Earlier I wrote the article ‘Legolas Exchange ICO Review’, in this article I mentioned how important the usability of a token is in a project. In this article I will share more information about the $LGO token and it’s usability on the Legolas Exchange. This article isn’t an advise to buy $LGO, I am just trying to help everyone understand how the $LGO token works.
Just a small heads-up over 40,000 people already subscribed for the ICO. So before you read all of this, be sure to register first! You can do that over here.
Why would someone buy $LGO tokens?
A legitimate question for any token buyer who is researching a project is ‘What is the value of the token I am buying?’. Another thing you should ask yourself is, if there will be liquidity to sell your tokens and preferable at a low cost.
Legolas Exchange designed the $LGO token in order to answer these questions. The main idea is to give access through the $LGO token to the value created by the company, which is the total transaction amount traded on Legolas Exchange. With this, the $LGO token has an intrinsic value and displays daily liquidity.
Intrinsic value
$LGO tokens are required for every user of Legolas Exchange to place orders and trade on the exchange, as all transaction fees are paid with $LGOs.
Let’s imagine that the transaction fees are at 0.25%. If trader A buys 1.000 Bitcoin from trader B, trader A will have to pay a transaction fee valued at 2.5 Bitcoin. This fee will not be paid in Bitcoin, but in $LGO. With this, each transaction on the network (in any currency) leads to another transaction in which the transactor sends a fee in $LGO to the exchange.
The paid fee will be split in different parts:
- 25% of the fee will go to market makers in order to incentivize them to bring liquidity on the exchange on every currency traded
- 50% of the fee will go to Legolas Exchange
- 25% of the fee will be destroyed
By destroying 25% of the fees that are paid on Legolas Exchange, each transaction will lead to a reduction of the total supply of tokens. In theory this could lead to a small increase of the $LGO in price. Legolas cleverly tied the price of $LGO to the volume of transactions on Legolas Exchange.
Some people will wonder if the total supply of tokens eventually will go to zero.. Well of course that will never happen, think about breaking a stick in half, then breaking each half in half, etc. You never get to a point where the length of the stick is zero. This is the same here, the total supply will never go to zero. This is because $LGO tokens are divisible, having a total supply of 100M tokens or 1,000 tokens doesn’t change the fact that users will be able to pay their transaction fees with $LGOs.
Liquidity
A problem with a lot of ICOs recently is that they don’t have liquidity, especially for the bigger investors. ICO investors usually have a hard time selling the tokens they bought because these are either not on a decent exchange or because there is no one buying them.
Because every transaction fee on Legolas Exchange is paid in $LGO, tokens are bought at every transaction that happens on the network. Hence there is a continuous demand for the token on the platform, which means a constant liquidity for $LGO holders who could sell their coins very easily — if they wanted!
I hope this gives you a better understanding of the $LGO token and it’s usability.
If you want to invest after you did your own research, you can register for the ICO over here.
Cheers,
Khilone
https://twitter.com/Khil0ne
