Token Redenomination - Crypto Academy / S4W3 - Homework Post for @wahyunahryl

1) Explain what is Token Redemption in your personal opinion? What distinguishes it from currency or other assets redenominations?
Token Redenomination refers to the process of simplifying a currency to increase its buying power. This process happens in almost all currencies be it crypto or fiat currency. Redenomination comes in handy in the fiat currency when inflation occurs and services and other products are bought with such huge volumes of capital.

Therefore, only those with huge amounts of that currency can purchase anything. Therefore to curb inflation the government and the central bank can recall old notes to exchange them for new ones with similar value but in small quantities. In fiat currency that is how Redenomination works.

In cryptocurrencies it works the same way. When projects are started in crypto one of the ways to wether the project is doing well is to produce tokens and if a lot of interest is shown in the token and it is purchased highly then the project is considered a success though if the tokens are not bought highly and are shown little interest then the project is not considered good.

There are some instances though when the token is bought is over bought in that its value soars and only those with large amounts of capital are able to purchase the token. In such a case the dealer, the person that controls that cryptocurrency normally write to the holders of the cryptocurrency and informs them of the decision to redenominate.

The cryptocurrency is then redenominated in the sense that crypto is redistributed to increase liquidity though the value does not change much. This allows small investors to be able to trade

2) Mention the advantages and disadvantages of Redenomination.
Advantages.
1) Redenomination enables small investors without large amounts of capital to buy the tokens. This brings in fresh funds which can be used to boost the project. Most people would have thought that it would be better to have few big investors with lots of money investing in the token however to prevent stagnation of the market and to create more liquidity the token is redenominated to have more players in the market. More players in the market also promote a higher bargaining power for the price of the token.

2) Redenomination promotes liquidity in the market because when more people come into the market there is more capital in circulation. One has to note that numbers of the investors also increased which is amazing as the bargaining power for the price of the token becomes high.

3) Redenomination causes the token market cap to increase in value. The market cap follows the demand and supply element. If more of the token is purchased then its value increases however if low volumes of the token are being sold then its value drops.

**The project ecosystem develops when Redenomination occurs because more capital is accumulated which allows availability of funds to do various activities under the project. The dealers have to prove to the investors that the project is developing and is growing and has the continuity element.

Redenomination has largely advantages as its main goals is to cure the imbalance that happens in any financial market, therefore since its main goals is to make a positive change the negative effects are almost non existent.

3) Do all cryptocurrency projects need to do Token Redenomination? Explain in your personal opinion.
No, not all cryptocurrency projects need to do token Redenomination. Redenomination happens only when the token of the project is such a huge success in that its value soars and in that only investors with large amounts of capital can invest in it. Therefore to enable retail investors to invest in the token the project then redenominates its token so other players can come into the market.

**4) Choose a project that has or is currently doing token Redenomination and show how to convert old tokens into new tokens. (Screenshot required).

Polka dot is a blockchain network which enables Web 3.0 a decentralized and fair internet where users control their own data. Therefore polkadot is considered the Blockchain of blockchains because it enables interpretability between chains. Its two main structural components are relay chains and parachains. Dot is the token on polkadot blockchain.

It was founded in 2016 by Gavin Wood who was a co-founder of the Ethereum blockchain. The Redenomination of polkadot token happened on 21st August, 2021. A letter for Redenomination was released to the tokens holders who then voted that the denomination by a factor of one hundred.

To change the old tokens for new ones on polkadot one has to go to the website and choose the claim option and if they have already claimed them then they only have to attest them.

On clicking the claim option one will be required to input the Ethereum address used to purchase the dot tokens. A polkadot address will be created which one can use to claim their new tokens.

5) Analyze whether the token from the project you chose in question number 4 is worth investing in. (Screenshot Required).

Polkadot is worth investing in because it solves a key problem of interpretability of chains. Therefore it provides value thus its continuity is guaranteed provided the problem whose solution it provides is still around.

Investment in tokens is still a new idea therefore longevity can’t necessarily be certain as the market has to be studied for a long time to be able to predict patterns however as we saw earlier since value is being provided as long as the service is still needed then at least the crypto can be considered worth investing in.

Polkadot just like any other cryptocurrency is volatile thus one can easily make high profits though one can easily make really huge losses to.

Conclusion.
Therefore Redenomination in general should be carried out where necessary as it has great advantages that bring more equality in the market as all investors whether retail or big investors are given an opportunity to invest in a high value commodity.