Increase ARTH peg to $2.20

In the interim of developing Oracles and the GMU, we currently have a fixed ARTH peg at $2.00. I’d like to suggest that we increase this peg to $2.20 as a manual adjustment to this years inflation rate and increase in BTC and Gold price.

The GMU is weighted 80% of the following;
USA - USD (29.93%)
Euro Area - EURO (23.23%)
China - YUAN (18.90%)
Japan - YEN (10.17%)
India - RUPEE (4.85%)
UK - POUND STERLING (4.78%)
Brazil - BRAZILIAN REAL (3.84%)
Canada - CANADIAN DOLLAR (3.18%)
Switzerland - SWISS FRANC (1.12%)

Utilizing the following % of the currency weight;

Gold Weighting: 15%
Bitcoin Weighting: 5%

Since June 2021, Arth has been soft pegged to $2.00. Given the above weightings, we need to calculate the adjusted peg by looking at each currencies inflation rate over this time period, and the price appreciation of Gold and BTC. Then converting this all back into USD price point.

Since June 2021;
GOLD: $1,773 (June 2021), $1,801 (Current - Nov 2021). This is a 1.57924% Increase in Value
BTC: $32,000 (June 2021), $65,000 (Current - Nov 2021). This is a 103.125% increase in Value

USD - 5.4% Inflation
EURO - 4.1% Inflation
YUAN - 0.7% Inflation
YEN - 0.2% Inflation
RUPEE - 4.25% Inflation
POUND - 3.1% Inflation
BRAZILLIAN REAL - 10.25% Inflation
CANADIAN DOLLARS - 4.4% Inflation
SWISS FRANC - 1.2% Inflation
(data from https://tradingeconomics.com/)

Overlaying these inflation rates with the weighting of each for ARTH GMU at $2.00, we get the following;

ARTH = $1.60 (80% of $2.00)
Formula Example for USD:
(1.6 x 0.2993) x 1.054 = $0.5047

USD - 29.93% ($0.4788) +5.4% inflation = $0.5047
EURO - 23.23% ($0.3716) +4.1% inflation = $0.3869
YUAN - 18.90% ($0.3024) +0.7% inflation = $0.3045
YEN - 10.17% ($0.1627) +0.2% inflation = $0.1630
RUPEE - 4.85% ($0.0776) +4.25% Inflation = $0.0808
POUND STERLING - 4.78% ($0.0764) +3.1% Inflation = $0.0788
BRAZILIAN REAL - 3.84% ($0.0614) +10.25% Inflation = $0.0677
CANADIAN DOLLARS - 3.18% ($0.0508) +4.4% Inflation = $0.0531
SWISS FRANC - 1.12% ($0.0179) +1.2% Inflation = $0.0181

Gold And Bitcoin calculate at % of $2.00 (15% of 2, and 5% of 2), As opposed to the above fiats that are % calculations of the 80% GMU portion.

Gold: 15% ($0.30) +1.57% Value increase since June = $0.3047
Bitcoin: 5% ($0.10) +103.12% Value increase since June = $0.2031

Lets add this up to give us an accurate peg price of both June and Now.


June Calculation;
Gold: 15% ($0.30)
Bitcoin: 5% ($0.10)

USD - 29.93% ($0.4788)
EURO - 23.23% ($0.3716)
YUAN - 18.90% ($0.3024)
YEN - 10.17% ($0.1627)
RUPEE - 4.85% ($0.0776)
POUND STERLING - 4.78% ($0.0764)
BRAZILIAN REAL - 3.84% ($0.0614)
CANADIAN DOLLARS - 3.18% ($0.0508)
SWISS FRANC - 1.12% ($0.0179)
Total: $1.9996


Current:
Gold: +1.57% Value increase since June = $0.3047
Bitcoin: +103.12% Value increase since June = $0.2031

USD +5.4% inflation = $0.5047
EURO +4.1% inflation = $0.3869
YUAN +0.7% inflation = $0.3045
YEN +0.2% inflation = $0.1630
RUPEE +4.25% Inflation = $0.0808
POUND STERLING +3.1% Inflation = $0.0788
BRAZILIAN REAL +10.25% Inflation = $0.0677
CANADIAN DOLLARS +4.4% Inflation = $0.0531
SWISS FRANC +1.2% Inflation = $0.0181
Total: $2.1654

Calculating for the 80/15/5 GMU weighting, and the Fiat weightings of the 80% portion, including their inflation rates, puts Arth at a current fair value of $2.1654

I think that’s a good idea, however the next GMU update should be done through oracles to not change it manually time after time. The changed peg will show again that ARTH is not a regular stable coin, but raises in value :+1:

Second thing I’m thinking about is the calculation of the inflation based on CPI index which is just wrong at all times, because the basket of goods is so manipulated - inflation is higher than 5.4% (for USD) - it’s probably closer to >10% but that’s the thing - we can’t really measure it in an objective way.

Ed Butowsky once created the Chapwood Index showing real inflation rate. It’s calculated as follows:

“It reports the unadjusted actual cost and price fluctuation of the top 500 items on which Americans spend their after-tax dollars in the 50 largest cities in the nation.”

The Chapwood index is constantly being taken down from web and unfortunately It’s not being updated anymore. You can see the old website here: http://www.chapwoodindex.org/. For example the 5 years average (2015-2019) for USA is ~10% inflation rate YEARLY.

I’m just thinking out loud - if we want to be precise we can’t really follow CPI measures, can we?

Maybe it would be good if we hold Arth at 2 dollars for the time being until the end of the year. Until the rest of the products and the information material are out and the people are using Arth.

Now, at the beginning, Arth still needs to be explained and for the people who use it for the first time, it is easiest if they have a simple conversion rate.

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I like the ideal of updating GMU manually according to agreed parameters until we have Oracles. We should do it periodically bi-yearly or at quarter base.
We are all aware how the printing money machine is declining FIAT value. We should take this advantages and show off as a project which is able to provide real “store of value”
During last 3 months ARTHv2 shown that is able to maintain PEG. We should go step further.
Instead providing exact value as a voting proposal we should ask in community about options: 2.1, 2.15, 2.2, 2.25
And ask how often the peg should be updated.

If we have a fixed basket (GMU) of currencies (and this basket has been set), then the level of Arth should not be determined by voting, but by the values of the assets in the basket.

The question in voting should therefore only be “when” and “how often” we adjust the value of Arth to the current value of the basket.

Currently, this adjustment has to be done manually. Later it will be done automatically via oracles, I assume.

Yes I agree. However if we do it manually we aren’t able to predict and adjust ARTH token value according to gold and BTC price. Especially BTC is fluctuating and over year or certain period is changing.

With the calculations in the original post - BTC while only accounting for 5% of GMU, still valued at $0.10 more on ARTH with an approx 100% rise from 32k to 65k… even now at 57k, this would be about 1-2 cents difference in arth gmu.