Token Redenomination - Crypto Academy / S4W3 - Homework Post for @wahyunahrul
Hello lovely people,
I am very pleased to partake in the week 3 of the season 4 Beginners' Homework.
Below is my presentation.
- Explain what is Token Redenomination in your personal opinion?
Therefore the token's value or price becomes normal for mass purchasing, trading or investment.
In the crypto world some tokens are highly valued due to their high demand and prices therefore making it difficult for investors with low income level to purchase, which in turn negatively affect the liguidity level and the demand and supply rate of such tokens in the market.
Token owners therefore employ the redenomination strategy to help curb the challenges faced by the market underprevileged investors and traders so that they can also have their fair share of investing or trading with the token.
Usually the redenomination takes place by changing the ratio, contract and the logo of the token.
What distinguishes it from currency or other assets redenominations?
The main goal of token redenomination is to expand its activities so that many people can partake in the trading and investment of the token whiles currency redenomination focuses on stabilizing the country's economy so that many people will have the purchasing power for goods and services. Meaning market expansion is the main reason for token redenomination whiles inflation is the main reason why a country will go for currency redenomination.
Token redenomination is normally proposed first by the project or token developer, usually through an open letter to the investors, then the investors will go through the letter in order to know the details and reasons behind the token redenomination so that there will be awareness of the new steps that are being prepared or taken by the developer.
Token holders of the project will therefore be given the right to vote in order to determine the ratio that will be used for the token redenomination.
Whiles normal currency redenomination are being carried out through the policies and implementation of the central government, therefore there is no consultation of investors.
2). Mention the advantages and disadvantages of Token Redenomination
Below are some advantages and disadvantages of token redenomination.
Merits
Increased number of investors; the very first advantage of token redenomination is that there will be huge number of investors of the since most people will get the opportunity to invest with the little money they have. With the arrival of these investors, the project will get new fresh funds that can be utilized to develop ongoing projects to the next stage.
High liquidity; the token's market will become more active and liquid since there will be many people involved in the trading. If a cryptocurrency market is only controlled by a few people, then the transaction process that occurs in that market will not develop or it will stagnate, this is because the number of people who make offers to buy and sell on the cryptocurrency market is only a few and tends to be the same people.
High market Cap; market capitalization usually tell the value of an asset or cryptocurrency therefore it is often used by investors to weigh or know how good and attractive a cryptocurrency is.
If the market capitalization value of a cryptocurrency has a large value, it can be concluded that the cryptocurrency is good, whereas if the market capitalization value is small, then it is would be of less value for a cryptocurrency.
The market capitalization value itself affects how many people are interested in a cryptocurrency. So if the number of investors buying a cryptocurrency increases, the market capitalization value of the cryptocurrency will also increase, this is in line with the law of Demand and Supply.
If a cryptocurrency redenominates it's token and succeeds in attracting investors to invest in the token, then the market capitalization value will also increase so that it will be an added value for the token project.Growth of the project's Ecosystem; the additional capital gained from new investors will also affect the growth rate of the ecosystem of the token's project. Usually when a project redo tokens, they also make new changes to the project in order to convince the investors that the project will go far and will not just end there.
Demerits
The huge number of new investors and traders in the market will eventually increase the price of the token again which will leave most people behind because they would not have the purchasing and investment power of the token anymore.
There will be more confusion on the part of the existing and new traders or investors with regards to the new development that has taken place. A lot of confusion may arise with regards to the decimal value and the logo of the token and questions will be ask if the new development of the token is real or fake.
Transactional fees charged in the course of the conversion will have the tendency of depreciating
the trader's or investor's total asset's value.Scammers and hackers may hinge on that opportunity to offer fake services to the traders and investors which will lead to loss of assets.
3). Do all cryptocurrency projects need to do Token Redenomination? Explain in your personal opinion
Personally I don't agree that all cryptocurrency projects need to do token redenomination simply because not all cryptocurrencies are highly valued or push away small investors so there wouldn't be the need. The big men should stay in their lane and vice versa, the reason is that there are multiple low price tokens available that an investor or trader with less income can choose from. As mentioned earlier there will also be some form of confusion on the part of the investors or traders with regards to the new development.
If the need for token redenomination arise, it should be employed whiles on the other hand it is not a must for all cryptocurrency projects.
4). Choose a project that has or is currently doing Token Redenomination and show how to convert old tokens into new tokens. (Screenshot Required)
SUN TOKEN
On June 4, 2021, Justin Sun who is the founder of the Tron Blockchain circulated an open letter to members of the SUN community which was uploaded through the Tron Foundation account on the Medium platform and also on Justin Sun's personal Twitter account.
In the letter, he informed the community that there would be a plan to redo the token from the Sun.io platform, namely Sun Token with a ratio of 1:1000 which means that there will be an increase in the supply of SUN tokens that were originally 19,900,730 to 19,900,730,000. This is done with the aim of minimizing investment barriers that occur due to the high price of SUN tokens before redenomination and if this can be realized it will increase the growth of the Sun platform ecosystem.
According to Justin Sun, the current capitalization of SUN tokens is still very low at $500 million when compared to its competitor Curve, which has a market capitalization of $5.8 billion. According to him, the Sun Token is still very undervalued by only having such a large market capitalization, whereas, with everything that the SUN platform has, such as a strong ecosystem, high scalability, etc. The SUN Token should be able to have a larger market capitalization.
At the time of the redenomination of SUN tokens, there will be some changes made to the Sun.io platform. The first thing is to change the name of the old SUN token to "SUNOLD" and the name of the "SUN" token will be used by the redenominated SUN token. Then there will be a change in the logo of SUN.
Then there will be a change in the contract address where the new SUN Token will be used, from TKkeiboTkxXKJpbmVFbv4a8ov5rAfRDMf9 to TSSMHYeV2uE9qYH95DqyoCuNCzEL1NvU3S.
In addition to token redenomination, the Sun platform has also made several improvements to the features offered to make users more comfortable using this platform. The features offered include:
Stablecoin Swap feature.
Liquidity Mining with several types: 3pool LP, SUN-TRX LP, SUN Stake, and SUN Stake&Lock.
Airdrop of SUN tokens for veCRV holders.
Steps on how to convert OLDSUN to SUN
I have chosen the SUN token which is on the Tron blockchain and emerged as a result of the OLDSUN token redenomination and below are the easy steps to convert OLDSUN to SUN.
- To make an easy conversion without stress or having to make external wallet connection on a PC browser open your TronLink Wallet app. Incase you don't have it I recommend you to try your best to download it because it offers effective and efficient services such the swapping of tokens.
- Go to Discover and select JustSwap
- Navigate to the to right corner and click on the menu.
- Click on Sun swap and you will automatically be taken to the swap page.
- Enter the amount of SUNOLD you want to convert to SUN and click on confirm in order to confirm your conversion of the OLDSUN to SUN tokens.
All the above screenshots were taken from the TronLink wallet app.
In case you don't have the TronLink wallet app you can equally open Justswap.io on your PC's browser here and link your Tron wallet then proceed with with the necessary procedure as shown above starting from step three.
5). Analyze whether the token from the project you chose in question number 5 is worth investing in. (Screenshot Required)
There is no 100% guaranteed prediction of cryptocurrency prices due to their volatile nature or fluctuations in the crypto market but however some things can be considered or observed to determine whether an asset is worth for investment or not.
Considering the status and legacy of SUN in the coinmarketcap I strongly believe for now SUN is not worth investing in because about a year now the value of the asset keeps depreciating and even if there is a possibility of a gain it wouldn't be a better offer or deal for the investors especially those who invest for interest on monthly or short period basis.
Below is the current status of the SUN token in the coinmarketcap.
Although there have been significant improvement from the SUNOLD to SUN in terms of market capitalization, the supply rate of the token and etc. but I personally think the token is not worth investing in due to its current market status and the pace at which the price keeps decreasing from time to time.
Conclusion
Token redenomination has both advantages and disadvantages and think not all cryptocurrencies need to undergo into such development.
As the days go so as the brain grows, this is a great lesson and I have learned new concept in the crypto world which is token redenomination.
Thank you Prof. @wahyunahrul for the enlightenment and your dedication in the Academy.