An in-depth analysis of the unique tokenomics of Lynchpin Token
November 27, 2018
The Lynchpin Token project was created with a clear purpose in mind: to develop a universal utility token; a stable coin that can be used as a safe medium of exchange without being affected in any way by hype or speculation. The true value of our LYN token lies within a network built around its use. Our unique tokenomics model is based on several core elements: supply, demand, and the 18 decimal point of Ethereum’s ERC20 smart contract model.
Generally speaking, mining and staking are accountable for creating a new token supply. This creates inflation similar to fiat currency, and usually, the last person that purchased a certain coin or token gets affected the most. Bitcoin is the perfect example. Those that bought it $20,000 back in December 2017, now suffer the most. Rather than create a new token supply, we, at Lynchpin Token prefer to pay the gas fees linked to the Ethereum network.
In the following lines, we will try to answer several fundamental questions pertaining to our business model and unique selling proposition. We hope that the answers will help paint a clearer picture of the Lynchpin Token ecosystem, as well as our mission to bring real adoption using LYN token into the market.
We’ve pinpointed four fundamental industry problems in the world of cryptocurrencies. With LYN we can solve them.
1. Hype triggers speculation, leaving no room for real adoption to occur. From an economical perspective, hype creates a bubble that will eventually burst. By using LYN, we control keep the price under control with a low supply and a proprietary merchant adoption program to increase demand.
2. Cryptocurrencies don’t have any real value because there’s no viable story backing up a concept. Most projects offer a vision, an idea, or a concept that might work in the future. We’ve created an utility token with applied benefits now, in the present.
3. There’s no utility proposition to most cryptocurrencies because people can’t use ICO tokens to purchase physical goods. They’ll have to wait for that token to be listed on an exchange, trade it for BTC/ETH, and then trade again for cash. LYN token holders can use LYN to buy physical goods directly from our partners’ websites. (one of our signed partners, is upcoming e-commerce platform Go Buy Bid, but more merchants will be announced soon).
4. Most project issue new token supplies via mininr or staking, triggering inflation and inevitable corrections. LYN token has a limited supply of 5 million LYN (3 million will be locked for 12 months, leaving only 2 million in circulation). We’re not offering any free tokens via airdrops or bounties because we want to create more demand and ensure the constant increase in price of LYN.
Understanding token supply
It’s impossible to put a defined price or set a value on a cryptocurrency without first acknowledging current and future supply. A given coin’s supply plays a fundamental role in establishing a price, but we understand things can get confusing at times. A token’s market cap usually becomes affected by factors like circulating & maximum supply, inflation, lost tokens, airdrops, and more. Understanding circulating supply, as well as the way it uniquely related to a coin is an important part of performing due diligence.
How circulating supply vs. total supply works for LYN token
If you do a quick Google search for CoinMarketCap, you’ll come across thousands of digital coins, each with a different circulating supply listed. Given that each token is different, the circulating supply has to be weighed against that token’s eventual maximum supply.
We, at Lynchpin Token, have divided our tokenomics into two core sections:
• Total token supply: 5 million LYN
• Circulating token supply: 4 million LYN
The remaining 1 million LYN tokens from the total token supply is reserved for our internal team and partners. Following the completion of our ICO, there will be a lock-up period of 12 months on:
• 1 million LYN tokens
• 2 million LYN tokens reserved for our private sale
According to CoinMarketCap, “locked coins cannot be sold on the public market; therefore they do not affect the price of token, nor the market capitalization”. By locking a total amount of 3 million tokens in a safe escrow account for 12 months, we limit supply and increase demand for LYN tokens.
For our public sale, we have reserved 2 million LYN tokens. These are the tokens that won’t be locked away following the completion of our ICO; token holders that purchased LYN during the public sale are free to trade their LYN as soon as the token has been listed on major exchanges.
While we are aware that some people will dump LYN tokens following the ICO, our greatest advantage is the limited supply. After the 12-month lock-up period ends, we estimate LYN token to have already increased 10x, 20x times due to demand. Why we predict there will be tremendous demand for LYN tokens?
Understanding token demand
Token demand is directly linked to the way a token is used. Depending on each project’s business model, demand can either increase or decrease. Lynchpin Token aims to create utility by leveraging several proprietary products and programs:
• LynPay Debit Card solution developed in partnership with LynPay Payment Solutions Pte. Ltd. This debit card will allow you to convert your cryptocurrencies into fiat to make payments for goods and services. To subscribe for one of the cards you would need to buy with your LYN tokens.
• LynPay POS machines which our signed merchants will implement to perform cryptocurrency transactions. This would allow direct payment to merchants using cryptocurrencies (e.g. BTC, ETH, LYN).
• LynPay multi-currency wallet. Version 2.0 of the wallet would make it a one stop solution to do KYC, sell your cryptocurrencies on an exchange, use your debit card, use the wallet to make purchases via the POS machines.
• LynPay merchant adoption program (We have already partnered with upcoming e-commerce platform GoBuyBid, and game development company, RMP Games). LYN tokens will be the main spending currency in the near future.
How token demand works for Lyn token
Since demand goes hand in hand with supply, we’ve chosen to limit our LYN token supply to 5 million LYN tokens throughout our token sale event. We will not be issuing any new tokens to prevent inflation, and we will not have any free airdrops or bounties because we value our investors. Our number one priority is to limit supply to prevent unforeseen LYN token dumps following the completion of our ICO. We believe that a low token supply combined with proper marketing of our uses cases (LynPay Debit Card, POS machines, LynPay merchant adoption program) will create great demand for LYN tokens, leading to outstanding price increases.
In response to our community asking us why we chose to have a total token supply of 5 million LYN tokens, we reply:
“Our aim is to create stability for our LYN token, and we plan to do that by limiting our supply to 5 million tokens. Furthermore, a total amount of 3 million LYN tokens will be locked for 12 months, leaving a limited supply of 2 million LYN tokens for the public. To increase the price of LYN, we are focusing on building strong uses cases for our project, as well as leverage the Ethereum-based 18 decimal point to help increase the intrinsic value of LYN”.
In terms of marketing and community growth strategies, we chose to do cash-based campaigns only based on high-quality PR, content & social media marketing via our channels, events and meetups around the world where anyone can attend to ask questions about the project.
We chose not to set up free airdrops because we believe their scope is to onboard random people with no interest of being part of the Lynchpin Token community. We, at Lynchpin Token, aim to build a loyal community for our project.
Why did we choose the 18 decimal point for LYN token?
Ether, the main cryptocurrency of Ethereum, has 18 decimals. 1 ETH equals 1,000,000,000,000,000,000 wei, which provides greater precision. Basically, we don’t want to limit our users. Take the US dollar for example. The minimum you can own is $0.01; you can’t go any lower than that. Although it may not seem relevant now, we’ve decided to use the 18 decimal standard to allow as many users as possible to own LYN tokens and increase its value.
Although we understand that the zero (0) decimal standard is easier to assimilate, we believe it’s about which unit to use. With ETH, wei permits skipping decimals, meaning that you can’t go lower than 1 wei. Furthermore, preserving the same decimals eases smart contract programming because there’s no need to perform unit conversions (which provides 18 decimal precision).
Many ICOs these days include airdrops and free token giveaways as part of their marketing efforts. But their only goal is to hit their hard cap, not strengthen the community. We’ve seen the strategy backfire many times, because as soon as a coin/token reaches an exchange, it is immediately dumped. We strongly believe in creating a loyal community that truly believes in our project and can help protect it. We don’t offer LYN token packages at a certain amount, and we don’t have any requirements regarding a minimum amount required to purchase LYN tokens. We believe support can come in any form, and everyone can buy as little as 1 LYN token.
The cryptocurrency market is paved with thousands of cryptocurrencies. Before supporting any token, make sure that you understand its tokenomics first. We, at Lynchpin Token, believe that with a solid tokenomics we will be successful with solving the main problems in the industry today. With solid grounding on tokenomics , it will also allow us to be ready for growth and adoption. Any success in adoption will enhance the value for early supporters of the token not devalue it.
Source: Ioana Paicu, Content Writer at Lynchpin Token