Requesting feedback and criticism for NONICO-TB ERC20 (and EOS in the future) token funding concept
I'm developing a concept for funding cryptotoken projects that heavily depends on the idea of token burn (Vitalik calls it sinks). This approach provides increased protection for project contributors and aligns incentives for token owners and token developers.
I'll be using a temporary NONICO-TB (transfer burn) name to describe this category of token smart contracts.
The NONICO-TB smart contract has the following critical features:
ERC20 compliant
An NONICO-TB contributor can withdraw their contribution in ethers in their entirety (majority). As soon as contributor withdraws ethers, tokens are burnt.
As soon as investor uses an ERC20 transfer function to move/sell their tokens to another address, a certain amount of tokens is burnt (transfer burn)
Transfer burn rate is set dynamically either by token holders votes and/or by a predefined function
As soon as tokens are burnt, a corresponding amount of ethers becomes available for withdrawal by project owners
Cryptotoken investors are often expecting returns of 10x-100x. Market dynamics allows implementation of relatively high transfer burn rates.
Transfer burn rate starts high ( 1-10% ) at the early project stages and fall to 0.1-1% with the increase of transfer volumes/time/valuation etc.
At any point in time, any token owner in a contract conforming to the NONICO-TR standard can withdraw ether.
Any NONICO-TR token sale implements a default (defaults are very powerful) but voluntary donation scheme to provide funds for early stage runway
Token exchange rate in ethers has a defined minimum
NONICO-TR contributors' funds have a high degree of protection against fraud/incompetence/evil black swans
A possible real-world example:
- Alice purchases 1,000 tokens at a NONICO-TR token generation event at a rate of 1,000 tokens = 1 ether.
- After smart contract transfer functionality is enabled, trading starts.
- Cheshire missed the token generation event but is willing to purchase tokens from Alice. Remember, Alice can always withdraw all her tokens at a token generation event rate.
- Therefore Alice will consider selling her tokens to Cheshire only if his offering price is more than one eth per 1,000 tokens + Ethereum transaction fees + NONICO transfer burn rate.
- Cheshire is offering to buy 500 tokens from Alice for 0.6 ethers. Fees for token transfer are set at 5% which means that transfer of 500 tokens will burn 25 tokens, Cheshire will get 500 tokens and Alice will hold 475 tokens and receive 0.6 ethers. At this moment 0.025 ethers become available for withdrawal by smart contract developers.
- Cheshire now holds 500 tokens that are redeemable for 0.5 ether.
One of my concerns is that transfer amounts could be too low to fund development of the tokenized system.
Transfer burn concept is just a part of the token economics and is not a substitute for value generation/utility arising from other token properties.
In general, I believe that token burning is severely underutilized and token burn rates could be at least a significant fraction of eth transaction fees.
I'm researching variations and enhancements of a transfer burn strategy. I've intentionally simplified the concept here as I'm looking for feedback and criticism for a core idea.
Thanks!
Vitalik Buterin tweeted @ 20 Oct 2017 - 11:36 UTC
In short: good token economics require sinks (ie. fees), not just flows
Disclaimer: I am just a bot trying to be helpful.
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