KickToken: Transition to a deflationary model
Recently, deflationary tokens have started showing extraordinary demand
Dear KICK Holders and those who still haven’t joined our friendly community but soon will!
Recently, deflationary tokens have started showing extraordinary demand. The reason is obvious: the more tokens are burned over time, the more profitable it is for holders to hold them, as with time, their share of the total supply increases. Below, I’ll tell you how this works and why it does.
Deflationary tokens have a system built into their smart contract to burn them with each transaction. Every time tokens are transferred in a blockchain, some percentage of them is automatically burned. That way, each transaction increases the percentage of owned tokens relative to the total supply, which decreases accordingly. The more transactions, the faster the supply decreases, and the faster the percentage of holders, who don’t transfer tokens, increases. Burning takes place in both — blockchain transfers and buying/selling on decentralized exchanges like Uniswap. No burning occurs when trading on centralized exchanges like KickEX.
Let’s take a look at an example. Suppose we have a total supply of 10,000 tokens. Holder A has 1,000 tokens, while other users own the remaining 9,000 tokens. Holder A thus owns 10% of the total token amount. Let us now imagine that there was a total of 5,000 token transactions within a period of 24 hours. 5% of them were burned, which represents 250 tokens in our example. This implies that the total supply is now 9,750 tokens, and Holder A’s share is no longer 10% but 10.25%.
In addition, almost all deflationary tokens incorporate a redistribution method, also known as staking, or POS (Proof of Stake). This method, like staking, distributes a small percentage of each transaction to token holders in proportion to their percentage of ownership. That way, the holders’ share increases even more: both because of the burn and because they receive additional tokens due to the distribution. Various contracts implement this in different ways: on Safemoon, tokens are sent to a specific pool, from where, once they reach a certain set amount, they are distributed to all holders. The KICK token uses a more advanced method, and each transaction redistributes the shares immediately to all holders.
Therefore, the more transactions there are, the faster holders’ shares increase. In theory, this should lead to a situation in which, after some time, there are significantly fewer tokens. This will result in the demand for them growing, which will dissuade holders from selling and allow a rapid decrease of the total supply. This is, however, just the theory of it. In practice, things might not turn out so rosy.
Almost all current deflationary tokens have a huge supply — quadrillions of tokens. As I said earlier, more transactions result in more tokens getting burned, which in turn will cause the token price to grow. As I said earlier, the more transactions will occur, the more will be burned, and the higher the token’s price will grow. Therein lies the catch that the creators of these tokens don’t come clean about: the higher the price is, the lower the number of tokens to be sent will be, which will cause burning and distribution times to slow. That is why the quadrillions aren’t going anywhere, and their supply can’t go down significantly even in ten years.
That’s why we’re doing the KICK token denomination so that we can initially reduce the number of tokens from 150 billion to 1.5 billion. This will allow the deflation process to work more efficiently, and reducing total supply becomes more feasible than with quadrillions, which will stay forever. So, yes, the slowing effect will occur in this case, but it will be much less pronounced, and the deflation will be several orders of magnitude more effective than for tokens with huge supplies.
Furthermore, most of the current deflationary tokens don’t have any actual products that they could be used for, and it’s not certain whether this will change in the future. Therefore, it’s more likely that in most cases, a significant demand will not occur. In KICK’s case, things are different: we already have working products, and the token is already being used to reduce and pay trade commissions, where it is also being burned. In addition, there will be more uses for the KICK token in the future. Not long after we replace the token with the KICK v8 version, we will launch our secret project that may show high demand. Later, there will be pro-accounts that will accept KICK tokens as a means of payment, and we will start integrating KICK as a payment method into third-party projects and businesses, leading to higher demand, more transactions, and, as a result, faster burning and more intensive token distribution to its holders.
For example, $500,000 worth of KICK token transactions were made on June 9, 2021. This means that with the current token parameters of 5% to burn, and 5% to distribute, $25,000 worth of KICK tokens would have been burned, and $25,000 would have been distributed to holders. Those with 10% of the entire supply would get $2500 worth of KICK tokens, and those with 1% would get $250. For passive token holders, I think these are excellent and very tempting numbers. If you extrapolate it to a month, then it becomes an entirely different figure. If you do this during a year, given the increasing demand and the growing number of transactions, this will become an astronomical figure.
Additionally, after the swap, we will start negotiations with top exchanges regarding KICK listing. Right now, so long as the token has a method of supply and it is unlimited, exchanges are afraid to list KICK, as it could lead to negative consequences for their users. However, once the token is replaced, the supply will be permanently restricted, and this risk will be removed. This way, exchanges will not only not be afraid of listing, but they will also be able to make money on staking, which will make KICK v8 many times more attractive than it is now.
The transition to a deflationary model will certainly and inevitably have a positive effect on the reputation and value of the token and will benefit all its holders. That means you should HODL KICK, believe in KICK, and your expectations are sure to be more than rewarded!
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Founder and CEO of Kick Ecosystem, KickICO, and KickEX.
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