POW Ecosystem basics: Understanding POW and POWx tokens
Our platform relies on two different EOS-based tokens: POW and POWx. Why do we need two separate assets? This post will provide an explanation.
All internal processes in POW Ecosystem are governed by complex mathematical algorithms. The platform works as a perfect economic simulation, with tokens seamlessly generated and burned and dividends accruing to all token holders. It is a streamlined and rational system, which doesn’t require human control. That’s what the original ideals of decentralization are all about: building economic systems that eliminate the need for supervision and intermediaries. Every placed order triggers the smart contract, which completes the transaction. The result is recorded on the blockchain and remains there, immutable.
This framework centers around the POW token. Unlike cryptocurrencies like Ethereum or Stellar, POW were not pre-mined. Instead, they are issued on the spot according to the current demand. If you place a buy order in the dApp, the required number of tokens will be instantly minted by the smart contract. This means that the administration of the ecosystem doesn’t have any initial large stake in the platform, as it has happened with the creators of other digital assets. There is no risk that the creators of POW will at some point “dump” their tokens on the market, causing a price slump.
Similarly, when you sell your POW to the platform, they are instantly burned — not accumulated by the admins or anyone else.
When you buy or sell POW, a flat 10% fee is charged by the system in the form of dividends, which are distributed to all POW holders — including you. This is the first great advantage of the ecosystem — you benefit from all transactions on the platform.
Every transaction of purchase or sale causes the nominal price to change. This, too, is done automatically by means of a special formula. The nominal price always corresponds to the amount of POW in circulation. The token can be neither “oversold” nor “overbought”. In other words, the internal exchange of the POW Ecosystem is a perfect market with no information asymmetry.
However, to ensure the equilibrium of the internal market, all POW tokens need to remain within the ecosystem. To provide a connection with the general digital asset market, we have introduced a second token — POWx, also built on EOS.
POWx functions as a loyalty token. When you buy POW, 1% of your purchase value is transferred to you in POWx. All POWx are 100% backed by POW in the smart contract. The conversion rate between the two set at 1 POW = 100 POWx. In the dApp, you’ll see your POWx and POW balances as separate. The two types of tokens can be freely converted into each other at any time.
POWx tokens will be listed on a number of external crypto exchanges, so you can trade them like any other EOS-based asset. Their price will freely fluctuate based on supply and demand. This is the second key advantage of POW ecosystem: you accumulate POWx automatically as loyalty points of sorts, but you can later sell them outside of the platform for EOS and increase your revenue — especially if you wait till the price of POWx grows substantially.
In our next post, we’ll see how POW Ecosystem differs favorably from other crypto platforms — and why we chose EOS as the blockchain to built on.
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