cunoro
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FAQ

Why do we need cunoro in the first place?

Dollar-pegged stablecoins have become an essential part of crypto due to their lack of volatility as compared to tokens such as Bitcoin and Ether. Users are comfortable with transacting using stablecoins knowing that they hold the same amount of purchasing power today vs. tomorrow. But this is a fallacy. The dollar is controlled by the US government and the Federal Reserve. This means a depreciation of dollar also means a depreciation of these stablecoins.
cunoro aims to solve this by creating a free-floating reserve currency, NORO, that is backed by a basket of assets. By focusing on supply growth rather than price appreciation, cunoro hopes that NORO can function as a currency that is able to hold its purchasing power regardless of market volatility.

Is NORO a stable coin?

No, NORO is not a stable coin. Rather, NORO aspires to become an algorithmic reserve currency backed by other decentralized assets. Similar to the idea of the gold standard, NORO provides free floating value its users can always fall back on, simply because of the fractional treasury reserves NORO draws its intrinsic value from.

NORO is backed, not pegged.

Each NORO is backed by 1 FRAX, not pegged to it. Because the treasury backs every NORO with at least 1 FRAX, the protocol would buy back and burn NORO when it trades below 1 FRAX. This has the effect of pushing NORO price back up to 1 FRAX. NORO could always trade above 1 FRAX because there is no upper limit imposed by the protocol. Think pegged == 1, while backed >= 1.
You might say that the NORO floor price or intrinsic value is 1 FRAX. We believe that the actual price will always be 1 FRAX + premium, but in the end that is up to the market to decide.

How does it work?

At a high level, cunoro consists of its protocol managed treasury, protocol owned liquidity (POL), mint mechanism, and staking rewards that are designed to control supply expansion.
Mint sales generate profit for the protocol, and the treasury uses the profit to mint NORO and distribute them to stakers. With liquidity mints, the protocol is able to accumulate its own liquidity. Check out the entry below on the importance of POL.

What is the deal with (3,3)?

(3,3) is the idea that, if everyone love Cunoro, it would generate the greatest gain for everyone (from a game theory standpoint). Currently, there are three actions a user can take:
  • Staking (🦦)
  • Minting (
    )
  • Selling (💀)
Staking and minting are considered beneficial to the protocol, while selling is considered detrimental. Staking and selling will also cause a price move, while minting does not (we consider buying NORO from the market as a prerequisite of staking, thus causing a price move). If both actions are beneficial, the actor who moves price also gets half of the benefit (
). If both actions are contradictory, the bad actor who moves price gets half of the benefit (
), while the good actor who moves price gets half of the downside (💀). If both actions are detrimental, which implies both actors are selling, they both get half of the downside (💀).
Thus, given two actors, all scenarios of what they could do and the effect on the protocol are shown here:
  • If we both stake (🦦, 🦦), it is the best thing for both of us and the protocol.
  • If one of us stakes and the other one mints, it is also great because staking takes NORO off the market and puts it into the protocol, while minting provides liquidity and FRAX for the treasury.
  • When one of us sells, it diminishes the effort of the other one who stakes or mints.
  • When we both sell, it creates the worst outcome for both of us and the protocol (💀,💀).

Why is PCV important?

As the protocol controls the funds in its treasury, NORO can only be minted or burned by the protocol. This also guarantees that the protocol can always back 1 NORO with 1 FRAX. You can easily define the risk of your investment because you can be confident that the protocol will indefinitely buy NORO below 1 FRAX with the treasury assets until no one is left to sell. You can't trust the FED but you can trust the code.
As the protocol accumulates more PCV, more runway is guaranteed for the stakers. This means the stakers can be confident that the current staking APY can be sustained for a longer term because more funds are available in the treasury.

Why is the market price of NORO so volatile?

It is extremely important to understand how early in development the cunoro protocol is. A large amount of discussion has centered around the current price and expected a stable value moving forward. The reality is that these characteristics are not yet determined. The network is currently tuned for expansion of NORO supply, which when paired with the staking, minting, and yield mechanics of cunoro, result in a fair amount of volatility.
NORO could trade at a very high price because the market is ready to pay a hefty premium to capture a percentage of the current market capitalization. However, the price of NORO could also drop to a large degree if the market sentiment turns bearish. We would expect significant price volatility during our growth phase so please do your own research whether this project suits your goals.

What is the point of buying it now when NORO trades at a very high premium?

When you buy and stake NORO, you capture a percentage of the supply (market cap) that will remain close to a constant. This is because your staked NORO balance also increases along with the circulating supply. The implication is that if you buy NORO when the market cap is low, you would be capturing a larger percentage of the market cap.

What is a harvest?

Harvest is a mechanism by which your staked NORO balance increases automatically. When new NORO are minted by the protocol, a large portion of it goes to the stakers. Because stakers only see staked NORO balance instead of NORO, the protocol utilizes the harvest mechanism to increase the staked NORO balance so that 1 staked NORO is always redeemable for 1 NORO.

What is reward yield?

Reward yield is the percentage by which your staked NORO balance increases on the next epoch. It is also known as harvest rate. You can find this number on the cunoro staking page.

What is APY?

APY stands for annual percentage yield. It measures the real rate of return on your principal by taking into account the effect of compounding interest. In the case of cunoro, your staked NORO represents your principal, and the compound interest is added periodically on every epoch (8 hours) thanks to the harvest mechanism.
One interesting fact about APY is that your balance will grow not linearly but exponentially over time! Assuming a daily compound interest of 2%, if you start with a balance of 1 NORO on day 1, after a year, your balance will grow to about 1377. That is a lot!
The power of compounding

How is the APY calculated?

The APY is calculated from the reward yield (a.k.a harvest rate) using the following equation:
APY=(1+rewardYield)1095APY = ( 1 + rewardYield )^{1095}
It raises to the power of 1095 because a harvest happens 3 times daily. Consider there are 365 days in a year, this would give a harvest frequency of 365 * 3 = 1095.
Reward yield is determined by the following equation:
rewardYield=NOROdistributed/NOROtotalStakedrewardYield = NORO_{distributed} / NORO_{totalStaked}
The number of NORO distributed to the staking contract is calculated from NORO total supply using the following equation:
NOROdistributed=NOROtotalSupply×rewardRateNORO_{distributed} = NORO_{totalSupply} \times rewardRate
Note that the reward rate is subject to change by the protocol.

Why does the price of NORO become irrelevant in long term?

As illustrated above, your NORO balance will grow exponentially over time thanks to the power of compounding. Let's say you buy a NORO for $400 now and the market decides that in 1 year time, the intrinsic value of NORO will be $2. Assuming a daily compound interest rate of 2%, your balance would grow to about 1377 NOROs by the end of the year, which is worth around $2754. That is a cool $2354 profit! By now, you should understand that you are paying a premium for NORO now in exchange for a long-term benefit. Thus, you should have a long time horizon to allow your NORO balance to grow exponentially and make this a worthwhile investment.

What will be NORO's intrinsic value in the future?

There is no clear answer for this, but the intrinsic value can be determined by the treasury performance. For example, if the treasury could guarantee to back every NORO with 100 FRAX, the intrinsic value will be 100 FRAX. It can also be decided by the DAO. For example, if the DAO decides to raise the price floor of NORO, its intrinsic value will rise accordingly.

How does the protocol manage to maintain the high staking APY?

Let’s say the protocol targets an APY of 100,000%. This would translate to a harvest rate of about 0.6328%, or a daily growth of about 2%. Please refer to the equation above to learn how APY is calculated from the harvest rate.
If there are 100,000 of NORO staked right now, the protocol would need to mint an additional 2000 NORO to achieve this daily growth. This is achievable if the protocol can bring in at least 2000 FRAX daily from mint sales. If the protocol fails to achieve this, the APY of 100,000% cannot be guaranteed.

Do I have to unstake and stake NORO on every epoch to get my harvest rewards?

No. Once you have staked NORO with cunoro, your staked NORO balance will auto-compound on every epoch. That increase in balance represents your harvest rewards.

How do I track my harvest rewards?

You can track your harvest rewards by calculating the increase in your staked NORO balance.
  1. 1.
    Record down the Current Index value on the staking page when you first stake your NORO. Let's call this the Start Index.
  2. 2.
    After staking for some time, if you want to determine by how much your balance has increased, check the Current Index value again. Let's call this the End Index.
  3. 3.
    By dividing the End Index by Start Index, you would get the ratio by which your staked NORO balance has increased.
ratio=endIndex/startIndexratio = endIndex / startIndex
  1. 1.
    In this example, the NORO balance has grown by 1.5 times.
ratio=13.2 / 8.8=1.5ratio = 13.2\ /\ 8.8\newline = 1.5

Is cunoro Audited?

cunoro is currently unaudited! It is a fork of Olympus DAO on Avalanche Network, audits will occur at a later stage. Stay tuned!