Token Redenomination - Crypto Academy / S4W3 - Homework Post for @wahyunahrul
sourceExplain what a Token Re-denomination in your personal opinion? What distinguishes it from currency or other asset Re- denominations
With the great boost in block chain technology new tokens are pushed into the market everyday. Some of these projects gonon to be very successful while others breakdown and are eliminated. When a token is successful, it attracts more investors. This can increase the value of the token rapidly and quickly. Therefore, a very promising token will see a great increase in demand which will lead to an increase in price, basic economic principle.
When the price of tokens increase, it will become expensive for small investors to acquire. This is because the price is very high. Small investors maybe a very big group or number of people which the token may lose out on due to it's high price. Therefore, to expand and create an avenue for these large number of small investors, token Re- denominations comes in to play. This is to increase the liquidity of this token and accommodate small investors.
Token redenomination is a technique whereby currencies are recalibrated due to inflation or where the purchasing power in the market has reduced. In the areas of tokens, Re-denominations is carriec out to allow small investors to acquire these token. This is because when the price of a token increases it creates room for only small investors to afford it and invest. Liquidity decreases because small investors who may make up a large number cannot purchase it. Hence the need for tokens Redenomination to be carried out to decrease the rate of inflation and increase the liquidity in the market.
Redenomination can be done to other assets like Fiat currencies. The currency that has gone to highest re-denomination is the Zimbabwe Dollar. In 2006, the Zimbabwean Dollar was re-denominated at a rate of 1000 old Zimbabwean Dollars to one new Zimbabwe dollars. This was a result of annual inflation rate of more than 231 million Percent.
This was carried out by the government through the central bank. Unlike re-denomination in the crypto space which is done by the project developers. When Re-denominations are carried out in currency, it is done to reduce inflation and as well as increase purchasing power.
When Re-denomination occurs in currency, old note may not be in circulation or maybe circulated at a fixed rate as against the new notes. Also when a currency is re-denominated the decision in taken by the government without the need to consult public opinion unlike token re-denomination where the opinion of the community is required.
Mention the advantages and disadvantages of tokens re-denomination
Advantages
It attracts small investors which may may make up a large number of buyers and sellers thus increasing liquidity. If there are only big investors liquidity with decrease as purchasing or selling the token will be too expensive for people to afford. So when a token is re-denominated at a fixed rate it becomes affordable to small investors which in turn increase enough buyers and sellers.
Liquidity increases when a token is re-denominated. Liquidity means that there is enough buyers and sellers in the market. When the value of a token is high there may be only a small number of investors to trade the token thus leading to a decrease in liquidity.
It increases the market value and market cap of the token. When a token is re-denominated it is at a low price and this attracts more investors and increases the demand. Hence, an increase in demand equals an increase in price.
Token re-denomination allows the project make it create new upgrade or features that previously was not available. This new features attracts more users to the block chain.
Disadvantages
1.When a token is re-denominated converting old tokens to new tokens can be very difficult due to high transaction fee.
New changes may turn out to be unfavorable in inventors especially old investors. Who may pull out from the market due to fear. Re-denomination is not a guarantee that the project will do well.
Before a token is re-denominated it will be brought before the community to be voted upon. There will also be voted of acceptance and votes of rejection. If the re-denomination is approved, investors who voted against it may withdraw.
Do all crypto-currency projects need to do token Re-denomination? Explain in your personal opinion
Not all tokens need to carry our token re-denomination. A token would be re-denominated if the project develops and other members of the community deem it fit for such process to be performed. This is especially where liquidity is very low. But where a token had high liquidity and it is affordable by both big companies and small investors alike then it does not require re-denomination. There are a variety of other tokens with low prices and high liquidity. In this case there is no use for re-denomination of such currencies since both big and small investors respectively can afford them.
Pick a project that has or is doing token renaming and show how to convert old tokens to new tokens
Under the section will be showing the method to convert old tokens to new tokens after redenomination. For this purpose I will be using the PUNDI X token.
PUNDI X is underEthereum Network and it is going to be redenominated from NPXS to PUNDI X. The redenomination started on the 30th of March, 2021.
To convert the NPXS token to the PUNDI X we will take the following procedures;
. Visit the official website and Click on the swap option under the write up.
source. You will be taken to the swap page to link your wallet. I am connect my Trust wallet so I will click on WalletConnect in the option.
source. When I clicked on WalletConnect, Another display popped out to connect my mobile wallet. So I clicked on connect.
source. I was taken to my Trust Wallet app where I connected my wallet to PUNDI X swap.
source. A wallet address appeared after connection to PUNDI X was confirmed.
source. I went back to the website but I couldn't swap due to zero balance or no NPXS tokens.
sourceSo I can't go further but I can describe the remaining steps
Enter the amount of NPXs you will see the equivalent amount of PUNDI X tokens then swap.
Your token will be converted to a PUNDI X token at a ratio of 1000:1 ratio. However gas fee in form of Ethereum will apply since it's an ERC-20 network.
Analyze whether the token from the project you chose in question number 5 is worth investing in
PUNDI X is a token for daily life transaction. This project aims to make crypto spending as easy as credit card. The project developers hope it will be used as an Ethereum-based-point-of-sale. During it's ICO it raised $35million. The company is working on creating a card which they are calling the Xpass Card, this card will serve the purpose of working hand in hand with the mobile app and wallet thus allowing payment and deposits by card. This will allow people to pay for goods and services using crypto.
From all this we can say that PUNDI X token is worth investing as it will encourage massive adoption. This means it everyday use in paying for goods and services will increase it's value.
Coinmarketcap of PUNDI X
sourceMarket Cap - $330,990,421
Circulating Supply - 258,491,637.23 PUNDI X
Rank - 234
Price - $1.28
sourceConclusion
Thank you Prof @wahyunahrul it was a great lecture. Token Redenomination is a check on inflation and it increases liquidity as well but not all coins must undergoe such process.