Token Redenomination - Crypto Academy / S4W3 - Homework Post for @wahyunahrul
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It's another week in the Crypto Academy. It is my pleasure to submit this homework post to Professor @wahyunahrul in response to the assignment given after his lecture on "Token Redenomination - Cryptocurrency Value Simplification." In the next paragraphs, I will dealing with the questions one after the other. Follow me closely.
Question 1
Explain what is Token Redenomination in your personal opinion? What distinguishes it from currency or other assets redenominations?
Since the invention of Btcoin, the father of cryptocurrency, there have been many coins which have come to existence. Some projects which can't have their own coin, create tokens which are normally built on popular blockchains like Ethereum, Tron. etc. Many coins and tokens have experienced significant growth because of what the token represent, the input of the developer to making sure their coins or tokens come to limelight, increase in the demand of the coins and tokens by people and many more reasons. A token actually increases in value as result of many Investors which invest in the token.
As people keep adopting a token, there will be an increase in price and value of the token which makes it difficult for small investors to invest in the token. There are many instances that small investors may want to buy the token but because the price has skyrocketed, they may not be because of the lack of funds. So, it is only big investors who have enough capital that will dominate the market and thereby, small Investors won't have chance. In essence, when the price of the token is such high, especially the token which is indivisible, the market becomes the market of big investors because they will be the one which perform every activity in the market. Once this happens, the organizers or developers of the token usually organize what's called redenominations.
Redenomination is a process by which the organizers or developers of a token redo the token to make the market liquid. Redenomination often takes place as a result of hype Inflation in the price of the token which make it difficult for small Investors to participate in investing in the token. Redenomination is like calling back the token to a new start. When redenomination takes place, the old token can be exchanged to a new token which will at the rate of the new token. Small investors which can't afford investing in the old token will be able to invest in the redo token and thereby making them to participate in the market.
Just as there's token redenomination, there's also currency or fiat redenomination. In fact, currency redenomination comes first because we know that Fiat currencies have been in existence since. So, it can be said that the recommendation is first with fiat currency. Currency redenomination is also similar to token redenomination. The way by which currency is "refashion" due to inflation or devaluation of that currency is known as Fiat or currency redenomination. But it is different from token redenomination in the sense that, every process involved the redenomination of the fiat currency is done by the government of the country. Whereas, before token redenomination will take place, the developer of the token will announce it through a newsletter sent to the public and every investor would have to vote. Whatever they agree on, is what would be acted upon. In essence, token redenomination is both done by the developers and the Investors whereas, government of the country control the fiat currency redenomination
Fiat redenomination often takes place in order to balance the the economy of the nation. For example, where there's inflation, the economy of the nation may experience instability. Some people may not have capital to purchase what they need and as a result, people who produce goods which are exported out of the country may decrease the production rate. Also, when the currency is totally devalued, currency redenomination may be one of the solutions which government may propose.
Question 2
Mention the advantages and disadvantages of Token Redenomination
In this part of the question, I'm going to be mentioning advantages and disadvantages of token redenomination. Let's begin with the advantages.
Advantages of Token Redenomination
One of the advantages of token redenomination is that, it increases the number of investors since the price of the "redo token" is always very low. Remember that I said in the question above that when the price of the token is skyrocketed, the market will only be for big investors. But when the token undergoes redenomination, small investors who doesn't have enough capital will be able to invest since they can now afford to invest.
Also, price redenomination increases the market capitalization of the token. Market capitalization increases when the number of investors increases. When people sees that the future of a token looks promising , they tend to invest in the token. And one of the things that judges how the token will look like in the future is when the ecosystem succeeds and have many achievement. People will see the token redenomination as an achievement and therefore will invest and the market cap. of the token increases.
When a token undergoes redenomination, there will be increase in liquidity in the market. When the token doesn't have many Investors, the transaction there and various activities will not be high. But in the case of large investors, more people will be transacting and perform various activities on the ecosystem and thereby making the market to be more liquid.
Further, Redenomination of the token makes the ecosystem to experience growth. When there's redo of the token, more people invest and that makes the token to be more popular. Also, as there's increase in the number of Investors, the developer may have reasons to introduce new things and include more features on their blockchain which make the ecosystem to expand.
Investors of the token participate in the process, since the developer will announce it and they would have to vote. So, it means, Investors will have say and participate in the decision making.
Disadvantages of Token Redenomination
Any project requires fund. Token Redenomination is a project which requires resources. So, the developer will have to gather resources together which may not be something easy to do for them.
Token redenomination may result in loosing some of the big investors. Some investors may not see the reason for redenomination, and so when it is proposed, they way withdraw their investment and go invest in another project.
The developer of the token doesn't have total say over the redenomination, since it must be voted for by the investors. And if many investors don't agree, it may be difficult to embark on the journey of redenomination. In fact, it may not be advisable to do it.
Another disadvantage is that, conversion of the old token to new one may lead to spending more resources on the investors side.
Question 3
Do all cryptocurrency projects need to do Token Redenomination? Explain in your personal opinion
Not all cryptocurrency projects need to do token redenomination. We know that token redenomination is a way or method by which developers of the token in agreement with the investors redo the token. And this is actually done in order to reduce the price of the hype inflated token, so as to make token available, especially to the small investors. So, in my personal opinion, if the token of the cryptocurrency is affordable, then that cryptocurrency doesn't need to undergo token redenomination.
There are some cryptocurrency which the price of the token is very high and yet people can still invest in in the token. For example, Bitcoin. The price of bitcoin is skyrocketed and as such small investors can still invest because, btcoin is designed is such a way that it can be divisible. People who can't buy 1 bitcoin can by some divisible portion such Satoshi.
Fig. 1: Table Showing Division of Bitcoin
IMAGE SOURCE
As it is seen in the table above, Bitcoin has division. If an investor can't by 1 unit of of bitcoin, he can buy milli bitcoin or micro. He can even buy satoshi unit. So, with the many units of bitcoin, almost all Investors can afford investing on the coin.
Question 4
Choose a project that has or is currently doing Token Redenomination and show how to convert old tokens into new tokens. (Screenshot Required)
In this part of the question, I'm going to be showing a token that has undergone redenomination and how to swap the old token into new token. For this task, I have choose a token called NPXS which is the old token of Pundi X
NPXS is a token that's built on the ethereum blockchain. It is supports ERC-20. It was founded in the year 2017 by three people, Zac Cheah, Pitt Huang and Danny Lim The coin is listed on different exchange platforms.
Now, in the month of March 30th, 2021, the swapping of old token, NPXS to new one, PUNDIX began. But prior to this time, the developer has made announcement and created a pool which allows every Investors to vote on the project of token redenomination. According to research, about 88% of people agreed with the redenomination.
It's said, that the holder of the NPXS then can exchange or convert 1, 000 NPXS to 1 PUNDIX. The value of this coin would not change. That means, if 1,000NPXS is equivalent to $100, when it converted to 1PUNDIX, it will still be $100.
Let's see how to convert NPXS to PUNDIX
Conversion of NPXS to PUNDIX
There are three ways by which the holders of NPXS can convert their NPXS to PUNDIX. These ways are:
On chain Swap Method through the official PUNDIX website. This conversion method is for the people who have ERC-20 compatible wallet.
The second way or method is through auto swap Xwallet. Holders who have Xwallet can use this method.
The last method is auto swap in the exchange platforms that support PUNDIX. This method is for those who have wallet in the exchange platform.
Now, let's see these three methods one after the other.
On Chain Method using Official PUNDIX website.
To use this method, visit the official website of PUNDIX. You can click this Link.
Upon clicking this, you will be directed to the website.
Fig. 2: Homepage of PUNDIX Website | _pundix.com
Then, next to click on "swap now" at the top of the page.
Fig. 3: Swap now section at the top of the page | pundix.com
Upon clicking on it, you will see a page where you can choose the wallet you want to add. You can use so many options. There metamask, wallet connect, trezor, and ledger. I chose wallet connect because I have trust wallet.
Fig. 4: Different wallet types | pundix.com
Now, upon clicking on it, another page will appear. In the page, you will see "connect". Ick on connect.
Fig. 5: "Connect Page" | pundix.com
Then, a pop notification will appear showing the trust wallet. Click on the trust wallet. And as you click on it, you will see connect at the bottom, click on it.
Fig. 6: "PUNDIX On the Trustwallet" | trustwallet_
Then, once you do, you will see a page showing that your wallet has been connected successfully.
Fig. 7: Page showing that wallet has been connected | trust wallet
Now, once the wallet is successfully connected, you can convert your NPXS to PUNDIX. The users which use this method were privileged to participate in staking in April, 2021. Though, the use of this method will demands that the users pay ETH for gas fee.
Auto Swap through F(X) wallet Method
This is another method of converting NPXS to PUNDIX.
To get the wallet, you can get it by clicking on the PUNDIX website. Upon click go download on the page, you will be taken to the place store where you will download the wallet.
Fig. 8: Go download on PUNDIX website | trust wallet
Then click on download on play store to download and install the wallet.
Fig. 9: X wallet on play store| playstore
Once the installation is done, open the wallet and click on the create wallet
Fig. 10: Creating X wallet | X wallet
Then, make sure you back up your wallet and write down the seed properly. Once you do that, you can click "I have written the seed down". And upon clicking on it, you will be taken to the homepage of the wallet.
Fig. 11: F(X)wallet home page | F(X) wallet
Now, to swap NPXS to PUNDIX, click on the round icon at the bottom of the homepage in the fx wallet. In the screenshot below, I circled it with red color.
Fig. 12: F(X)wallet home page with Round Icon | F(X) wallet
Upon clicking on the icon, some features will appear. Click on swap. In the screenshot below, I used a red arrow to point at it.
Fig. 13: Features in the Round Icon | F(X) wallet
Upon clicking on swap, you will see a page where you can convert your NPXS to PUNDIX. The first box on the page contains several token
Choose NPXS and write the number you want to convert. In the second box, select PUNDIX which is the token we want to convert our NPXS to. In the screenshot below, you will see I have chosen all the details. But if you look at the bottom where I used red rectangular box to indicate, you will notice it says "insufficient NPXS balance". This means I don't have NPXS in my wallet. For users who have, they will just click continue or what it says and swap it.
Fig. 14: Conversion Page | F(X) wallet
This method doesn't require gas fee from the users. That is the won't pay any gas fee. But they cannot participate in staking unless they withdraw their PUNDIX from fx wallet and transfer it to their private wallet.
Auto swap in the exchange platforms.
The last method is swapping in the exchange platform. There many exchange platforms that supports PUNDIX.
This method is automatically. That's users who uses the exchange platform don't have to convert their NPXS. This doesn't have any gas fee, too. Just like conversion using fx wallet, the users which use this method cannot participate in staking, unless they withdraw their PUNDIX token to their private wallet.
Question 5
Analyze whether the token from the project you chose in question number 5 is worth investing in. (Screenshot Required)
PUNDIX token is a cryptocurrency created which aims to provide alternative way if using cryptocurrency rather than in exchange platforms that most tokens are being used. Thanks tolen called PUNDIX provides people a way to use Cryptocurrency in real life. There's a terminal called XPOS which is used In retailing for sale.
The PUNDIX was actually created to reduce the complex way people view cryptocurrency. People believe, that digital coin, cryptocurrencies are only used to trade online and can't be used in the real life. So this token was created to reduce this complexity and that people may adopt the use of the cryptocurrency
There have been increase in the adoption of the PUNDIX as a result of the uniqueness in its use. People can use their PUNDIX to pay for goods they buy in retail shops or stores which make it easier for people to do transaction. This increase the use of this token, especially in Indonesia.
With the way this token operates, many people have been investing in the token. Also, as a result of the redenomination that the project underwent recently, in March 2021, more people are now aware of it. And since we know that when the token undergoes redenomination, market capitalization of will increase once more investors come in and invest in the token. So, it is a sign that the token is worth investing in.
Now, anytime I'm asked to to analyze a token, I like to use either Coingecko or coinmarketcap to view some day which can help us see the data which the token has such as market capitalization, volume, price etc. Now, let us look at the screenshot below taken from the coinmarketcap.
Fig. 15: PUNDIX data on coinmarketcap | coinmarketcap.com
As it seen in the screenshot above, as the time of writing this post,
PUNDIX price is $1.37
PUNDIX is ranked 233
PUNDIX market cap is $353, 585, 999
Now, if we look at the price, the price is still very low. And also, considering the market capitalization, this shows that people are investing on the token. 1 PUNDIX is $1.37, this means one can afford buying some amount of PUNDIX.
Now, if we look at this price, it is very close to all time low, which means the price is at the extreme low. Let's see the screenshot below.
Fig. 16: Chart showing all time high and low of PUNDIX | coinmarketcap.com
According to the screenshot above, the all time low of PUNDIX is $0.467 all time high is $9.78. Now, if we compare the price of PUNDIX to all time low and high, we can see that it is very close to all time low. This means the price is at the extreme low and it is a good time to invest.
There is what is called discount price and premium price. Discount price means the price of an asset is at a very low price. It is a price when the asset has been oversold. If you have heard that people say, buy at discount price and sell at premium price. Premium price means the extreme peak of price, when the asset has been overbought or overpriced.
When you buy at discount price, you are actually buying at a very cheap price which may make you to gain maximally. So, we can say that the price of PUNDIX is at a discount price. Anyone who invest in it now is actually buying at a cheap price.
Let me also say that PUNDIX has been listed in many exchanges platforms, both centralized and decentralized exchange. So there's no problem of exchanging your PUNDIX when you want to exchange it. This is another reason why PUNDIX is worth investing in.
Fig. 17: PUNDIX markets | coinmarketcap.com
Conclusion
Token redenomination is a method used to redo token so as to make the token available to many users, especially small investors who do not have enough capital. Token redenomination often takes place as result of hyper Inflation in the price of the token. When the developer notices that the token price has skyrocketed and want to look for a way to make the it affordable by small investors, they propose redenomination.
Redenomination is a sign of growth. When a token undergoes redenomination, it is a sign that people have adopted the old token. The new token, redo token will attract many investors as people, especially small Investors can now afford to invest in it. There are many advantages of token redenomination to the developer and inestors.
Thanks to Professor @wahyunahrul for bringing this topic up at a time like this. I have learnt one or two things from the topic. I have been able to research and see a token NPXS which underwent redenomination and its new name is PUNDIX.
Written by @msquaretk
CC : @wahyunahrul