2KEY Token Circulation System
If you simply mint a new ERC20 token and expose it to exchanges with no actual utility usage for the token, you’ll only get speculative trading. Without actual utility-based circulation to serve as a baseline for the network’s market cap, there’s little chance of long term prosperity for the token or the distributed network using it.
Real token circulation stemming from actual usage of the utility provided by the token’s application and network is therefore crucial for enabling a viable token economy.
Currently, the cryptocurrency playing-field is split to either tokens being speculated on exchanges with no baseline utility-driven circulation to support the trading; or a whole host of infrastructure products which are basically developer tools built for developers who then build other developer tools for developers. Both options fail to reach and engage actual end-users, making an actual token economy unrealistic.
Building a Tokenomics Baseline for 2key.network
Our aim in 2key.network is to establish a real baseline for the 2KEY token economics, so that there is an autonomous circulation system working to pump 2KEYs through the 2key Network’s regular operation, prior to releasing the token to be traded on exchanges.
This autonomous circulation will act as a baseline supply-and-demand feedback mechanism, ensuring the token will bear actual intrinsic value by both giving access to and depicting the value of a new technology serving actual users to create and exercise multi-step online referral campaigns.
The 4 major pillars underlying the 2KEY circulation system are:
- Automatic Demand Mechanism: the 2key campaign contracts will automatically buy 2KEY for ETH when a conversion occurs. These 2KEYs will be bought for the ETH of the referral reward, so that the 2key campaign contract will send ETH to the 2key singleton exchange contract, and get back 2KEYs which are then distributed internally within the 2key campaign contract to the reward balances of the referrers.
- Automatic Staking Mechanism: The reward 2KEYs are kept in the 2key campaign contract until each of the referrers decides to withdraw them.
- Controlled Release of 2KEY for public trading — only once a steady circulation baseline has been built: The 2key Admin contract will maintain a parameter that will be set to allow withdrawing of 2KEY to user wallets only once a threshold value of steady circulation of 2KEY within the network contracts has been achieved.
- Rewards can always be cashed out to stable coin: while referrers looking to cash out 2KEY will have to wait for the public trading release date, they can always cash out their 2KEY back to stable coin and into their private wallets.
Here is a step by step flow of how it will work for 2key campaigns in which the conversion event is payment of ETH by the converter (campaigns of type — token sale, donations, crowdfunding, patrons):
- 2key Campaign Contract: once a conversion occurs, and ETH is inserted by a converter to the campaign contract, the contract allocates the referral reward for that conversion, as a percent of the conversion amount.
- The referral reward for the entire conversion is then sent to the 2key Upgradable Exchange Contract, which is a singleton contract that accepts requests only from valid 2key campaigns. The exchange contract then accepts the ETH from the campaign contract, and: (A) exchanges the ETH via an external DEX contract to a stable coin (TUSD / DAI) and keeps the stable coin in the 2key exchange contract for supporting future withdrawals by referrers, and (B) sends back 2KEY to the campaign contract.
- The 2key Campaign Contract then holds the 2KEY and distributes it internally to the balance of the referrers who took part in the referral chain leading to the successful conversion.
- The 2key singleton Admin Contract holds a parameter which identifies the public token distribution date for 2KEY. This date will be set so that it occurs as soon as a steady baseline of actual usage of 2KEY by the 2key.network campaigns has built up.
- Once a referrer wants to cash out his or her rewards, they can either cash it out in 2KEY form if the public trading release date has passed, or keep it staked in the campaign contracts until the release date (all are tracked and visible in the user’s home page in the app), or the referrer can choose to cash it out back to a stable coin .
- Cash out to stablecoin: Whoever chooses the latter option, the campaign contract will send this referrer’s reward balance, in 2KEY, from the campaign contract back to the 2key exchange contract (which only accepts requests from valid 2key campaigns), and then the exchange contract will change the 2KEY to stable coin, and send this stable coin balance directly to the private address of the referrer — i.e. to the referrer’s wallet. The 2key exchange contract will maintain a spread between the buy rate for 2KEY and the sell rate for 2KEY, so that a small net gain for the network will be maintained by the spread.
Moderator Fees And Feeding the Network Community Rewards Pool
In each conversion there is also a network fee taken by 2key.network as the default moderator. The fee amount is defined by the 2key Admin contract network wide, and is currently at 2%. This network fee is sent in 2KEY form to the admin contract’s balance, and kept there as network staking. from that fee, just like for any other integrator, a community taarif/tax is taken (also defined network wide in the Admin contract, currently at 2%). This tax is sent to the Deep Freeze token pool, which is frozen for 10 years and will then be used to replenish the community rewards pool.
Circulation Buildup Triggering Open Trading Launch
As described above, the 2KEY tokens will be kept in a closed positive feedback circulation loop, flowing between valid 2key campaign contracts and singleton contracts (2key Admin Contract, 2key Exchange Contract, 2key Deep Freeze Token Pool Contract). This circulation will be maintained in a closed loop with no ability to pull 2KEY to private wallets, until the volume will rise to a Minimal Circulating Volume Threshold, and the volatility will decrease to a Maximal Circulation Volatility Threshold. Once these thresholds are met, the 2key Admin contract will modify the public trading release date and allow to start pulling 2KEY to users’ wallets.
Upwards & Onwards
We expect this mechanism to ensure a minimal market cap baseline to support against speculative trading, and to ensure a more stable and valuable trading in 2KEY tokens once they’re released to the hands of the public.
Thanks for reading!
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Co-Founder, CTO, CIO @ 2key.network