The Chia Plot community member Grizzo has recently written up his thoughts about Chia Asset Tokens (CATs) and has shared them with us, along with a very useful technical primer on how CATs work. The point about melting stablecoins is a very good one, and I think that mechanism might open up some interesting problems for projects relying on a fixed supply.
The Chia team recently announced the beta release of their equivalent to Ethereum tokens [(ERC20 and associated derivative upgrades ERC223, ERC777, ERC1155)] https://www.gemini.com/cryptopedia/ethereum-token-standards-erc777-erc1155-erc223-erc1337. This standard ushers in a new era for Chia where real businesses can be built by allowing for advanced smart contract programming.
The Chia team has created something very interesting in the way that CATs work through splitting the token into two parts, the CAT1 standard itself defining how a token is behaves and operates, and the TAIL, the program that contains the unique id (GENESIS_ID) and it’s issuance characteristics. The team created 3 reference TAILs that demonstrate a full range of things that are possible – [fixed supply, anything, delegated] https://github.com/Chia-Network/chialisp-web/blob/d3b0dfacd2314177f0fe441060789d3f6a57dab2/docs/puzzles/cats.md.
The ancillary effect of creating all this flexibility is the nightmare it creates for any exchange that might want to support Chia and CATs. First off we need to consider the basic question, how many CAT tokens are there for a given issuance. This is not at all easy to calculate! First of CATs can be melted by users. When a CAT is created using the default standard you need to use 1000 mojos to create 1 CAT. Since there are 1,000,000,000,000 mojos to a Chia (that’s 1 trillion) a single Chia can create a token with 1,000,000,000 (that’s 1 billion) tokens. If you want more than 1 billion you need to spend an increasing amount of Chia. 10 XCH to get 10 billion, 100 XCH to get 100 billion and so on. That implies that all tokens have an intrinsic value of 1000 mojos and the price really shouldn’t ever fall below that floor, because if it did you could swoop them up and convert to XCH using the melt operation and make money. This ability to melt is a nightmare for calculating total supply. If users can melt tokens then you need to walk the entire blockchain to figure out how many of a given CAT exist.
The problem is even more pronounced if a CAT is created with some other TAIL. The Chia team indicated that Stablecoins should use a TAIL where the supply can be increased at will. However melting a Stablecoin seems to imply that there could be an imbalance between the creating company and it’s ledger of assets.
It will be interesting to see how this all plays out.