A BRIEF INTRODUCTION
Not a day goes by that we don't learn something new in the world of the crypto market. We are at our 2nd homework in the 3rd week of the 4th season of Steemit Crypto Academy trainings. Thank you professor @wahyunahrul for this valuable explanation on the bid-ask spread. You can see my homework below.
1). Explain what is Token Redenomination in your personal opinion? What distinguishes it from currency or other assets redenominations?
Redenomination is something we are familiar with. In 2005, 6 zeros were removed from our TRY currency in our country. 1000000 Turkish Lira turned into 1 New Turkish Lira.
sourceExplain what is Token Redenomination in your personal opinion?
A currency's amount changes when Redenomination is done, but its value remains the same. This happens not only in physical currencies, but also in tokens in the cryptocurrency markets. Nowadays, blockchain-based projects are being developed. Cryptocurrencies that represent the quality of these projects are also called tokens. Sometimes these projects are based on very solid foundations. In such cases, the tokens of the project are very popular. The small investor cannot buy because the demanded token will increase in price or even gain too much value. This is where the issue of redenomination comes into play. Token developer makes Token Redomination. The goal here is to increase the number of tokens. Thus, the liquidity of the calibrated new token will increase. Small investors are also included in the replay game.
What distinguishes it from currency or other assets redenominations?
Redenominations in physical currencies are applied when inflation is high and purchasing power is low. The aim is to build trust and reputation for the currency. In this way, daily life and economic activities are greatly facilitated. Old paper money and new paper money have the same value. After a certain transition period, the old money ceases to be in circulation.
In cryptocurrencies, it is as if a new currency is entering the market with the same project. Even the logo of the old token and that of the new one are different. The transition process to the new takes place in the digital environment. It is allowed to use the old one for a short time. The most important difference is that while only the developer makes the token redomination decision, in other assets, redenomination is made by a decision made by people at certain levels of the government together.
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2). Mention the advantages and disadvantages of Token Redenomination
As with any change we experience, there are advantages and disadvantages to Token Redenomination. I'm listing them below, with brief explanations.
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Small investors start to be more interested. As hyperinflation will be eliminated with Redenomination, small investors who can't afford the old token will be able to invest in the new token.
The token becomes more liquid, the volume in the market increases. With the increase in the number of small investors, the trading also increases, as the market expands further, the token becomes more liquid.
Project support increases. The price has already increased as the project has attracted great interest. Since the developer gives the impression that he will develop his project further by doing Redenomination by being interested in the project, the investment in the new token increases. Thus, the project support is received.
The token gains value. After the redenomination, people in the market are more interested in the token. The capitalization value of the cryptocurrency increases and the token gains value.
Existing investors who do not know about Redenomination may become worried and divert their investments to other tokens.
New investors who are considering investing may give up with the fear of fraud.
After redenomination, sometimes high sometimes low transaction fees are charged during the transition from old token to new. This situation is a disadvantage for the investor.
3). Do all cryptocurrency projects need to do Token Redenomination? Explain in your personal opinion
The purpose of redenomination is to revive the falling liquidity of a token whose price has fluctuated excessively. But there are also cryptocurrencies that do not decrease in popularity, although the price has risen a lot. In such cases, no matter how high the price is, small investors still continue to invest by buying a small amount of this high-priced commodity. So its liquidity is still high. For this reason, Redenomination is not necessary in all cases.
Another issue is one of the issues we count among the disadvantages. In my opinion, there is no need to intervene in a project that has already been successful, unless there is an extreme need. Because this will definitely make all investors deal with additional transactions and unnecessary costs. Perhaps it will cause many investors to quit supporting the project.
In summary, I don't think all cryptocurrency projects need to do Redenomination.
4). Choose a project that has or is currently doing Token Redenomination and show how to convert old tokens into new tokens. (Screenshot Required)
Before we start the swap process, let's give a little information. PUNDI X is an Ethereum-based token. Redenomination processes started on March 30 and are still ongoing.
- First of all, we go to the PUNDI X website.
- On the page that opens, we look at the yellow highlighted area named NPXS in now PUNDIX. Click on Swap Now on the bottom.
Source: PUNDIX home pageAfter the swap page opens, we will link our wallet. I used metamask.
Source: PUNDIXswap pageWe approve our Metamask wallet. This will be easy since I have the plugin.
Source: PUNDIXswap pageWe are logged into the Metamask plugin, but we need to select the Network type to be able to connect to our wallet from the pundix site. Click on main ethereum network.
When we refresh our swap page, the NPXSs in our metamask wallet appear automatically. At the point I marked with the blue arrow, 0 appears. That's because it's not in my portfolio. If it was in my wallet, we would continue as follows.
Source: PUNDIXswap page
Source: PUNDIXswap pageThe screenshot on the left shows my linked metamask wallet at the top of the page. Unfortunately i have no balance.
If I had some NPXS in my account, for example, if I wanted to swap 5000, I would only get 5 PUNDIX in receive.
The rate of change is given as 1.000NPXS = 1 PUNDIX in the highlighted section below. At the same time, for this change, after writing the amount to be changed, the change fee is reflected in the attachment below. This amount is paid with ETH cryptocurrency.
- In this way, we can get rid of the old token and support the new one.
5). Analyze whether the token from the project you chose in question number 5 is worth investing in. (Screenshot Required)
PUNDIX is a token that I was not aware of before. I came across it while doing research when I wanted to learn about Redenomination. The project has a very productive idea, which I, as a small investor, will support. They are working on an infrastructure where we can make our daily payments with cryptocurrency. Even this feature sets it apart from many cryptocurrencies that are simply becoming a digital commodity.
When we examine the coin market cap data, it seems that the price is instantaneously $1.27. its trading volume in the last 24 hours is $25,910,981. The current CoinMarketCap ranking is #235
It is clear that there is a noticeable pullback on the PUNDIX price chart. This is not investment advice. However, it has come down quite a bit from the peak price it saw. There may be a significant increase in its price, it can be added to the portfolio, albeit slightly. Of course, it is recommended that everyone trades at their own risk.
Source: PUNDIX details on coinmarketcapIn light of the data I mentioned above, I think the Pundix coin is worth investing in. and I will add it to my portfolio as soon as possible. Because the front of the project is very open to real development.
Source: PUNDIX chart on coinmarketcap
6). Conclusion.
When we think of Redenomination as a digital update, it means that the relevant token is not left unattended. There is an entrepreneur who has not given up on developing the project. While the redenomination is done because the project is already growing, it shows that it has potential for further growth.
Each investor who will support the project will increase the liquidity. The market value of the token will also increase. But as never, these counts may not be 100% true here. Not every project can achieve the same success. The disadvantages we have mentioned may outweigh in some projects. In such cases, on rare occasions, Redenomination can be useless to the project.
In both cases, investors take their own risks. They should examine the project to be invested in detail and then make an investment decision.
Thus, we have come to the end of our homework by answering all the questions. Thanks in advance for the review, professor.
Cc:
@wahyunahrul
Thanks for your visit.
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