Token Redenomination - Crypto Academy / S4W3 - Homework Post for @wahyunahrul
QUESTION 1
Explain what is token redenomination in your personal opinion? What distinguishes it from currency or other assets redenomination?
Token Redenomination
Token redenomination is a situation in which we witness the increase of liquidity of a particular token in order for it to reach everyone especially small investors. The reason for token redenomination is because the increase of prices for a particular token makes it very difficult for to be purchased by small investors.
We see the rapid increase of the prices of a token when they have good and promising projects which attract big investors in investing and purchasing that particular token. This makes the prices of that token to rise drastically due to the increase in demand. as the law of demand and supply entails, when the demand increases, so does the difficulty increases in getting that particular asset. In this case, we see small investors having great difficulties in even purchasing that asset. This is where we see the need of Token Redenomination.
In explanation with examples, a token for instance Y, with a price of $600 means that for an investor to purchase about 20 of the token will be 600 * 20 = $12000, which is very expensive for small investors. For easy purchase by small investors we will need a token redenomination; for example after a token redenomination of the said currency, the price is $0.6, the 20 will now be 20 * 0.6 = $12.
We see that with this price, small investors can now easily purchase the token.
Distinguishing Token Redenomination from others
In my own opinion, I see the currency redenomination to be a scenario when the value of a particular currency is recalibrated which is due to a substantial change directed toward the buying power of that currency.
Differentiating them, we see that the currency and other redenomination comes in at a time due to economic reasons relating to the government or country pertaining in stabilizing purchasing power of goods and services.
QUESTION 2
Mention the advantage and disadvantages of token redenomination
Advantage of Token Redenomination
- We see an increase in the number of investors after token redenomination. With the increase of the number of small investors, so is the increase in the number of the transaction as well as the spread about the token. This will normally increase the liquidity in the market.
- Going now to the redenomination in relation to the decreased price. It will normally reach more small investors. With it reaching smaller investor, we will see the more and more holders of that particular token will exist.
- We have a sense of project completions after a token redenomination. This shows that the project has completed and is beginning all over again with additional scopes to advance it projects.
Disadvantages of Token Redenomination
- Token Redenomintion happens to be something the public is not really educated about; I for one was not until this lesson. This might make small investors fear that the scheme is subjected to scam.
- We see that holders of the token have to change or convert their initial token which will normally be done for a transaction fee, probably something which was not planned for.
- It is true that the majority always carry the day. Because since we have submission of vote, or be better still casting of votes before which the majority wins, this may leave a hate which will make a withdrawal of their investments.
QUESTION 3
Do all cryptocurrency projects need to do token redenomination? Explain in your personal opinion
Do all Cryptocurrencies need to do Token Redenomination
The simple is No, all crypto currencies do not necessarily need to do token redenomination.
This is because. Most crypto currencies have very small values; that is they have values less than a dollar/ this makes it very easy for the purchase of the token by even small as well as large investors.
Also, even the cryptocurrencies which large value can be bought in very quantities. For example a small investor can purchase as small as $10 worth of ethereum.
So concluding we see that not all crypocurrencies necessarily need to do token redenomination.
QUESTION 4
Choose a project that has or is currently doing token redenomination and show how to convert old tokens into new tokens
The SOMN Project
I will be discussing about thee sonm project which was particularly developed to in relation to a new fog computational design which makes it possible for software to work across the globe.
Moving now to the redenomination of the somn token, the process is expected to leave more chances in relation to the creation of somn software application.
SNM V1-ERC20
Contract Address
0x983F6d60db79ea8cA4eB9968C6aFf8cfA04B3c63
SNM V2-ERC20
Contract address
0x46d0DAc0926fa16707042CAdC23F1EB4141fe86B
Converting the old token to a new token
Step 1
We begin by logging into the SNM site
Step 2
We then click on connect wallet which I will be connecting to the TrustWallet on the Wallet Connect Tap.
We then do the authorization.
Step 3
After that, we then need to put amount we want to SNM-1 to SNM-2: and clicking on the Authorise button
QUESTION 5
Analyse whether the token from the project you chose in question number 5 is worth investing in.
Analysing the SMN Token
The redenomination rate was set at 10:1, with this, the SONM token total supply was reduced from 444 million to 44.4 million.
Checking at the current value and supply of the currency we see as follows on the screenshot below.
Statistics:
I now see the SNM-2 to have a rapid increase especially at a time when the previous project showed a sense of completion. With this, we also see the snm-2 token to reach more investors with the cut in its prices which will increase the number of active addresses and therefore causing an uprise of the token.
Conclusion
so far, we have seen token redenomination as a scenario in which the value of a cryptocurrencies is reduced in other to meet up with the need and purchase of the small investors. We have also seen the numerous advantages that comes with token redenomination as well as some few drawbacks relating it. Taking as an example, we have I have demonstrated the swapping of the old crypto to the new crypto using the SOMN Cryptocurrency.