Crypto Academy / Season 4 / Week 3 - Homework Post for [@wahyunahrul] Token Redenomination - Cryptocurrency Value Simplification

Hello Professor @wahyunahrul, I'm grateful for the opportunity to learn token redomination from you. It was a first for me so I was very interested in knowing more about it. Here's my homework task, I hope you like it

Redomination is the readjusting of the face-value of a currency, usually as a result of devaluation or hyperinflation by exchanging an old currency for a new one at a fixed rate. This is usually done as a result of the drastic change in the purchasing power of a currency. It is simply the equivalent exchange of a currency's bills for another with lower denomination. To make it easier, extra zeros are removed. One example is the redenomination of the Ghana Cedi back in 2007 such at a rate where 10,000 **Cedis** was equivalent to 1 **Ghana Cedis**, thus, it had four zeros taken off.

Token redenomination, in the same vein, is the recalibration on a token in order to increase the transaction power or liquidity of the token. This paves way for small-time investors to also invest in the token project which in turn attracts more investors and also increases the market capitalization value of the token. Some popular token redenominations are the SUN and DOT redenominations.

The difference between token denominatation and fiat denomination is with token denomination the developer of the token can redo the token so the token price becomes cheaper for small-time investors and not only when it experiences devaluation or inflation whereas with fiat currency, the denomination is issued and redone by the central bank of a country and it's done in response to inflation or devaluation.
One other difference is that for physical assets or fiat currencies, people who own them would have to go to a bank or an issued agency to exchange them for the new ones at the determined rate. Tokens however, have theirs done through an exchange.

Advantages of Token Redenomination

• Increase in investments:
  Token denomination gives investors with little capital to invest. With the reduction of the price value, investors with little capital will now be able to invest in the token project.

• Increased liquidity:
  As it was said before, when there's token redenomination, other investors are able to join in. This increases the number of people involved in the token's market. This increases buying and selling and other transactions in the market meaning liquidity will improve. This would not be seen as such if only a select few had access to the coin. Buying and selling would be stagnant as people would only buy or sell when they want to leading to illiquidity in the market.

• Increase in market cap:
  Market capitalization is used by investors to see how good a cryptocurrency is. Redenomination in cases where the token was devalued would see an increase in its market cap as investors would be interested in the remake. There's no remake that is the same as the previous one. The redenomination itself is enough to add more value to the token

• Boost in project growth:
  As investors join in the project, the funds the project will receive will increase which gives more room for development for the project. With the improvements and advancements that come with the project, more investors will be willing to join as they'll see it to be a profitable venture.

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Disadvantages of Token Redenomination

• Cost: Swapping an old token for the redenominated token comes at a cost and is not free as people might think. The cost or fee involved in swapping an old token for a new one can be high or minimal. Although it's usually not much, the idea of you losing part of your money is not exactly ideal and tends to discourage some.

Cryptocurrency projects do not necessarily need to redenominate tokens unless it has been devalued or hyperinflated. Redenomination is more or less a tool that is used to simplify a currency or in this case a cryptocurrency without reducing its value. A cryptocurrency project would only need to redenominate tokens when:

• There's a Lack Investors:
  When a the token price for a good project is too high, only investors with large capital are able to get involved. Those with smaller capitals are unable to invest therefore there are not many investors involved. When the token is redenominated, other investors are able to partake.

• The Token Market Needs To Be More Liquid:
  When token redenomination occurs, other investors like small-time investors are able join in on the project. This is good because when only big investors are involved in a project, the market of that token will be controlled by a few parties. Transactions in the market will stagnate as the number of people who would buy and sell will be few and will always be the same people. Thus, the market will be illiquid. Getting more people onboard will increase the market transactions, leading to development of the market and making it liquid.

• To Grow The Project Ecosystem:
  From the above we can see how redenominating tokens can lead to getting additional capital from investors. This also has an effect on the project ecosystem of the token's project. It's a norm to see upgrades when denominations occur and this is enough to convince investors that the project will continue to grow and hence, be worthwhile. This helps push the project forward.

Ultimately, there's no need to denominate a token unless it's necessary to do so. Most token projects have been around for a long time and has operated well during this period without being devalued or hyperinflated. As such token denomination would be a waste for such token projects

To swap SUNOLD for the new SUN token, one simple way is to use the TronLink Pro app. I chose this because I already have it installed. It's available on the Google PlayStore.

Once you open the app Click on the Swap feature

Tap on the arrow pointing downwards to choose your desired token. In this case the tokens are SUNOLD and SUN.

SUNOLD is on the left because that's what we're swapping and SUN is on the right because that's what we are swapping to.
The rate is shown down below so you can tell how much you'd get after the swap. I don't hold any of these tokens at the moment so there isn't much to see here.

Redomination is a tool that enables an asset have a comeback after it's been devalued or hyperinflated. Token redomination doesn't stop there but can also be used to give all investors especially those with little capital the chance to invest in the token's project. Token redenomination is very useful and helps boost the token project as well as, increase liquidity of the token and increase its market cap as well.