The wave of "absolute deflation" of platform currency is coming, how should exchanges make choices?
Platform currency refers to the token issued by the digital asset trading platform.
In the early days, the platform currency was mainly used for deduction of platform fees, participation in profit distribution, platform voting, etc., and its value was derived from the ecological function construction of the platform currency. However, with the rise of the platform currency repurchase and destruction wave, the price of the platform currency is increasingly determined by its own supply and demand relationship.
Since the beginning of this year, the OKEx platform has destroyed 70% of the issued platform currency OKB at one time, declaring that OKB has entered an era of absolute deflation since then. OKB immediately surged 87.5%, reaching a record high of $7.51, and led the overall rise of the platform currency sector.
For a time, many exchanges followed suit.A new wave of destruction aimed at the absolute deflation of the platform currency is officially coming.
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1. Platform currency price factor model
With the rise of the platform currency repurchase and destruction model, we need to build a new platform currency valuation model to analyze the impact of the destruction model on the platform currency price.
First we assume some parameters.
T is the total demand for platform currency by all participants in the market for a period of time. These demands include voting with platform currency, transaction fee deduction, and investment. For simplicity, we assume that when people use or invest in the platform currency, they always consider the value of the platform currency, so that T can be measured with legal tender;
P is the exchange price between platform currency and legal currency, indicating how much legal currency can be exchanged for one platform currency;
M is the supply of platform currency, and its total issuance is fixed;
V is the number of times the platform currency is exchanged within a period of time, representing the circulation velocity of the platform currency, so the total amount of platform currency used for transactions within a period of time is MV.
Now let's analyze the demand for platform currency. The total value of the platform currency we need is T dollars, and for every transaction corresponding to 1 dollar, we need 1/P digital currency to complete. Therefore, T/P is the demand for platform currency within a period of time, so:
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Formula 1)
It can be seen from the above formula that the price of the platform currency will rise with the increase of the demand for the platform currency, and will fall with the increase of the number of the platform currency, which also explains why the result of the platform currency repurchase and destruction model often leads to an increase in the price of the platform currency .
At the same time, factors such as platform currency ecological construction and function expansion will increase the demand T, so let these influencing factors be x𝑖:
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Formula (2)
It can be seen from this that the platform currency ecological construction, function expansion and other strategic layouts will also promote the rise of platform prices. However, due to the frequent changes in the stimulating effect of these influencing factors on demand, the impact on the platform currency price (that is, the coefficient of each influencing factor in the above formula) is sometimes strong and sometimes weak, positive or negative, unlike the direct destruction of the platform currency price The impact is more concise and positive.
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2. Price analysis of the three major platform coins under the tide of destruction
After reading the commonality, let us analyze why the market performance of each mainstream platform currency with a destruction mechanism is huge.
（1） OKB
OKB originally planned to issue one billion, of which 10% was used for foundation operations, 10% was used for early shareholder purchases, 20% was used for team incentives, and 60% was used for ecological operations; and among these 60%, another 300 million OKB was given out in the 2018 Spring Festival red envelopes and OKB reward point card for reservation purchase fee, and entered the market circulation.
In this wave of OKB destruction, OKEx will directly destroy 70% of OKB that has not yet entered circulation. Since then, the existing OKB has only 286 million OKB in circulation, and OKEx officials later announced that OKB’s repurchase and destruction measures will remain unchanged, and that contract revenue will be included in the repurchase funds in the future. Since then, OKB has become the first Absolutely deflationary platform currency.
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OKB price chart since the beginning of this year
（2）HT
HT originally planned to issue 300 million HT, of which 100 million HT is used for ecological operations, 100 million HT is used for team incentives, and 300 million HT is used for point card packages and has entered the market.
On February 29, Huobi’s official website announced the destruction of 147.4179 million HT, accounting for 29% of the total amount of Huobi. The price of HT rose from US$4.89 at the opening of the day to US$5.48, with a maximum increase of 12.07%.
The 147.4179 million HT destroyed this time mainly came from two parts:
(1) 97.3423 million HT in the unissued part of HT operation, which accounts for 19.4% of the total issuance;
(2) The previously established investor protection fund totaled 50.0756 million HT.
It should be emphasized that this part of the HT of the investor protection fund is the HT that Huobi used to repurchase from the platform revenue in the past. The market has previously expected that this part of HT will not enter the market again, so the part of the destroyed HT has a significant impact on the price. The impact is not large.
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HT price chart since this year
（3）BNB
The total amount of BNB issuance is constant at 200 million, of which 100 million is publicly issued in the form of ICO, the founding team members hold 80 million, and another 20 million is used for angel round financing. According to the Binance white paper, BNB will continue to be destroyed until the total amount drops to 100 million BNB.
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3. Conclusion
3. Conclusion
Judging from the destruction of mainstream currencies this time, OKEx chose to destroy 700 million OKB, and all existing OKB has been circulated in the market. Therefore, with the development of repurchase and destruction in the future, OKB has officially entered the era of absolute deflation; Huobi also followed up This wave of destruction has led to a total of 147 million HT destroyed at one time, accounting for 29.48%. The difference is that 50 million HT has been withdrawn from circulation, so the increase brought by the destruction is limited; Binance did not follow up the wave of destruction, so The performance is not eye-catching.
As the center of the digital currency industry, the exchange has attracted much attention from the market. The operation of platform currency is one of the core businesses of the exchange. When the trend of platform currency repurchase and destruction forms, only by transferring the interests of the exchange team to customers and implementing "absolute deflation" can it win market recognition.
