Thank you Professor @wahyunahrul for this insightful lecture on token re-denomination. This post is in response to the homework tasks.
Question 1: Explain what Token Redenomination is and what distinguishes it from currency or other assets re-denominations.
We consider Redenomination to be the modification of a currency, most probably due to monetary inflation occurring at a higher rate or currency devaluation.
This modification involves an old currency being exchanged for a new one at a set rate. We also know tokens to be a special crypto-based currency. They represent trade-able assets that reside in their blockchains. Putting them together in one context, we define token redenomination as the modification or exchange of an already existing token to a new one at a fixed rate.
Oftentimes, token-based projects have such an excellent success rate that there is pressure to create a large demand for the token for many people. Consequently, the large demand makes the token experience a spike in price. This is advantageous for investors who have a large capital. It is disadvantageous for investors who have little capital, un-enabling them from participating in the investment of the token.
Token Redominaton is a guaranteed way by which developers can bridge the gap in this divide. In token redenomination, the token goes through a simplification process where the worth of the token currency is not lost but contained within the currency. The developer takes the token redenomination step to increase the liquidation power of that token currency.
The distinguishing factor between token redenomination from currency or other assets denomination:
I believe one of the distinguishing factors between token currency redenomination and redenomination of other assets or fiat currency is the application process or execution. In fiat currency, old currency notes are exchanged for brand new currency notes. Here in my country, in an economic crisis like inflation and devaluation, the Central Bank of Nigeria is in charge of issuing new fiat currency notes. In token, this exchange is done digitally. Within the exchange platform of the token currency, investors can easily swap for the most available invention.
Question 2: Mention the advantages and disadvantages of token redenomination.
Advantages
There is increased liquidity
There is an increase in the market performance of the token
Token redenomination is attractive to project investors
Token redenomination promotes publicity of the project
There is an added value to the already existing token.
There is a significant reduction in hyperinflation and inflation of the token.
It gives investors the opportunity to participate in decision making
Disadvantages
There is a fee associated with swapping old tokens to new tokens.
Amount of tokens might reduce after swap due to the swapping rate.
Might discourage old investors from further investing.
There may be disagreements between certain sectors of the investing population
Success is not completely guaranteed
Confusion might arise concerning the slight change in details and statistics
Scammers and hackers might capitalize on this confusion to offer similar but fake services to the community
Question 3: In your personal opinion, do all Cryptocurrency projects need to do Token redenomination?
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In as much as token redenomination has been established as an important tool in the crypto world for devalued tokens, I do not think all cryptocurrency projects need to undergo token redenomination.
Token redenomination can only come into play when there is a serious case of huge token devaluation or inflation. It would be needless for a crypto project that has had no issue or anything of the sort to undergo token redenomination. Token redenomination should be limited to tokens that have undergone devaluation or hyperinflation and not tokens that are progressing as planned. So no, in my personal opinion, not all cryptocurrency projects need to undergo token redenomination.
Question 4: A Token that is currently doing token redenomination
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A project that has undergone redenomination is the NPXS token project. It has been redenominated to PundiX. The token redenomination began on March 30, 2021. There are 3 ways through which NPXS can be swapped for PUNDI X on the platform:
manual swap at the pundi x official site
auto swapping in the x wallet
auto swapping in the supporting exchanges
How to swap NPXS for PUNDIX
I will be using the manual swap through the pundix official website.
- Step 1: Go to the website (I will be using the mobile version)
- Step 2: Click on the "swap now" button located at the bottom of the yellow box
Another window appears displaying the wallet to be downloaded
- Step 3: Click on the "Go to download" button in the white box
A separate window opens displaying where you can download the wallet on different versions
- Step 4: After inputting the necessary details required for setting up a new wallet
The following default page is displayed on the app:
- Step 5: Click on what the arrow is indicating in the above screenshot
Then click on "swap tokens"
- Step 6: In this window, we input the amount of token we are swapping for the NPXS/PUNDIX token
The insufficient balance displayed at the bottom of the page shows that i do not have enough in my wallet to carry on with the transaction
Question 5: Analysis of PUNDIX token project.
Pundi X token is a cryptocurrency project aimed at improving cryptocurrency transaction services that actually help out in life experiences with people. The project’s purpose is to create a seamless process of the transaction and to make crypto-based expenses to be as simple as using your credit card.
The objective of the developers of the then NPXS token which has currently become PUNDIX token is to ensure that the token is used on their POS devices which are Etherum based. If this objective comes to fruition, basic banking services would be accessible to local and underdeveloped regions.
Current price - $1.27
Rank - 234
Market Cap - $329,683,829
Volume - $26,722,962
Volume / Market Cap - 0.08196
Circulating supply - 258,491,637.23 PUNDIX
Maximum supply - 258,526,640
Total Supply - 258,491,637
Watchlist - 37,644
Its rank at #234 out of thousands on coinmarketcap shows that it is a good project. Its watchlist is also large, meaning that the project is attractive enough to have thousands of investors watching it.
The above shows the price chart of PundiX. The current price of PUNDIX is pegged at $1.27. There is every possible likelihood that this price will skyrocket as PUNDIX positively progresses. The realistic application of the PUNDIX token has given it significant value and it has also become more relevant in real-world applications. From this, I believe the PUNDIX token is worth investing in.
Conclusion
Conclusively, we understand how important token redenomination is and the role it plays in the cryptocurrency ecosystem. In cases of massive inflation and devaluation, all hope is not lost for token currencies going through this crisis. Token redenomination not only saves the day but also boosts the overall performance of the token. It is a good way of approaching cryptocurrency-based issues. It would also be very necessary for current and future developers to ensure that the risks of losing tokens during the process of token redenomination be reduced to the minimum.