Token-economics
Have you heard about the term tokenomic or token economics? You may search via Google and you will be given many different definitions.
I always have a question in my mind. What is so called token economics and how it is trying to explain the development of different Cryptos especially those blockchain like EOS or Tron which you can receive free tokens via airdrop/ airgrap. Then, you may find the price of almost all tokens will drop after listing on the Exchange. As we know that airdrop/airgrap is free to EOS holders, I just wonder how money can be generated from thin air, how to value different tokens and whether airgrap/airdrop really cost nothing to Cryptos holders (definitely RAM cost is incurred). On the other hand, is it correct to say that those Dapps with token price dropping to almost zero has little value and we can neglect them? As an investor is it correct to dump them on the first day of listing?
I am writing to express my queries. If you are new to Cryptos this article may serve a good reference for you. If you are more senior crypto investors, you may have your answers already and please share your view points to us.
Tokens vs. Stocks or debentures
Tokens are not stocks or debentures. The tokens you hold will not give you any ability to claim anything even though that specific tokens are issued by a specific company. The situation may not change unless security tokens are being launched and legal frameworks for security tokens have been well build. Now almost all tokens are utility tokens which price are almost determined by general market force. No general accepted evaluation vehicles or tools are available right now.
Therefore ICO is totally different from IPO. If you are new investors with less experience and knowledge in this space, it is important to understand the differences. From legal point of view, stock holders possess certain percentage of assets but not for token holders.
Underwriters
In case of IPO, normally there are underwriters which will in most of the case hold part of the IPO stocks and able to maintain the price of the stocks during the initial stage after listing (sometimes it fail and price will drop below the IPO price).
In case of ICO or airdrop/ airgrap, arrangements are different for different tokens and overall listing conditions are different in different exchanges too. Now we have Initial exchange offerings (IEO) service and Binance are the first Exchanges providing the service. Bittorrent token (BTT) is the first token using IEO service from Binance and the result is so great.
As an investor it is crucial for us to read the whitepaper, understand ICO arrangement, industry development and understand the management of different companies. The we should build up our unique understanding or else we will lose the direction and don’t know how to do. With all the basic information and understanding, now we will proceed by asking ourselves several questions.
Different strategies
Which strategies I can make in order to optimize our investment performance?
Try to buy the stock of that company even though it is a small and non listed one.
Hold the tokens from airdrop/airgrap and try to even buy more from any exchanges till the company introduces the service to the market.
Dump at the best price as far as you can.
Dump at the first day since you believe that the peak normally appear on the first day of listing.
Use the funds after selling the tokens of any Dapps and purchase the token of the Blockchain instead. That means switching from DApps to the Blockchain and expect for receiving more airdrop/air grap from different DApps in future.
In the next articles, we will discuss the pros and cons of different options. If you have any opinions, please feel free to comment and let’s brainstorming together.