Thread by @tokengineering

🧵0/20
#ARMM (Automated Regressive Market Makers) is a #DeFi innovation that supports the trade of digital assets based on a multitude of their attributes.

Read @DevanAC 's ARMM thread, summarizing a @block_science @hedera @HBAR_foundation research collaboration👇

@DevanAC @block_science @hedera @HBAR_foundation 1/20 Semi-fungible goods? Think of Renewable Energy Credits #REC. These credits are fungible. Still, attributes like location of production matter! ARMMs = price discovery based on multiple non-fungible attributes.

Part 1 of 2 on #ARMMs👇
References are quoted in the last tweet.

@DevanAC @block_science @hedera @HBAR_foundation 2/20 The problem: Semi-fungible tokens are not commodities

High dimension semi-fungible tokens are hard to trade on traditional markets.

Order-book marketplaces do not offer adequate transparency, price discovery, and liquidity.

#orderbook #semifungibletokens #SFT

@DevanAC @block_science @hedera @HBAR_foundation 3/20 Solution: ARMMs (Automated Regressive Market Makers)

What do ARMMs do?
✓ Provide Price Discovery for semi-fungible tokens
✓ Signal the state of the market
✓ Make direct trades

#ARMM

@DevanAC @block_science @hedera @HBAR_foundation 4/20 Fungible, semi-fungible, and non-fungible tokens

Before we dive further down the rabbit hole, let’s get through some definitions & distinctions.

Examples of fungible tokens are BTC, ETH, and MATIC - they are portable, exchangeable & divisible.

#fungibletokens

@DevanAC @block_science @hedera @HBAR_foundation 5/20

CORCs & RECs are examples of semi-fungible tokens (SFT). These tokens vary in specific ways; eg. type of energy generation, how it's generated, quantity and quality of production equipment, geographic location, etc. multi-dimensions/attributes.

#semifungibletokens #SFT

@DevanAC @block_science @hedera @HBAR_foundation 6/20

Non-fungible tokens (NFT) are explicitly unique - digital art forms - common examples include CryptoPunks & BAYC.

#NFTs

@DevanAC @block_science @hedera @HBAR_foundation 7/20 Distinction between AMMs, ARMs & ARMMs

🆗 Automated Market Makers (AMMs) are protocols to trade fungible tokens.
🆗 Automated Regression Markets (ARMs) are protocols to trade SFTs.
🆗 ARMMs refer to specific implementations of ARMs.

#AMM #ARM #ARMM

@DevanAC @block_science @hedera @HBAR_foundation 8/20 Use Case: CORCs & RECs traded on ARMMs

CORC = Carbon offset/removal Credit
REC = Renewable Energy Credit

Good use case since SFT values greatly affected by context.
#CORC #REC #ARMM

@DevanAC @block_science @hedera @HBAR_foundation 9/20 ARMMs are developed to automate the price discovery and eventual trade of RECs and CORCs.

Source: @block_science
#CORC #REC #ARM #ARMM

@DevanAC @block_science @hedera @HBAR_foundation 10/20 #CORC Liquidity Challenges

⚡️Variety of unique assets available for search, aggregation & purchase. Millions of attribute types
⚡️Price discovery highly dependent upon buyer context
⚡️#dMRV (digitized Measurement, Recording & Verification) drives faster listing of offsets

@DevanAC @block_science @hedera @HBAR_foundation 11/20 #ARMM Causal Loop Diagram
Source: @TolamEarth

@DevanAC @block_science @hedera @HBAR_foundation @TolamEarth 12/20 Building ARMM SFTs

#SFTs are built by grouping assets with specific attributes into ‘classes’

ARMM R&D may adopt ML practices to build a model to fit a particular domain - model selection, feature & other customizations.

@DevanAC @block_science @hedera @HBAR_foundation @TolamEarth 13/20 ARMM Price Differentiation

✓ Buyer-preferred asset pools drive higher value & price.
✓ Higher value & pricing drive investment & generation of valued assets.
✓ This loop drives further availability of general & targeted buyer supply.

@DevanAC @block_science @hedera @HBAR_foundation @TolamEarth 14/20 Potential Benefits and Global Impact of ARMMing Energy Markets

✓ Growth estimate exceeding $106.6B in the energy-as-a-service market by 2026
✓ Growing importance of #CORCs and #RECs

🌈 #ARMMs will unleash the energy credit markets by employing #AMM tech in real-world

@DevanAC @block_science @hedera @HBAR_foundation @TolamEarth 15/20 Variables represented on-chain

✓ Efficient price discovery & trades support massive scaling of energy markets
✓ Secondary effects - greater incentives to invest in infrastructure that meets higher standards
✓ Local visibility to help retain value in local environment

@DevanAC @block_science @hedera @HBAR_foundation @TolamEarth 16/20 Potential Unintended Consequences

⚡️ Emerging ARMM tech could result in exploits and other negative outcomes.
⚡️ Systemic effects may result from these new market mechanisms.
⚡️ These can be mitigated with better design, engineering, and deployment.

@DevanAC @block_science @hedera @HBAR_foundation @TolamEarth 17/20 Engineering Better ARMMs

@cadcad_org (complex adaptive dynamics Computer-Aided Design) is an open-source modeling framework for research, validation & design of complex systems using computers.

Continue to Part 2 👇 to learn more about the use of tools like #cadCAD

@DevanAC @block_science @hedera @HBAR_foundation @TolamEarth @cadcad_org 18/20 Thread Summary

This introductory thread on ARMMs highlights the key features of this innovation to support the algorithmic trading of semi-fungible tokens (#SFTs). For deeper dives into ARMMs please refer to the references in the next tweet.

@DevanAC @block_science @hedera @HBAR_foundation @TolamEarth @cadcad_org 19/20 References

This thread makes references to the following resources:

Introducing Automated Regression Market Makers (ARMMs): A New Price Discovery Mechanism for Semi-Fungible Assets bit.ly/3UZlFZB from @block_science & @TolamEarth 's project

@DevanAC @block_science @hedera @HBAR_foundation @TolamEarth @cadcad_org 20/20 Continue to Part 2

If you found this thread useful/interesting please consider the following:

❤️ Like or RT the 1st Tweet in this thread
❤️ Continue to Part 2 to understand how #ARMM risks are mitigated in production

Thank you for making it to the end of this thread!

@DevanAC @block_science @hedera @HBAR_foundation @TolamEarth @cadcad_org ARMMs Part 2 – How #ARMM risks are mitigated in production :

https://twitter.com/tokengineering/status/1598376088916398097