Applying Internal Coordination Theory to the ORIZON Protocol

The idea that internal coordination is as important as price coordination is implemented in the ORIZON protocol. The set of rules in the ORIZON protocol essentially has three aspects:

- Staking (Internal Coordination)

- Bonding (Pricing Coordination)

- Treasury (Reserves)

This rule set is controlled by three main levers:

· Reward Rate and APY (Internal Metric of Internal Coordination)

· Bond Control Variable (Internal Metric of Price Coordination)

· Premium Over RFV (Price Metric of Internal Coordination) (RFV: Risk-Free Value; detailed explanation in Part Three of the white paper: Protocol Contracts Introduction)

Policy levers are the primary means by which ORIZON counters irrational, runaway reflexivity in self-regulating market conditions. These policy levers act as focal points, either offsetting or cooperating with external market forces to maintain internal productivity.

Staking (Internal Coordination):

The (3,3) scenario is a win-win situation where both players stake their ORI tokens. As a reward for removing them from circulation, stakers receive compounded rewards based on the yield rate, which is controlled by the ORIZON protocol. The (3,3) focal point essentially states that internal coordination — universal agreement, positive-sum, cooperative behaviour — is more economically productive than price coordination — zero-sum, competitive behaviour. Internal coordination forms a demand synchronization that absorbs economic value proportional to network effects. Price coordination is also a win-win equilibrium but to a lesser degree than the internal coordination equilibrium. Internal coordination is a generalization of economic demand, while price coordination is a generalization of economic supply.

Bonds (Price Coordination):

The (1,11) scenario is also a win-win situation but to a lesser extent. Bonding refers to buyers purchasing ORI tokens from the protocol at a price below market value. Buyers provide another asset (stablecoins, LP tokens, etc.) to the protocol treasury in exchange for ORI tokens. The discount is determined by market forces and the bond control variable managed by the policy team. The bond control variable sets a certain bond capacity or target limit for the amount of a given asset the treasury wants to receive within a specified time. As bond sales approach the capacity limit, the bond discount decreases to ensure the treasury accumulates the appropriate amount. The price coordination equilibrium is a generalization of economic supply.

Treasury (Reserve Support):

Funds from bond sales enter the treasury reserves. These are reserve assets that back the value of each ORI token. The Risk-Free Value (RFV) is an amount of stablecoins that supports each ORI token minted and sold through bonds or reward distribution. For each ORI token minted into circulation, the treasury must contain this RFV amount of stablecoins.