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Introducing HoodNote

Introducing HoodNote

HoodNote is a new kind of crypto-asset. It gives investors the means to invest in the best companies in the US stock markets, while at the same time being liquid, anonymous and peer-to-peer like cryptotokens. Furthermore, the note gives access to a distributed crowdfunding economy.

  • Operates as a crypto-token, can be bought and sold on crypto exchanges
  • Liquidity guaranteed by a market-maker
  • Value connected to a professionally managed stock portfolio
  • Gives access to a distributed project funding platform

Purpose – speculate together while creating commons
HoodNote is crypto-asset that is used as collaborative tool to produce commons while speculating together. The “real value” of the note is speculative and can produce profits or losses for its holders when liquidated.

The note gets its liquidation value via a market maker against a managed investment portfolio. The portfolio is separate from the note. The investment portfolio is used as a reference point that guarantees a bounded liquidation value for the notes. The market maker buys notes from note holders at a price that corresponds to the investment portfolio minus a liquidation fee. Notes can also be sold in after-markets, like other cryptoassets, with market participants setting the price of the note.

Organisationally – a human DAO
The owners of HoodNotes (together with the necessary support structure – the market maker, portfolio manager, exchanges) make up a DAO – a distributed autonoumous organisation. The DAO has its rules of governance, which can be amended. The development of the DAO is financed by a programmed percentage fee of the total sum of HoodNote value. The DAO also owns a number of Hoodnotes, and when the value of the HoodNotes appreciates, a part of the profit will be used for supporting commons-building projects.

Technically – cryptotoken
HoodNote is issued and functions as a token on the Ethereum blockchain. The owner of the note has access to the note via an Ethereum wallet. Transactions like buying and selling the note are technically buying and selling Ethereum tokens.

Financially – tied to the value of a stock portfolio
HoodNote is backed by a stock portfolio. The backing happens via a market maker that quotes a daily ask and bid price for the note. The market maker follows in its pricing the performance of a stock portfolio. Consequently, the value of the note appreciates and depreciates with the potfolio.

Investing Instruments & Algorithms
In addition to deploying existing investment intruments, the HoodNote DAO will develop and introduce new investment tools. At the moment, the furthest in development are two shorting-related algorithms.

Functionally – a new way to irrigate the commons
As per the Robin Hood principle, part of the appreciation of the value of the HoodNote is directed towards supporting commons-building projects (if the value has not gone up, nothing will be allocated to projects). The holders of HoodNote curate and vote on which projects to support. They can also put forward projects themselves and crowdfinance projects via other means than voting with HoodNotes.

The funding of the projects happens so that a project launches an ICO available to HoodNote owners. Projects who seek support from HoodNote DAO will make ICOs that are bought to the DAO´s portfolio according to note holders decision.

Commons projects will become a part of the notes ICO portfolio and change its internal capital structure to the commons projects over time. This makes the note a mechanism to extract capital from finance to commons and produce a commons based currency.

Opensourcially – Hood note as template for future projects
HoodNoote is a pilot model for DAO like co-operatives that can be run on top of blockchains and other distributed computing systems. In the near future, we aim to release HoodNote´s architecture in a form that is easily copyable, remixable and reusable for other use cases. This is one step in open sourcing finance.

Step by Step
First, HoodNote will be launched in a ICO-type event, where users can purchase HoodNotes with Bitcoin and Ether.

Step 1. Launch

Second, after the launch, the cryptotokens used for purchasing HoodNotes will be converted into fiat currency, which in turn is used to build an actively managed fund. The value of this fund is published daily by an oracle, which gives the possibility for a market maker to publish daily ask an bid prices for HoodNote. This establishes a market, where users can sell and buy HoodNotes from the market maker or from participating 3rd party crypto exchanges.

Step 2. On the market

Most crucially, when the HoodNote appreciates in value, part of the profit accured to the HoodNote DAO will be used to support commons-building projects. The projects will be vetted through commons criteria, and will make proposals of what they would accomplish with a given sum of support. HoodNote holders then vote through the HoodNote DAO over which projects to support. The elected projects will launch an ICO, and the HoodNote DAO will purchase the project tokens with HoodNotes. The project tokens will be placed in a fund, offering further backing to HoodNotes.

Step 3. Project funding

4 Likes

Great Note from the Hood :wink:

Some questions :

  • A portfolio is created .
  • The portfolio has the necessary value to be used has a reference for the HoodNote.
  • Each HoodNote via a ICO get’s more investment or the investment needed ?
  • The value that the ICO add’s to the HoodNote, will generate a Portfolio with even more value ?
  • So all the other Hoodnotes from that portfolio will benefit from that added value ?
  • This value from the ICO&Porfolio will be distributed to “workers&investers” and added to a “new” porfolio to back other Hoodnotes ?
  • If a HoodNote decreases the value, does the Portfolio add a “cooperative add-on” to maintain the value of the decreased HoodNote ?

Hope to ear from you soon

Each HoodNote via a ICO get’s more investment or the investment needed ?

– both are possible

The value that the ICO add’s to the HoodNote, will generate a Portfolio with even more value ?
So all the other Hoodnotes from that portfolio will benefit from that added value ?

– Yes

This value from the ICO&Porfolio will be distributed to “workers&investers” and added to a “new” porfolio to back other Hoodnotes ?

– Yes

If a HoodNote decreases the value, does the Portfolio add a “cooperative add-on” to maintain the value of the decreased HoodNote ?

– No (but could, a good idea!)

A new, slightly edited version here:

https://docs.google.com/document/d/1OisKts7fvTT2FrFiTAHRgqTf1JRQKpDj73G3VDVnO5M/pub

1 Like

Hi, I’ve some remarks regarding the correlation table. In my opinion, due to some empirical observations and methodical characteristics using correlations in investment decisions could be tricky.

  • correlation tend to be stable in “normal” market conditions. During a crisis or triggered by a single event the correlations are collapsing with a high probability.

  • correlations are reflecting the linear relationship of price changes correctly if both parameters are normally distributed. If this is not the case, the correlation values could be misleading

Nevertheless, correlations can be a tool for a qualitative assessment of interactions on capital markets.

Best regards

Ruediger

Hi Tere,
some questions regarding the financial products and strategies of the HoodNote:

  • Would it be possible to combine the stock portfolio with a bond portfolio (e.g. medium term green bonds) to generate some regular income and to strengthen the capital basis of the fund?

  • Looking at the performance/volatility of the fund last year, would it be a workable approach to implement trailing stop-loss limits and trailing take profit stops? This could remove some volatility.

Best regards

Ruediger

Thanks, Ruediger @R_M !
Very good points.
Stop-loss and take profit are something that has been discussed before, and would certainly have been beneficial in the previous years.
This is something to add on the agenda for the extra member meeting this summer: