well as as we've seen in other projects as well there is the executive council or the board that is going to be elected starting november by uh by the members but there is also the monetary committee which is an expert body that can suggest changes to the smart contract but those changes are always subject to veto right by the the entirety of the orders of so it's a system of checks and balances really to take all all the good things from decentralization but to also decentralize in a dowish way whatever is centralized by design

so the token holders have governance rights what stops me from you know buying up like a million dollars worth of sgr right now or right before the vote and swinging that vote uh in in my favor or you know in the favor of people i represent so thank you for this question uh demo economy this is what's uh um stopping you are strong arguments for voting by stake there are strong arguments for voting like in in our general elections one hand one vote the the argument for voting by stake would be that if i hold a million dollars in in in sgr and you old only one dollar

then i'm one million times more impacted by decisions taking sgr than you would be on the other end a currency needs to be used and it needs to be used not only by wales to store value but by people to buy goods and so one would uh not appreciate that the decision in regard to the currency would be taken only by the high stakeholders of it so how to balance the two we took the genie index which is an index that measures imparity in economies in in national economies and instead of measuring in parity is national economies we are using the formula of the gini index to measure the imperative in sgr if the the holdings of sgr

are at power then it is a vote by stake but as imperity grows it becomes a vote by identity depending on this gini coefficient so to to give an example if we have 1000 people holding 1000 sgr then it would be a vote by stake the gini coefficient would be zero the the distribution of holdings is is completely power but if now one would come and buy one million sgr then we would have one person holding half of the economy in a vote by stake there should be they should enjoy half of the voting power what would happen in the democonomy algorithm is that the genie coefficient would jump immediately

and they would enjoy to some extent the fact that they have more than others because they've purchased this but not to the extent of controlling the economy okay so i mean that that works when you have real identities tied to say smart contract addresses but or or wallet addresses but what would prevent someone from you know purchasing or acquiring uh large amounts of sgr and then splitting those up into smaller amounts and different addresses and then voting in that way so because of kyc and aml compliance issues saga is performing kyc for whoever wants to buy or sell directly to the contract

so we don't know of as soon as the kyc is over the address the wallet address is completely decoupled from the identity we ourselves cannot access it but we do have this whitelist on the blockchain anyone can see it of wallet addresses that have been whitelisted and associated to an identity and only those addresses can can participate in in voting so we enjoy the ability of asserting that one identity is one wallet to a certain extent right we're using the same severity as a us visa would use or or a banking e-banking kyc would use without really knowing the identity of the voter

themselves okay then why not just do identity based voting then why do this kind of um this weighted voting if you have the identity of the of the uh of the token holders because again voting only by identity means that the stake that people have within the economy are not considered at all we believe they should be considered we want to prevent plutocracy we want to prevent those who have more taking decisions that are resulting in them having even more but we don't want to annihilate the right that comes with the fact that they're holding a bigger stake in the

economy you know as just as an exercise imagine that voting in our states would be to some extent tied to how much taxes we pay eventually when we are voting we are voting on how will our shared resources be divided right when when when we're voting for a government that would set out a budget it would be an agenda that determines how to distribute the national wealth now this national wealth doesn't come from nowhere it comes from our taxes to have a notion of some linkage between the tax we're paying and the decisions that are taking on our be off

should be an interesting experiment not only in cryptocurrencies okay so you're trying to strike some balance between uh identity-based voting and stake-based voting and the way that you've done this is with this genie coefficient uh that you've kind of commandeered for your own for your own uh use and and that allows you to have a sort of coefficient that will adjust based on the amount of disparity in the system so when disparities are high the genie coefficient kicks in and tries to to to counteract that that uh that disparity but when disparity is low then the genie coefficient

is uh is not taken into account or less so right so the gini coefficient runs between zero and one uh when when it is zero then the stake is being uh is being fully represented when it is going up uh the algorithm itself determines how to punish stake if you want in favor of identity and again this is a part of the smart contract it's an algorithm and it's fully accepted expectable we don't have to have any interference with it in real time interesting so i guess that kind of addresses one of the one of the issues that i that i have with with crypto in general is the you know the representative nature

or the lack of representation i'd say in in crypto of um you know underrepresented populations i'd say like you know if you take something like maker i i don't know what the proportion of you know affluent uh college-educated people uh in the sort of maker governance pool are but i'd say that's probably pretty high with sogar whoever whoever you are as a token holder you have some rights in governance and those rights are weighted based on this genie coefficient that accounts for disproportional inequalities right and this is why unlike maker for example

we have taken the decision of not issuing a governance token but unifying the currency and the governance token it's it's not two projects and it's not two currencies it is your holdings in saga and and the the criteria for being able to vote uh is to hold ten sagas right equal to 14 now and and this is to avoid spamming on one end but we didn't want to put them higher because we don't want to create a sort of barrage from from the access to power and the access to voting so yes this is definitely one of the premises uh and and one of the the ways in which we are considering that the sovereigns of of sauger are the

holders of sober whoever they would be regardless of their geography or their background obviously so just a little bit a little bit longer here on this governance so you mentioned that uh there was this this foundation there air there's like the council and there is a panel of experts what is their role in determining and what is the weight of the role say in determining you know future update upgrades to the contract or the monetary policy or something we haven't touched on which is you know what do you do with the reserves are they just sitting there in the bank or are they you know bearing interest somehow or being used for other investments and things like that so i'll start with the end because it's

the easier currently they're sitting in a bank in two weeks time new functions would be released to vote for example 10 of the reserve would be able upon voting by the community to be deposited in stable coins instead of in the the base fiat in defy projects to the vote of the community but still the majority of the funds 90 of the funds will sit in plain vanilla currencies in bank accounts they're not geared towards yield they're geared towards stability they're here to support

uh um the currency from volatility when it comes to the reserve the role of of monetary experts is to take monetary decisions and consider the long term if if you look at central banks or the way central banks should be not the way they necessarily behave the reason why central banks are usually or policy monetary policy boards in central banks are enjoying the the so-called independence of the central bank is that when a government is elected every four years it tends to be populist it wants to be re-elected which is completely natural but monetary decisions have their way of having a longer impact we are still living the impact of several

monetary decisions taken in the 1970s like the abolishment of the golden standard right and you would like those decisions to be weighing expertise and and longevity into the consideration but at the same time unlike a central bank we don't want the experts not to be accountable to the public that is holding the currency and so while the experts are the ones that are drafting proposals although the public can draft proposals as well their decisions are always subject to a veto right by the holders of saga so again this is a sort of balance between the ability to use expertise in monetary decision making on the on the one end but also being

accountable to those who are really staking to to those whose stake you're taking decision for uh which are the currency holder tell us a little bit about the team and the investors that are backing this project and i'm also curious to hear how you managed to get like nobel laureates on on your advisory board what went into building the team and the project yeah so uh it was three years ago starting with the funding it was clear to us that we don't want to um to ico uh because back then i had a crazy idea in my head nothing implemented yet we wanted to start

create and and create a team and it didn't seem logical to us to turn to the public and ask them to speculate on whether a low speculation tamed volatility project would succeed or not it's a sort of a speculative tautology that we wanted to avoid and so instead we went to to vcs and and you'd found them amongst our investors this is such as lightspeed or vertex or mangrove large traditional vcs that are not the usual suspects for crypto investment i believe that vertex invested only in binance and in saga to my knowledge these are the only two just as an example blockchain investment

and and we couldn't give them shares because we don't have any so instead we created a token called sgn saga genesis uh or sogar genesis now which can be converted to sgr the conversion ratio again is dependent on the size of the economy if our investors and myself that all the stakeholders this is the only center of profit if you want in the soccer project soccer is not for profit but vertex didn't enjoy invest as an an impact investment so holders of sgn can send their sgn to the contract get sgr in return if they send sgn now they'll get zero sgrs in return because the amount of sgr is again

dependent on the size of the economy and it is capped at 15 being one five yes being that one sgn cannot be worth more than 15 sgr so that they can never control the economy by converting the sgn to sgr and then voting with their sgr so this is about the investors when it comes to to the advisors and and we're very very blessed and lucky to have advisors such as professor myron schultz uh and professor jacob frankel who was the governor of the bank of israel and up until very recently the chairman of j.p morgan chase international it all started with barry tough our chief economist so i called called barry

was the previous head of markets operation in the bank of israel and he was the first advisor and he later told me that he wanted to kick me off the line after one minute uh central banker cryptocurrency 2017 it doesn't sound defeating but then when i told him of the concept it started to intrigue him and lucky for me was caught in a traffic jam so so he gave me 15 more minutes uh by the end of which we decided to agree only for barry two months later to become our chief economist and not just an advisor but when barry joined it was very worrisome he said well

i i don't want to be build pink elephants and i don't have comparables so at least we should gather around us a group of that could serve as a sounding board that could challenge our concepts that could have us defend the model and change it if necessary the price band i just told you about uh before is a result of such a defense and so it started with professor jacob franco and later with professor myron charles but not only we have on the advisory board also professor rashford morris who is the chair of the history faculty in the hebrew university of jerusalem because it really interested us to have the guidance of

what uh led the evolution of money before and and it has been extremely helpful and dr avilitu was the deputy attorney general of israel to deal with all governance issues and how to create you know these sets of balances checks and balances uh for a governance system it's not dull it's interesting and that's that's really impressive and and uh our listeners will also uh recognize emin good sierra and matan field uh on your advisory board uh you know for the crypto cred uh i think these will attest to that i want to come back just to something on

the uh on the investors just to kind of reiterate that point because i think it's it's an interesting point and that is that so the the investors uh who invested in in sogar received these sgn tokens and at some point they will be able to regime redeem those sgn tokens for sgr right now if they send those sgn tokens to the contract they'll get nothing because the economy is too small but whatever happens no matter what the size of the economy in the future they will only be able to resume 15 sgr tokens per sgn uh and that is a mechanism that is in place to ensure that they never control a too large portion of the economy right you know think of bono

he invested in facebook in the very early stage right he should be able to be remunerated for the risk he took back then right but if you consider that facebook is providing a civic service should it be also able 20 years afterwards to control this and and we're speaking about issuing currency potentially a global currency it cannot be owned by people simply because they were there at the beginning and this is true to me and this is true to our investors as well they should be remunerated for the fact that they took a risk on a project a high risk project as any startup is unlike sgr holders they are not backed

by any reserve the fund we raised from them when to build the project they should be remunerated but under two conditions one is that they're remunerated only if the project really succeeds and as much as the project flex succeeds you you've mentioned the 15 sgr per sgn for sg sgn to be worth 15 sgr the market cup of sgr needs to be five trillion dollars okay so it's a very gradual and slow process that works in tandem with the growth of the economy and the second one is that the fact that they need to need to be remunerated doesn't mean that they get to own or to control the economy this is only led to the holders of the

of the currency so i'd like to briefly talk about uh the the regulatory context for this uh before we were uh talking before the interview we were talking about the fact that you had tried to establish this as a swiss foundation and you got in a bit of a disagreement i guess with finma and so had to move to to the uk so not a disagreement between we chose the switzerland to begin with for two main reasons uh the first one was the swiss foundation uh which is as we discussed provides from a governance perspective a perfect solution and this is why so many projects are choosing switzerland such as ethereum

and tesos and others as well but the other one was that finra invited projects to come and get rulings to say instead of begging for for forgiveness come and ask for permission and we went and met finma presented the project and they said well uh five for a ruling you'll get it between six and eight weeks we've waited a month and a year and a half until we decided that we were waiting no more it's actually the first time as an entrepreneur i've ever been with a product that is ready for a year and that i'm not launching because of regulation so they got cold feet and to say at least i i think that they got more than they bargained for uh by

offering rulings a ruling is something that obliges the regulator to be explicit and i think that many regulators are avoiding the need to be to explicitly say and and set the boundaries partially because they are still studying and learning the field as just like we are so what are some of the regulatory risks that you face and i ask you this in the context of the uh the digital finance package that was just published by the european commission and you know the early draft of this project uh this regulatory project would impose reserves on what they're calling asset reference currencies so

so stable coins effectively do you uh fear that you know regulation could come down pretty hard on what uh what they consider to be you know stable coins or asset reference currencies and and that sogar might fall under that category so at present we don't believe that we fall under this category the commission has issued if i believe if i'm correct in november the fundaments of of what it is issuing now and it was clearly oriented to global stable currency and the definition was fully stable being pegged to one single currency on one end

and the second condition was enjoying an already existing network of global users and and this is understandable in the sense that uh a network with let's say two billion us users uh offering a new currency could really pose uh risks to financial stability i don't think that this is the the the um the case with sogger uh we are starting bottom up we are considering that everything we're doing in the entire industry is still an experiment we're still a very young industry and that it needs to be carefully conducted regulatory risks are always always existing policies change and regulators change

as for now we're fully compliant with aml d5 regulation the the new european aml regulation we actually complied with it even before it was passed and and and we're constantly studying the regulatory framework right we are for example blocked in in the u.s a u.s citizen cannot engage directly with the contract because the u.s regulatory framework is still lacking clarity as to what could be compliant and what would not so it's a constant study but one has to remember that this uh this is not a zero-sum game only for us as as projects but for states as well states that would issue non-clear

regulation or regulation that is burdening innovation would find projects that are migrating to states that are more forthcoming of such innovation and there are so those as well i guess what i'm concerned about is what you're building is so ambitious and you're kind of you know some central banks some states might interpret what you're doing as a direct threat to their monetary sovereignty maybe not the u.s maybe not european countries but let's say sogger gets you know massively adopted in in some smaller economy just because it's so much more useful than uh the local currency because of inflation or things like that

that might be seen as a threat by those countries or central banks who may try to clamp down on your project and like i think in the current context of kovid where fundamentals of monetary policy are just like turned on their heads the likeliness of this happening in some places i think is quite high so do you think about you know what sugar represents to say you know a second or third tier currency that uh you know might be toppling in the next couple of years or even months and where governments might start clamping down on the use of of such crypto assets so we did not create sogger to compete with anyone or or to menace anyone and frankly

we are still an experiment i believe an interesting experiment i believe one that is well thought with a lot of checks and balances but still an experiment um and so i don't believe that anyone should be threatened i think that states that would find themselves in hardships in in in the management of their own monetary policy and in providing the security that the currency needs to provide which is a stabilized store of value would have its own problems regardless to whether sauger exists or doesn't exist such a currency is already competing with the dollar it is already competing with euro for their own it is not in vain that we are seeing

countries that are struggling imposing immediately restrictions on capital flow uh and on on foreign capital holding in their own countries it is always bound to fail because it is instead of solving the real problem which is an inherent monetary instability it is trying to restrict the citizens of the country uh from doing what it is that they should be doing in order to maintain their security but this has nothing to do with us this is i believe that we will be seeing countries that are struggling to keep their monetary stability um i don't think that they will have a a quarrel or a beef with us um they'll have to resolve their problems

one of the things that uh that central banks do of course is that they you know they they they invest through expansion of the monetary supply and currently that expansion is pretty rampant and and central banks are investing in say their own people by uh by uh by keeping their economies afloat you might be broadcasting from france but you're using british understatements okay yeah do you see uh sogar in the future as you know perhaps through governance able to invest also in uh say social good projects or things that might be valuable to the community of people who use it so it's it's really for the community to decide i don't think that the reserve

is uh is a fund for investment there is the the purpose of the reserve is to tie the reality of the soccer prize into the global reality as it is currently let's say you have a friend that wants to record an album and he's doing some music and he thinks his music is cool and then he goes in the close circle of friends and they're telling him his music is cool as well i wouldn't rush into motown uh being sure that they will sign him for a contract right this is what is happening so frequently in our crypto community we're telling ourselves that we're cool and the price is a derivative of us telling ourselves that we're cool

and what we try to do with the reserving sdr is to go to motown is to say well the price of saga near of sauger of sgr needs to be tied to the prices that the world is acknowledging not to the one we want the world to acknowledge in 20 years to the ones that the world is acknowledging now and we will separate from those prices only when we're way way bigger than we are now where when we are becoming the mo towns and the disney's and the barclays if you want of of the world so i this is the way i see the function of the reserve but again this is not my project if the community will see it otherwise it is very much free to do as as it is fit so what's the roadmap

here i think you mentioned some governance votes that are coming up so what's what's uh to expect in the sort of short term uh in the longer term for sauger and where can people find you and get involved in the community so many more partnerships we've just listed on exmo after having listed on uh liquid btom and etherics prior and there are several listings uh that are coming as i mentioned we just released the the sdr eth oracle with chain link which uh we're very happy with we are uh planning a bug bounty next month and a hackathon

for developers to be able to along with git coin uh for akatons to be able to develop to um on based on the sgr smart contract um solutions i i believe that what we'll be seeing in the next two months is way more dexes that are adopting sgr and way more involvement of sgr in the defy community as eventually in every d5 project decentralized as it will at the base you have a stable coin that is sitting and i think that at this stage of as of sgr as it is fully pegged and not by one currency but by many currencies it makes sense uh to utilize sgr in the

defy environment as well as for those who believe in the longer term vision of of of sauger um and and of the currency and would be more of hodlers than uh than defeast if you want i was thinking about that as well as the you know the role of sagar and defy and you know one could uh also imagine say you know in in a in a multi-collateral die world that's that sogar could also serve as collateral for uh for die loans for example but uh yeah i'm i'm curious to see how that will unfold ido thank you very much for joining us today it was really interesting to learn more about sogar and the vision that you guys

are rolling out and i'll be looking forward to learning more about the project as as it continues to evolve thank you so much for having me enjoy the conversation very much merci thank you for joining us on this week's episode we release new episodes every week you can find and subscribe to the show on itunes spotify youtube soundcloud or wherever you listen to podcasts and if you have a google home or alexa device you can tell it to listen to the latest episode of the epicenter podcast go to epicenter dot tv subscribe for a full list of places where you can watch and listen and while you're there be sure to sign up for the newsletter so you get new episodes in your inbox as they're released if you want to interact with us guests or other podcast

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