Voice of the MANXers: Series #4
The fourth MANX Ask Me Anything (AMA) focused on token economics. It was conducted on September 6, 2018 in the MANX Academy of Token Economics (MATE) group, an invitation-only telegram group focused on informational and educational discussions on all aspects of blockchain technology. The members of the group are selected for their active engagement in the global MANX communities.
This session was led by Dr. Dennis Zhang (Head of Token Economics), Dr. Yawei Cui (co-founder), and moderated by Jennifer Bie-Purewal (Head of Global Communities). This transcript has been edited for clarity.
Olivia: How will you make the value of MANX tokens grow so you can reward your investors?
Dennis: MANX focuses on the use cases for MANX tokens. Our token economics considers the different requirements and interests of MANX stakeholders. The dynamic token reward rules incentivize the expansion of the ecosystem while stabilizing token distribution over time.
We also engage a portfolio management team to provide market liquidity to stabilize the token’s value on the exchange. This should provide endogenous and exogenous support for the token’s value.
Yawei: I’d like to add something. The MANX token is a utility token that enables the MANX public chain to function as well as providing the value exchange medium for the MANX ecosystem. The MANX token’s value is the present value of the aggregation of goods and services provided in the MANX ecosystem from now to the future.
So, the MANX project core team and all the constituents of the MANX ecosystem, including developers, DApp project teams, community members and consumers, are all incentivized to see the maximization of goods and services on the MANX platform.
Jennifer: Some MANXers wonder about how we keep the value of MANX tokens growing; what is your opinion on this?
Yawei: Essentially, the value of MANX tokens is the expectation of the value derived from the true goods and services provided on MANX platform.
Dennis: A lot of information can be found in our article on token economics: http://www.macrochain.io/Library.html#articles
As discussed earlier, MANX tokens benefit from the growing number of applications on the platform. We will design incentive programs to motivate the community to add DApps on the platform, for example, developer bounty programs, contests for DApps, etc.
MANXer: Why would investors choose to store assets in MANX tokens if these tokens are non-producing assets, they don’t deliver any dividends or rents?
Yawei: MANX, as a platform token, is a non-producing asset. However, tokens issued on the platform for different application scenarios can produce dividends through token economic design.
As application transactions increase, the need for MANX tokens will increase, thereby increasing the value of the underlying MANX tokens.
MANXer: Ok, but that’s not really a dividend as in when you buy a company stock and are rewarded with a share of the company’s profits. That value is more derived from the token’s value as a means of exchange and will depend on velocity / incentives to hold right?
Dennis: You are correct. MANX does not produce dividends. Your question is more about the difference between utility tokens and equity.
Yawei: Let me add one very important disclaimer: MANX is a utility token. The MANX Token is not intended to constitute securities in any jurisdiction, and will not entitle token holders to any promise of dividends, revenue, fees, profits or investment returns.
Sam: That doesn’t mean that the relative value of MANX will not increase (or decrease) compared to other virtual currencies. Obviously, we think we’re creating a very big and valuable global platform. But there are no guarantees of that increase, no profit sharing through the tokens. If you take a look at the White Paper on Token Economics from Dennis, that illustrates situations in which utility tokens increase in value.
Yawei: Please refer to MANX medium article: https://medium.com/@handshake_88276/economic-value-of-manx-token-76381a09d66b
MANXer: How would you define the monetary value of a token based on its use as collateral for voting? Any suitable formula or economic model?
Yawei: As collateral for voting, the voting result will directly impact the platform roadmap, product and services. The monetary value of collateral for voting will be reflected in the change of trading price in the market as the business value of the platform increases.
MANXer: What incentives will investors have to hold tokens?
Yawei: There will be multiple opportunities to incentivize token holders in the long term, including the following scenarios:
a. Stakes for validation services
b. Stakes for voting
c. Collateral for application scenarios. For example, for financial services (e.g., insurance reserves) to share insurance premiums.
MANXer: In the Tokenomics paper you give us examples about Insurance. Can you discuss any other applications?
Dennis: Yes, we are designing smart contract templates for various applications. Let us use data sharing as an example. Data such as location data, health data and social behavior data can be used by various applications. Factors driving such token economics include:
1. data/token exchange rate
2. profit sharing when data is used
3. token/product/service/benefit exchange rate
MANXer: How flexible will the system be? How deep can companies configure it?
Dennis: The platform comes with well thought-through protocol design, cross-chain interaction protocols and distributed service interaction protocols. Different modules provide flexibility for different applications.
Please also refer to Whitepaper for more details.
MANXer: Your 8 templates are a very cool idea! Have you tested them or are they still in the planning stage?
Yawei: The design and implementation of eight MANX application templates will be a significant step forward for rapid deployment of decentralized business models. When we publish the MANX economic whitepaper, you will get a more in-depth understanding of MANX templates design. The actual development of MANX templates will be built upon the MANX Framework, a suite of DApp development and deployment tools.
MANXer: Can you give a design example of MANX Token Economics?
Yawei: As mentioned in earlier articles, even in Bitcoin’s Proof of Work (PoW) protocol, the combination of the deterministic block/token reward rule and the difficulty adjustment algorithm help STABLIZE the mining of Bitcoins over time to ensure that the Bitcoin supply will not be exhausted too quickly.
While this design works just fine for Bitcoin, some people question the reasonability behind the rule due to its deterministic nature.
For MANX Token Economics Design, transaction token pricing will be dynamic and based on multiple factors, including exchange rates of data/token, service/token and transaction/token, etc.
In an insurance example, the sales team could lock up their commissions in the insurance reserve pool to earn additional token incentives. In general, the bonus will increase as the commission increases. However, if the insurance reserve pool increases faster than insurance sales, the marginal return to each token in the reserve pool will decrease therefore the bonus for commissions in the pool will also decrease.
Therefore, the combined bonus per token for commissions in the reserve pool will be dynamic, depending on the growth rate of the commission into the reserve pool and insurance sales. This mechanism helps stabilize the insurance reserve pool and the distribution of token incentives.
Olivia: And here is another interesting one: Token design will lead to security issue, like fomo3d. How do you deal with this?
Dennis: FOMO3D is an interesting game that has attracted a lot of attention. The game hugely rewards the last player. Therefore, hackers mounted an attack first to buy a key to qualify for the game, then to block the network to prevent other transactions from going through. This attack strategy is well designed to take advantage of the game/token economics design.
It is impossible to have hacking-proof token economics. The design of token economics should be audited by an anti-hacking security team. The team should have a solid back-up plan for when hacking attacks happen.
A token economist asked: The incentives are important since the system is decentralized, in order to allow anyone to behave for the good of the system. When the core team owns 15% of the tokens and the whole ecosystem 30%, it seems to me an imbalance since the incentives are mainly financial.
· Token sale (30%) for MANX Development Cost
· Mining (20%)
· Foundation Reserves (30%) for maintaining MANX partnership community and provide incentives to ecosystem partners
· Core Team (15%) for incentives for core management and technical teams
· Legal and Advisors (5%)
MANXer: What’s the vesting period for the team and advisor tokens?
Yawei: For team members, 4 years, released 25% each year. For advisors, 1 year. Both vesting periods are much longer than the restrictions on any investors.
MANXer: I asked because it’s not easy to maintain the token price above its ICO price until the main network is available in the future. What are your thoughts on that?
Yawei: We plan to make the announcement concerning how we will proactively maintain our token value in the best way possible.
Dennis: We are engaging a portfolio team to provide liquidity management after being listed on an exchange. We will provide continuous updates on tech stack/mainnet in the community. Also we are in progress of partnering with several SME businesses to onboard their service onto the MANX platform. Regular B2B partnership announcements will help stabilize the token value before the mainnet goes live.
MANXer: What is the goal of MANX token economics?
Dennis: The goal of MANX token economics is to incentivize our community to grow for various application scenarios, while stabilizing token distribution over the platform. It is a dynamic algorithm.
Please refer to the example in the medium article: https://medium.com/@handshake_88276/economic-value-of-manx-token-76381a09d66b
MANXer: Can you give a concrete example of how a business can use the MANX network for problem solving/process optimization?
Yawei: Larger Internet platforms can achieve decreasing marginal costs and increasing marginal utilities, thus we see Internet platforms emerging in every vertical service field, squeezing out smaller players.
For example, Didi Taxi serves 35 million taxi orders each day in China’s 600+ cities. If a local taxi operator in Nanjing, a city with 9 million residents and 50,000 taxi cabs wanted to challenge the monopoly of the Didi Taxi platform, they could create a Nanjing Cab sidechain on the MANX public chain and issue 1 billion Nanjing Cab tokens on the MANX platform very easily.
MANX can help Nanjing Cab design its token economy in the MANX ecosystem. For example, basic taxi service in Nanjing costs 11 yuan or 1 NanjingCab token. So the NanjingCab token has a real service utility and it has a natural exchange mechanism pegged with a fiat currency, Chinese RMB.
NanjingCab project managers have a strong incentive to provide better services in order to see NanjingCab tokens rise in value because they have a vested interest in the tokens reserved for their core team. Nanjing cab drivers will be rewarded with NanjingCab tokens as well as RMB. So they want to provide the best services they can to the customers as well.
Taxi customers also own or get incentives from the NanjingCab project team for using NanjingCab tokens. The MANX project team is also happy to see the MANX ecosystem flourish. With the MANX platform and ecosystem, a true closed loop value creation system can be created to provide value for all parties involved.
MANXer: How much economic activity (like transaction volume in the MANX platform) and growth rates justify a fully diluted $100M valuation?
Yawei: We estimate that once MANX reaches 100,000 users, then the MANX ecosystem will reach critical mass and will become attractive to SMEs to develop DApps for their goods and services. We hope MANX will reach 100,000 users within the first 6 months after the public chain goes live, reaching 500,000 users in the first 12 months. With a valuation of $200 per active user, MANX could attain a valuation of $100M within the first year. BTC has a total transaction value of $1.2 trillion in 2017 and a valuation of $110 billion as of 9/8/2018. XRP has a total transaction value of $1 billion in 2017 and a valuation of $12 billion. MANX as a new public chain platform should enjoy some premium in valuation. If we estimate valuation to be 5 times first-year transaction value, and if MANX’s first-year transactions reach $20 million, then we should have a valuation of $100M.
Woven through the serious discussions were several exciting announcements on the contest winners for MANX catchphrases. 30 entries, including phrases, poems and stickers, were received from 17 MANXers.
2 first place, 3 second place and 4 third place awards were announced, as well as participation awards for everyone who submitted ideas. We were excited to receive so many creative ideas and general enthusiastic support from our global MANX family. Thanks everyone!
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