The main feature of Minter as a flagship of an "Internet of Money" is it's token's economy model. In this article we will try figure out how it works and what are the factors, influence on issuing and existence of tokens.
Preparing for token creation.
Before you create a token, especially if it will have a real usage, you should carefully calculate its economy and understand why do you need this or that parameter. The main elements in the backstage of every token are: reserve, CRR (constant reserve ratio) and token supply. We won't discuss ticker's fee as it is not so important except 3 and 4 lettered tickers, that are very attractive for community members. But they are expensive enough for most projects, at least on the start of their life, and they are not ready to invest a lot in ticker of their token.
Very important moment - to choose amount of tokens for creation from the start. And we will start from token supply because the token's utility should have some price. It really doesn't matter how much is the service or staff costs in custom token, main price is absolute price, in USD for example. But you should realize that, for example, loaf of bread with the price of 10,000 tokens looks very strange. The same thing with the price like 0,0001 token. Here in crypto we are ready for an enormous amount of nulls but in real life, people not related to crypto doesn't need it, right? I think it's obvious. So the conclusion is: measure the unit cost of your product with the value of the token to make it look reasonable at least at the first stage.
Tokens are backed by the reserve that were locked by the creator and along with the token amount determines starting price, volatility level, the price of the entire project and even project's trust level. We will talk about volatility later and now we will talk about trust. Trust is a very subjective thing and for the low community project it's not critical to have low reserve. Especially if you're planning to buyback your tokens in time and do not predict huge buys of your tokens by the third party. But if you're creating something serious and have a big plans, so you cannot disagree that low reserve with couple of thousands of BIPs will not look seriously. Big projects are usually have big reserves and big reserves are made from the start. And you'll have more trust with high reserve cause that will show that you have serious plans, you invest a lot in developing of your project
And volatility, that mostly dependent on CRR, also depends on the reserve. It will be easy to manipulate the price of your token even it has high CRR but low reserve, by the high buy volume. As a result, we will get high volatility and manipulability, which we tried to avoid with high CRR.
This parameter is one of the cornerstones of every project. Only a few projects with low CRR could show stable prices and/or stable growth. Because the lower CRR is the easier to manipulate the price. More of that, it makes little sense to delegate a coin with CRR below 70% . Minter's CEO said that too. The thing is that only 10% of token's price will be calculated for rewards during delegation of the token with CRR = 10%. That's not very attractive, isn't it?
If you're planning to create stable price or not too volatile you should set higher CRR, and if you want to fix the price to bip then set CRR = 100% and it will never change.
Example - Custom token MAGAZINE.
Let's have some practice with our channel's token, called MAGAZINE.
Name. As our token wouldn't be like something great, we had no need to pay higher fees just for the name (ticker). So we took a name related to channels name and cheap. Here is a price for ticker length:
3 letters - BIP 1,000,000
4 letters - BIP 100,000
5 letters - BIP 10,000
6 letters - BIP 1,000
7-10 letters - BIP 100
The second part was to set a reserve. We didn't think too long as there was no need and no free funds for a high reserve, so the starting reserve was 1500 BIP + 100 BIP fee for the ticker. SO the starting budget was 1600 BIPs. CRR was set as 75% and had two goals:
1 - To delegate our token
2 - with low reserve and demand, that shouldn't grow in near time, we didn't expect high volatility. But during buyback and further delegation our token will have a stable growth in price and with higher capitalization the volatility will be lower in time.
After releasing our token we've faced speculators, who are buying almost every token from the start to obtain fast profits. Well, they've sold the most part of the tokens next day and the price became stable enough. The day later we bought and delegated some more tokens and the price grew up again. You may see it on the chart below:
You may see from our example how does low reserve with high CRR lets the price be volatile and how it's easy to manipulate the price.
Choosing token to buy.
Everything we've talked previously should be checked even if you are going to buy any token. Tokens with low CRR are volatile like tokens with low reserve. If you don't know who and why created this token, you may face a hard dump of it's price some time later by the tokens issuer. So one more conclusion is to look at the delegated tokens amount. If the most part of tokens amount is not delegated , even if it has high CRR and reserve, and the most volume is at one account, it could be sold in one time and token buyers will be in poor position.
So, finishing the token model lets set a conclusion: created a functionality with instant liquidity of custom tokens, Minter's team gave all of us a powerful tool for almost borderless usage of the blockchain and cryptocurrencies. The next move should be done by those who will create or integrate their business model with tokens created in Minter. More of that, almost everyone is able to create his own token, make it useful and receive profits.
We've looked at all the main parts of Minter's economy, now it's your turn to create, buy and use all of it!
Thanks for reading!