Our 6th token burn is completed: what does it mean for the PXP ecosystem?
Last week we completed our 6th token burn. It is essential for the PointPay ecosystem, so we want to reveal what stands behind the PXP economics.
If you’ve invested in crypto before, you probably evaluated token economics, or tokenomics in short, of the targeted asset. This word denotes a model of economic stimulation and distribution of any cryptocurrency. In particular, demand is determined by the network participants that hold or use either coin or token.
While central banks can print money at any time without the participation of currency holders, token economics is built on code with mathematical rules and is governed by a decentralized network. Quite frankly, tokenomics are superior to classical state-controlled economic models.
What kind of tokens model exists?
Inflationary model
It is easy to understand the nature of inflationary tokens as it is similar to fiat currencies, such as Euro. How does it work? Just imagine you can issue as many coins as you want over time. You can decide to limit the maximum you can create per year, but there is still no “ceiling” for the total supply of your crypto.
Pros: It is the easiest to understand and the most studied economics model.
Cons: No surprise that the endless issuance of any asset can lead to the constant inflation and devaluation of the coin. It is debatable whether inflationary economics can ensure the sustainable development of a digital asset.
Ethereum (ETH) and EOS (EOS) are examples of inflationary assets.
Deflationary model
In simple words, the maximum emission of a deflationary asset is limited forever. The first coin built on deflationary tokenomics was Bitcoin. What’s more, crypto projects can also remove digital assets from the circulating supply using buyback, burn, or burn-on-transaction mechanisms. For instance, the Binance exchange is burning its native cryptocurrency every quarter.
Pros: Deflationary tokens are free from inflation. That means the decrease in supply affects the natural demand for an asset.
Cons: Even though this model is perceived as the most sustainable in a long-term perspective, there is a risk that users are more likely to accumulate deflationary crypto assets instead of using them.
Bitcoin (BTC) and Binance Coin (BNB) are examples of deflationary assets.
Dual-token model
The Dual-token model is a bit more complex than presented above. Imagine you issue two tokens with different purposes. One is used as a value exchange within the network, while another you sell to the community to attract funding. This is the most common dual-token model, where one token acts as a utility and another as security.
Now there are also modifications to this model. For instance, MakerDao issued a governance token — MKR — used by the community to manage the network and a stablecoin DAI.
Pros: Using two tokens allows separating financial incentivization from the utility.
Cons: The complex nature makes it harder to understand and estimate the viability of the dual-token model.
MakerDao (MKR/DAI) and VeChain (VET/VTHO) are examples of the dual-token model.
Asset-backed model
Do you remember the gold standard that was at the heart of the international monetary system until 1971? A similar principle formed the basis of the asset-backed token model. In that way, a coin is backed by another asset. Let’s take Tether (USDT), supposedly backed by the US dollar, for a simple understanding.
Pros: Asset-backed model allows creating stable assets while eliminating unwanted volatility.
Cons: In practice, it isn’t easy to assess how transparent the model is. For instance, it is doubtful now if Tether holds the USD reserve equivalent to an outstanding supply of tokens.
Tether (USDT) is a well-known example of an asset-backed cryptocurrency.
Why have we chosen the deflationary model?
There is no perfect token economics model. However, we are convinced that the limited total supply combined with the burn of PXP tokens will benefit our community in the long term.
The decline in the token supply, together with the increase in utility, maintains our token’s ability to retain value even in a bear market.
How token burning works at PointPay?
As promised to our community, we’ve burned 125 million unsold tokens on August 24, 2021. In addition, over the past two months, we have burnt about 4 million PXP with a total value of over $180,000.
PXP serves as a value exchange, allowing you to save on trading fees, get higher returns on deposits at PointPay Bank, and earn up to 40% per annum in the premium staking program.
As our network grows, so does the demand for our token. With the right incentivization and supply reduction, we can create an economic model that benefits all stakeholders in the ecosystem. This week, we’re planning to burn 1.2 million PXP tokens, so keep an eye on our updates.
💲 Buy PXP tokens: https://www.bithumb.pro/en-us/exchange/professional?q=PXP-USDT
💰 Earn up to 40% yearly with PXP staking program in PointPay Bank: https://bank.pointpay.io/staking
🏦 Remember, we are PointPay, and we are beyond banking!
💡Check PointPay Live-Roadmap (PointPay development in real-time): https://pointpay.io/live-roadmap/
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