Projecting the NOTES Token Velocity
Since our May 1st launch, we’ve witnessed amazing growth in artist sign-ups as word of Choon has spread virally in the music industry. This has provided an excellent dataset that’s allowed our CTO, John Watkinson PhD, to create a model projecting the long-term NOTES token velocity, and answer some of the questions the community has had regarding our 50% Streaming-As-Mining system.
The headline: We expect token velocity of NOTES to eventually settle down to a value around 8. Furthermore, the various artist staking mechanisms which will be introduced roughly nullify the inflationary effect of Streaming-As-Mining.
- Actual artist growth patterns from the first five weeks of operations were projected outwards and used to conservatively estimate the amount of NOTES economic activity that will be generated by artists in and around the Choon ecosystem.
- The effective token supply was modeled based on factors including Streaming-As-Mining, artist staking, and the vesting clauses of founders, employees and contributors.
- The model also follows our roadmap, estimating the amount of NOTES spending each artist will generate based on the token supply and the number of participants in the market.
The below graph shows our results. Note that the jagged points in the ‘Token Velocity’ curve relate to vesting events.
Effect of Staking on Streaming-As-Mining
Whilst blockchain community reactions to Choon have mostly been positive, we have faced a number of questions related to NOTES supply & demand, primarily focused on our artist-incentivizing model of distributing 50% of the all-time supply of NOTES to artists over the first ten years. Typically, questions follow along the lines of: ‘If artists are receiving tokens every day, surely that will lead to massive sell pressure on the token?’
This problem is effectively resolved by various staking mechanisms which we’re introducing which heavily incentivizes keeping NOTES within the Choon ecosystem. This includes:
- Aug 2018: Staking Proof-of-Concept. The first version of staking will unlock various profile features for artists who maintain a certain balance of NOTES.
- Oct 2018: Bi-Directional Tipping. Tipping to and from artists enabled to foster further in-ecosystem NOTES transactions.
- Nov 2018: Choon Collectibles. Aftermarket launches allowing users to bid for, buy and sell Choon Collectibles with NOTES.
- Jan 2019: Gamified Staking Features. Ability to stake NOTES for profile upgrades and badges.
- Mid-2019. Staking Required to Post Music. Artists must stake a certain number of NOTES to post music (ie: compete for work on the network).
Based on user growth projections, a long-term staked value of 500 NOTES per artist nullifies the inflationary effects from the 50% Streaming As Mining allocation entirely.
- When the NOTES token sale ends on August 2nd, just 34,125,000 NOTES will have been distributed to artists, equating to just 1.7% of overall supply.
- Given our modest token-sale cap of 25% of all-time supply, Streaming-As-Mining would only increase the amount of NOTES tradable upon unlocking to 26.7%, assuming all tokens were available to be traded. In actual fact, we estimate that well over half of NOTES sold in the token-sale will be subject to lock-ups, reducing circulating supply further.
- With just 1.7% held by artists, 25% sold in the token sale (but mostly locked up), and the Founding Team’s tokens, and most large advisor tokens subject to stringent multi-year vesting policies, the circulating supply at time-of-unlocking looks reasonable.
- So far, anecdotal evidences suggests most early-stage artists are “all in” on Choon, adopting more of a long-term holding strategy rather than the ‘instant cash out’ that some community members have feared. Currently, over 2000 artists have earned NOTES but less than 10 at the time of writing have chosen to withdraw from their Choon wallet to the Ethereum network.
As well as creating an equitable music economy for artists and listeners alike, we also recognize the factors that contribute to the long-term stable operation of a tokenized economy. We look forward to further modifying the macroeconomics of the platform to optimize for long-term token health, and we hope this article will have covered some of the questions the community has raised.
As a reminder, our token-sale starts on July 2nd.
The Choon Team