Explain what is Token Redenomination in your personal opinion? What distinguishes it from currency or other assets redenominations?
Redenomination refers to a situation whereby funds is injected into the economy in form newly calibrated currency in order to manage the harsh economy effect caused by inflation and devaluation. This process is carried out by an agency controlling a currency like the central bank in the case of a fiat currency.
Token Redenomination is usually done to enhance the buying power of the cryptocurrency. Token redenomination is carried out whenever the purchasing power of token is hit by hyperinflation. When there is inflation in the system only a few persons can participate in transactions, in order to enable more persons participate or have access to coin, the coin developer may decide to redo the same coin with the aim of making the available to more persons who would like to invest in the token.
What distinguishes it from currency or other assets redenominations?
There are several factors that differentiates token redenomination from other assets such as the decision to redenominate fiat currencies is usually taken by the central bank of the affected country. In the case of cryptocurrencies, the decision to redenominate is being done by the coin developer and retail investors who did not have the token can purchase it after redenomination while fiat currency requires that a person must be in possession of the old currencies that they would use for exchanging with the new one.
Cryptocurrency redenomination usually involves a redo of a particular coin while fiat currencies may only require that the central removes an extra zero from the currencies. Token redenomination usually makes provision for investors to vote either for or against the decision of the developer while in fiat currency the power to redenominate resides with the central bank and the government of the state.
Mention the advantages and disadvantages of Token Redenomination
Influx of new investors: during token redenomination, there is always an influx of new investors into the market. This new investors who are mostly small investment retailers are likely to push up the price of the due coin due to higher demand from investors.
Increase in market liquidity: the resultant effect of having more investors in the market is that there would be more assets in the market which
Increase in market capitalization: when there is high demand for a particular cryptocurrency by so many investors due to redenomination, there is every possibility that its market capitalization is going to be affected positively.
By using whole numbers instead of little decimals, it tries to provide more ergonomic or human-readable units and a more straightforward computation technique.
Fraud: there are possibilities that investor’s funds could be stolen by the developers of a cryptocurrency project.
False rise in market price: sometimes the rice of market value of a redenominated coin is influenced by hackers who simply manipulate the system in order to deceive investors.
Do all cryptocurrency projects need to do Token Redenomination? Explain in your personal opinion
Personally I think that token redenomination is not needed for all cryptocurrency project. This is because redenomination is done for a reason, and certain factors have to be put into consideration before the decision to redenominate comes up. Redenomination is usually done to make a crptocurrency more readily available to retail investors. It is only when there is a short supply of a particular coin that developers can begin to check how they can redo a coin in order for it to compete favourably in the market.
If a coin is not circulating only among a few individuals then I would not be necessary trying to redenominate. Not all cryptocurrency projects are going to suffer from short supply in the market. Conclusively, we state categorically that not all project needs to have a redenomination.
Choose a project that has or is currently doing Token Redenomination and show how to convert old tokens into new tokens. (Screenshot Required)
I made a research and I choose DREP Token
It is a token that is issued by the Drep foundation whose aim is creation of connectors and tool kits that are based on the block chain technology. Ethereum is the block chain on which it is built., it tends to provide solutions so as to enhance issues relating to flexibility, ease of use and an integration that is frictionless. Developers of DREP, notified its community about the plans to upgrade to DREP 2.0 as part of its future Journey of NFT+DeFI. In other to achieve that upgrade,there was a reduction in the token supply from 10,000,000,000 to 100,000,000. A smart contract swap was also implemented starting from 03/05/2021 to 01/09/2021.
Its algorithm is the schnorr multi-signature that is based on secp256K1 which helps to reduce problem of overhead transmission,thereby producing effective network efficiency. It makes use of homomorphic encryption that helps to protect users privacy. It makes use of a programming system that resembles that of JAVA which helps to decouple modules for clearer logic,when codes are refactored.
Due to a token redo, the contract address was changed and the token upgrade will be in a 100:1 ratio which simply means that all 100 old DREP will be equivalent to 1 upgraded 2.0 DREP. Holders of the old DREP will be unable to swap it once the deadline elapse. The deadline was 2021-09-01. Failure to swap or use up all old tokens will make it useless.
The 3 major problems DREP strives to address are;
• mismatch occurring between block chain technology and enterprise need
• poor performance of public chain and the reduced experience by the developers
• few user bases and segregation in the public chain ecosystem
• I logged into my metamask, and made sure i was on the Ethereum network.
• I clicked on the menu bar below
• I selected browser
• I input the address DREP.swap.org
- i was asked to connect to my wallet
- Due to insufficent fund,i was unable to complete the process
5). Analyze whether the token from the project you chose in question number 5 is worth investing in. (Screenshot Required)
DREP is actually a good long term investment, as it has been predicted that its price will get to a minimum of $10 before the year 2026. Its algorithm is the schnorr multi-signature that is based on secp256K1 which helps to reduce problem of overhead transmission,thereby producing effective network efficiency. It has actually grown massively since its token renomination.
It makes use of homomorphic encryption that helps to protect users privacy. It makes use of a programming system that resembles that of JAVA which helps to decouple modules for clearer logic,when codes are refactored. This token can be used to perform transactions on its block chain as well as gas fee payment. Its price was $0.5376 as at the time of my research.
Conclusion
Token renomination is done to enhance the price of a coin. Though it is advantageous to small investors, but it can lead to losing of the reason behind the project of the coin. It helps also to make the coin available to everyone. Special thanks to @wahyunahrul for the wonderful lecture as I have fully understood the course and can perform swapping on my own.
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