What is the MMU simulator, and why should you pay attention to it?
MMU is at the very core of what Anchor is and how it works – but understanding complex systems and seeing them work isn’t the same. So, we created a simulator that will help you understand Anchor and our pegging mechanism on a deeper level.
There are many stablecoins in the cryptocurrency world, promising to solve the long-standing issue of volatility. Most, however, are pegged to a singular fiat currency. In doing so, they are merely masking the problem, rather than solving it. Put simply, fiat-collateralized stablecoins are as prone to depreciation as their respective fiat currencies. On the other hand, crypto-collateralized stablecoins are just as susceptible to market fluctuations as the coins they’re attaching themselves to.
This called for an inventive solution that would counteract the volatility, ensure the coin’s stability, and enable Anchor to become a truly stable store of value. The MMU algorithm we’ve developed represents that solution.
The Inner Workings of the Monetary Measurement Unit
In essence, MMU is a numerical index which relies on the GDP and the level of contribution of over 190 countries in the global economy, to provide a reliable value peg for the Anchor Token. Having the Anchor’s value tied to a steady growth trend of the global economy doesn’t simply ensure our stablecoin’s stability, but also guarantees its value will appreciate in time.
MMU consists of two independent variables:
- the FX Indicator – this indicator is a representation of the participation of the most important fiat currencies in the world. The extent of their participation in the global economy is adjusted by their participation in the actual growth of global GDP and;
- the MMU Premium – Sovereign bond yields of select countries provide a premium that is adjusted in accordance with the inflation rates and the participation in the growth of global GDP.
Here’s a closer look at the Anchor’s pegging mechanism, so you can better understand its practical applications within the stablecoin’s system.
See How the MMU Algorithm Operates in Practice
MMU is the spine of the entire Anchor system. Hence, we wanted to enable Validators, traders, and investors to see exactly how the algorithm operates in practice, even before the official launch of the Anchor Token on global crypto exchanges. For that purpose, we have constructed the MMU simulator.
The simulator allows you to see exactly how the value of the MMU is calculated and how it behaves over time. More specifically, you can clearly see the gradual increase in our peg’s value from January 2012 to date. This is a real-world example which perfectly depicts the steady growth trend that we can expect to continue in the future as well.
Comparing MMU With Fiat Currencies by Using the MMU Simulator
The simulator allows you to see firsthand how our proprietary algorithm is applied within the Anchor system. It leverages a wealth of data and allows you to choose from the world’s 19 most widely used fiat currencies to express the value of the MMU based on daily exchange rates, for the selected time period.
In doing so, the simulator allows you to quickly and effortlessly compare the difference in value and purchasing power between any of said currencies and the Anchor Token. By making the MMU value public, we’ve ensured complete transparency of the Anchor Project. Moreover, the Monetary Measurement Unit will be applicable in other financial landscapes as a truly reliable and stable monetary value measurement standard.
MMU as an Indicator of the Real Growth of the Global Economy
MMU Simulator is an excellent way to follow the path of a singular currency even if you don’t plan to invest in Anchor tokens. For starters, it shows the actual growth of the global market value. With that data as the baseline you can get a lot more understanding about how the rate of inflation affects different currencies. For some fiat currencies that might change your mind for the better, but, at the same time, for others the value movement can become a lot more drastic and spell bad news.
Of course, once you do try the MMU simulator out and see how our algorithm performs over the course of the past 7 years, you will probably have some questions for us, and we’re looking forward to hearing them.
That said, feel free to check out the MMU simulator on our website and see firsthand why we are confident Anchor will rebuild the trust in crypto markets.
Disclaimer: The information provided in this post is not legal, accounting, or financial advice. I am not a lawyer, accountant, or financial advisor. I am not registered as an investment adviser with any federal or state regulatory agency. The Information should not be construed as investment or trading advice and is not meant to be a solicitation or recommendation to buy, sell, or hold any cryptocurrencies.
Title photo by Andrey_Popov, Shutterstock.