How does CZero maintain token value? (1) — NFT, Zero Mileage and CZero Pay Token.
If you look at the token value evaluation method proposed by Chris Bernisk of ARK Investment Management, famous in the token economy, and Vitalic Buterin, the founder of Ethereum, based on the money quantity theory,
Chris Bernisk’s Token Valuation
M x V = P X Q
M = Total Asset Size
V = Asset Distribution Rate (average number of coin owners change in one day)
P=Price of digital assets offered
Q = Total amount of digital assets delivered
Using the definition of Bernisk, the value is rearranged to M as follows: M=PQ/V
The value M of the token is calculated by calculating the market capitalization (PQ) and divided by the distribution rate (V).
Token Valuation of Vitalic Buterin
M x C = T x H
M = Total amount of coins issued
C = Price of currency
T = Trading volume (economic value of trading volume per hour)
H = 1/V (time the user holds the coin before making a transaction)
Using the definition of buterin, the price of a token is expressed as C=TH/M or C=T/VM.
As can be seen in both definitions, the value of a token is inversely proportional to the rate of distribution of the token. In other words, the longer people hold the token, the higher the value of the token. Therefore, it is very important to understand the speed of distribution in the token economy. However, if the distribution speed decreases, the value of tokens will increase, but if all of them hold tokens and do not trade, the transaction volume will also be zero, and prices will plunge without demand.
In the end, what is important is the optimization of the ratio of total issuance and distribution speed.
In general, it is judged that the distribution speed of utility tokens will be high, and that the distribution speed of STO (Security Token Offering) tokens will be low. In the case of finely designed securities tokens, less effort will be needed to maintain the value of the token, but in the case of utility tokens, if the high distribution speed is not controlled, the value of the token will not be kept high and stable.
Then, let’s look at what methods and models token companies introduce to reduce the distribution speed of tokens.
1. Introduction of a profit-sharing mechanism
In the case of AUGUR (REP), a fee is paid to the REP holder to perform network operations. The REP holder uploads the predicted event results to the network and pays for them. This revenue sharing mechanism can reduce the rate of distribution of tokens.
2. Add Staking Function
When a network participant staks a token, the token is bound for a certain period of time, which may reduce the distribution speed of the token. At this time, the higher the amount of staking and the longer the period, the lower the distribution speed. The usual staking method staks a portion of the node for verification and pays for performing the wrong task. However, tokens used for casino operations, such as Funfair, are stocking 50% of reserves to pay for special events that occur in gambling. Most casino tokens have a high rate of staking. The DiFi 2.0 model, which was popular in 2022, also applied a model to slow the distribution speed of tokens and maintain their value by paying high interest to those who staked them.
3. Introduction of the Burn-and-Mint mechanism
Factom uses BME(Burn and Mint Equilibrium model). Factom uses its own network, not ERC20, and a certain amount of FCT is generated every day. FCT is also incinerated every day, which is determined by network usage. If there are fewer participants, the amount of incineration is less and the amount of FCT produced is higher. Then, FCT is under pressure to fall in price, and conversely, when the number of FCTs incinerated is higher than the amount of new issuance due to more participants. It is possible to predict price fluctuations because FCT moves linearly according to network demand.
4. Encouraging Token Holders’ Interest
For example, when viewing content, you can vote for content with tokens you have and increase your ranking.Or, if the content is proposed and reflected in the production, it can induce interest in token holders and reduce the distribution speed. If you include a fun process like a game in the process of participating in the network, more people will hold tokens.
5. Become a means of storing value
It is the ultimate goal pursued by utility tokens. People are more likely to hold tokens than sell them if they believe they are valuable. This is because they expect prices to rise. Another reason is the expectation that the value of the token will be stabilized. This is a very difficult thing to do. The easiest way is to give faith by showing that goods and services are actually available through tokens.
[cc : https://brunch.co.kr/@borderline/5 ]
Now let’s look at NFTs, zero mileage, and how CZero Paytoken, which work in relation to the mandatory carbon market on the CZero token economy, can slow down the token distribution that they use to keep their value.
- CZero profit-sharing mechanism.
CZero sponsors the carbon reduction project with funds raised through carbon-neutral NFT Mining. And as a result of this project, if you get a quantifiable carbon reduction value, you’ll generate zero mileage and pay it to NFT Mining participants (owners) and staker sponsors. And this zero mileage can be exchanged for the CZero Pay token listed on the DEX exchange, which is supported and swapped with any other coin through a 1:1 liquidity pool and reserve with USDC coins made from the project’s profits.
2. CZero NFT Staking
Basically, when a participant stakes a token, the token will remain idle for a certain period of time, resulting in a decrease in the distribution speed of the token. However, CZero gets the right to participate in governance and reward through NFT, not tokens, and CZero NFT is guaranteed a reward for carbon reduction for at least 20 years, the same as participating in renewable energy projects, so the staking rate is high and there are not many resale activities. In addition, there is a limitation in liquidity in that it is an NFT. This helps to reduce the distribution speed of NFT and maintain NFT value.
3. CZero Burn-and-mint mechanism
Zero mileage (=CZero Pay tokens) are generated daily in a certain amount depending on the amount of carbon savings generated by the effect of CZero Dao’s Carbon Neutral Initiative project. And zero mileage is incinerated in exchange for a CZero Pay token, which, when the owner of the CZero Pay token exchanges a CZero Pay token with another coin (USDC), increases the CZero Pay token in the liquidity pool and decreases the value of the USDC Stable Coin (=$1USD), instead of the CZero protocol prepares the pay token through the renewable energy project. The reserve will always have the same value of the total zero mileage distribution.
4. CZero Dapp, carbon-neutral games, metaverse, etc. that attract token holders’ interest.
CZero offers various programs to Dao participants on CZero Dapp. We will develop and provide services such as the Climate Crisis and Environmental Protection NFT Works Competition, the Climate Action Program, carbon neutral and social contribution games such as Alipay’s Ant Forest, and metaverse. In particular, the climate action program, in which Dao participants will participate, will be linked to the Voluntary Carbon Market (VCM) to create a carbon credit market.
5. Means of storing value
Owning a CZero NFT means that while contributing to carbon neutrality, you will be rewarded for the carbon-reducing effects you have contributed for more than 20 years. And the rewards that you get are kept in value and you can exchange them for other assets at any time. It has asset management and decentralization effects.
However, CZero should not only provide Dao participants with a model that maintains value by slowing the above token distribution, but also be recognized by providing individuals with the opportunity to actually contribute to carbon neutrality and carbon reduction for our sustainable future. The purpose of participating in CZero Dao should be to practice carbon-neutral, climate action, not investment or profits.
