Saga, found online at Saga.org, aims to create a global digital currency. Find out how it works today in our review.
What is Saga?
Saga is a non-anonymous, reserve-backed cryptocurrency that aims to solve crucial problems in the world’s crypto industry – like who will control digital currencies, how digital currencies will be regulated, and what is the underlying logic and value of cryptocurrencies.
With these questions in mind, Saga will launch a cryptocurrency that sees itself “as complementary to the existing financial system.” Saga is also being developed by “global subject-matter leaders”.
Saga plans to be backed by fiat currency assets. The reserve ratio will vary over time, starting at around 94% before ultimately dropping to 10%. This should help the coin maintain a stable currency over time.
What Problems Does Saga Seek to Solve?
Saga acknowledges that digital currencies have enormous potential. However, we also need to solve crucial problems in the cryptocurrency industry, to be successful in the long run. Some of these problems include:
- Cryptocurrencies are volatile
- Cryptocurrencies require a high level of trust, with users forced to trust that a company is launching a cryptocurrency with altruistic principles in mind
- Certain questions about cryptocurrencies remain unanswered, including who can issue digital currencies, how digital currencies will be regulated, and what is the underlying logic and value behind a cryptocurrency
- Creating a cryptocurrency requires a broad, interdisciplinary effort, and it’s rare to find a team that has all of the skills and tools necessary for a project to succeed
With these problems in mind, Saga wants to create a cryptocurrency that is complementary to the existing financial system.
How Does Saga Work?
Saga will create a blockchain-based digital currency. The main goals of the currency are to reduce the risk of governance bias, reduce the cost of governance, increase the ease of transfer, and boost the ease of storage.
Each SGA token is backed by a reserve held in a regulated banking institution on behalf of Saga customers. The reserve is stored, according to the Saga whitepaper, “in assets Saga aims to stabilize”, including established, widely adopted currencies. Saga plans to use a basket of fiat currencies “whose composition replicates the International Monetary Fund’s SDR.”
In other words, all Saga tokens will be backed by the value of fiat currencies stored in a reserve fund at a regulated banking institution.
Saga will operate a variable reserve ratio that balances the dual aims of growth and stability for the currency. The goal will be to grow adoption of the currency and have it gain traction over time.
SGA will not be pre-issued. Instead, it will be generated by the Saga contract on the Ethereum network. Anyone who wishes to buy Saga tokens will send ETH to the contract. In exchange, the contract generates and returns an appropriate amount of SGA.
Saga will not hold an ICO. Instead, you’ll be able to purchase Saga tokens from the contract at any time.
In addition, participants can sell SGA tokens back to the contract. When you sell SGA back to the contract, ETH is extracted from the liquidity buffer to reimburse the seller, and the SGA is burned.
Saga’s core benefits include all of the following:
- By determining the reserve ratio, the Saga model controls the divergence of Saga’s price from the value of its backing, which is a fancy way of saying that it reduces the volatility of SGA’s price
- Asynchronous price discovery, with anyone who wishes to trade SGA having the option to engage the smart contract directly; a minimal bid/ask spread will be provided until there’s a well-established secondary market for SGA tokens
- The price discovery’s inner workings are transparent and pre-coded into the contract, with governance automated and tamper-resistant
- Saga will have a price band, with markets free to fluctuate within a particular band
- A reserve ratio that varies with the market cap, including a reserve ratio of 94% when the coin has a 100 million SDR market cap, a reserve ratio of 50% with a 2 billion SDR market cap, and a reserve ratio of 10% when the coin has a 3 trillion SDR market cap