source

Token Redemomination

Before we go any further let's define the Terms that make up our topic which are token and redenomination

A token is a digital asset built on a blockchain in regards to a project and whose value is determined by the success of the project. It is distributed or sold at low prices during ICOs or IEOs.

Redenomination is the process by which the value of something is being split into smaller or lager fractions of an initial or standard value.

From the above subdefinitions, we can define token redenomination as the process by which a given company or token developer exchanged her old tokens for newly developed tokens. It is simply a means of recalibrating the previous token to either make it cheaper or increase the volume available in its ecosystem.

we can also say it is the production of a new token ; at an acceptable ratio to the old one, to replace the old token probably because the old token has lost value or because the value is too high that it becomes difficult for small traders or investors to invest into the project. Token denomination is Analogous to the Fiat currency denomination which involves the creation of another currency or unit of currency to replace the old one due to the loss of value of the Currency and inflation; like the Zimbabwean dollar, or due to the joining of a political Burble ; like the French Franc. In the case of token redemmination, the symbol of the new token may be slightly different from the old token and the name of the token also modified.

Difference between Token Redenomination and Fiat currency redenomination.

Redenomination is not just a term limited to cryptocurrency alone, but a term used even in the Fiat money currency. In assets or fiat redenomination, hyperinflation, devaluation and host country joining another currency union are the main reasons while fiat currencies are redenominated. While tokens redenomination happen as a result of token scarcity for low income investors and decrease in token traded volume. some currencies has over the years had to redenominated reasons like inflation; to avoid carried a large load of money that can not purchase much, and also to fit into some Political or economic block and in Cryptocurrency, one reason for redenomination is to attract small investors.

Below are some Points of contrast between Token redenomination and Fiat currency redenomination.

1. Tangibility: Token denomination involved the Introduction of a new token of an older type but with less value and this Whole process is done digitally using Cryptocurrency Exchages, and no form of physical exchanging takes place whereas in the fiat currency redenomination, the old currencies are traded for the new one at a fixed exchange rate and this process is done relatively physically through banks.
2. Effectors: For the token redenomination, those who effect or implement the resolve is the creator's of the token but in the case of the Fiat currencies, the Redenomination is implemented by the central bank responsible for the minting of the Bills.

MERITS OF TOKEN REDENOMINATION.

1. it gives room for small and more investors: token redenomination allows traders who are interested in investing into a project but do not have the Big capital to havee access to the project and invest in smaller denomination. This helps to make the network even more decentralized as the network is not just limited to the whales.
   More investors ensure more value for the token. you might be wondering why are small investors important, why not target the whales? A cryptocurrency token that comprises of big investors mostly is not a very stable one because a big investor can decide to withdraw tho or her investment and the value of the token begins to plummet , but if a network consists plenty small investors, it is a very strong one and will be even more stable with time, as no few investors can have a considerable influence on the price of the token.
2. Increase in token traded volume: Because more trades with low capital will be able to invest and buy the token, the Market Capitalization and traded volume will increase.
3. Exponential growth of token ecosystem: Because of the increase in Market Capitalization and investors. The ecosystem become busy and other projects can be attracted to the community.
4. liquidation: Due to many investors coming into the project, there is increase in funds which can serve as liquid to liquidate transactions. Also, more money can be generated to fund other projects within the same community.
5. It's discourage the activity of whales: because the tokens are few in volume certain investors with big money can easily manipulate the market to their advantage but with redenomination such act will be minimised.

DEMERITS OF TOKEN REDENOMINATION.

1. Gas fees : To exchange or swap old coins to new redenominated coins usually cost a fee. This fee is introduced for security reasons and for reward to validators but it causes a major setback to redenomination as holders of the old coin may not be very willing to pay such fees to Swap their coin especially if it is very small.
2. Exchange ratio: Sometimes the exchange ratio may not be something good at all especially if the investors sees that it wont give him or her value for their investment. This is one major issue with token redomination because the investor may begin to doubt the viability of the project and may not see need to Swap considering the Gas Fee too.
3. Reduction in value of assets: Old investors with big capital might experience a reduction in the value of their assets because in must cases the value is reduced upto 100%.
4. Suspension of transaction: During redenomination transactions are usually suspended until the redenomination is over. This might affect trading temporarily.

IS TOKEN REDENOMINATION COMPULSORY FOR ALL TOKENS OR PROJECTS?

My answer is NO, if the token is doing very well in terms of market capitalisation, ecosystem growth, and traded volume. Then, there is no need for token redenomination. It is not compulsory for all crypto currency project project. In fact the only projects that need redenomination are those that have devalued seriously or those that the value has greatly increased and this is done so as for the investment in those token to be Increased and easy for traders or investors. What this means by implication is that one should only think of redenomination when the token is in an undesirable situation like low investment due to the High price of the token, so as to interest or artract small investors and stabilize the project.

EXAMPLE TOKEN REDENOMINATION

There are tokens in the process of redenomination and others that intend to follow in the future. One token that has seen great success after denominationn is the Pokadot, but we will be talking extensively on the Pundix redenomination. A notable token that recently also underwent Redenomination of it's token is the Pundix. The exchange ratio has been fixed at 100:1 NPXS to Pundix.

Steps to follow in other to SWAP from old token to the New token
Step 1: Visit the Pundix website (pundix.com).

Step 2: Click "swap now"

Step 3 : Click on connect wallet and select the "wallet connect" option to connect to your wallet.

Step 4: input the amount of token you wish to SWAP and approve NPXS ; There is some gas fee to be paid in Ether.

Step 5: Click on " Place order " and the transaction will be processed.

WHY You should invest in Pundi X

Pundi x is token that runs on the Ethereum blockchain and one that should be taken seriously considering that the Ethereum blochchain is investing and paving way for innovative utilities like the Dapps and also, from the history of Pokadot that was mentioned earlier, redenomination helps a coin attract small investors who are confident that their stake in the project will amount to some good turnover in the nearest future. Bellow is an analysis from coingecko .

CONCLUSION

Redenomination, just like the Fiat currency redenomination, is the Introduction of a new token to replace and old token who's price may be too high for Smaller investors or A token who'ssse valhe isngreatlybfalling with the hope that it will attract small investors and the price of the token will rese again. This strategy has in theory helped some tokens like the pokadot and will be of help in the cases of devaluation of the value of a coin or high coin price. We looked at Pundi x and the great prospects of investing in it ; the blochchain is built on and Dapps.

Cc: @wahyunahrul