Rate3 Tokenomics

Disclaimer: Token economics is a relatively new field. The following discussion is strictly not investment advice, but provides a framework to think more critically about the role of a crypto-token in an ecosystem. PLEASE CONSULT YOUR LEGAL, FINANCIAL, TAX OR OTHER PROFESSIONAL ADVISOR(S), IF YOU WANT TO MAKE A DECISION.

What is a token and its role in an ecosystem?

Put simply, a token is a unit of value that an organization creates to self-govern its business model, and empower its users to interact with its products, while facilitating the distribution and sharing of rewards and benefits to all of its stakeholders. The utility role of the token is a primary consideration in the success of the models that intend to exploit their powers. Tokens are multi-purpose instruments. Properly debating its role is still in its nascent stage, but provides a reasonable framework to think about the interactions within the ecosystem.

What is token economics (“tokenomics”) and why does it matter?

Cryptocurrency tokens are essentially a part of an abstract economy. As such, they are affected by economic forces like supply and demand, inflation, and rises and falls in worth compared to other currencies. Understanding the token economics of any token matter to all participant, because it governs and incentivizes interactions.

For investors especially, even if the cryptocurrency project you are investing in is wildly successful, it still might not be clear what you can actually use your tokens for. You need to understand the utility of tokens to make yourself more confident in your cryptocurrency investments.

What is a Rate3 (RTE) token, and how will RTE tokens be in circulation?

An Rate3 (RTE) token is the native token that fuels all transactions within the RTE network. By having one single token in the e-commerce ecosystem, you create value in terms of faciliating more transactions or even using it as a store of value.

How can I get hold of RTE tokens in the future?

You can get hold of RTE tokens through participating in our token sale or you can purchase it in exchanges in the future. Alternatively, you can get hold of them through swapping with others who hold the tokens.

Why does the price of a RTE token rise? What is in it for RTE investors?

An RTE token will rise in price because of the inherent network token economics: carefully measured declining supply of tokens, and inherent demand of tokens by all participants.

A well-designed token network carefully manages the distribution of tokens and incentives across all groups of network participants (buyers, sellers, borrowers, investors, financial institutions) maximize the growth of this e-commerce network. A thriving e-commerce ecosystem does not simply include inventives for buyers and sellers, but consider the incentives for other participants as well: how to change borrowers into buyers, how to help sellers sell more by borrowing more, and many other elements.

Viewed in this respect, the native RTE token is not simply a medium of exchange in this ecosytem, but a store of value that aligns the incentives of all participants. RTE is used not only as a means of exchange or payment on the Rate3 network but also as a means to account for, judge, verify and incentivize ecosystem participation. RTE is the native fuel that facilitates interactions on the Rate3 network.

First, in terms of token design, the circulating supply of RTE tokens will decrease as more transactions happen due to the built-in network fee. As spoken by Vitalik, the important thing is that for the token to have a stable value, it is highly beneficial for the token supply to have sinks — places where tokens actually disappear and so the total token quantity decreases over time. This is traditional macro-economics and you can read more about how a decreasing token supply in a carefully measured way helps to increase the entire ecosystem value.

There is a built-in network fee for using the Rate3 network. To clarify, this network fee does not refer to the current transaction or exchange rate mark-up fees that we know today. For instance, Tommy is a buyer from Singapore who wishes to purchase products from the United States. Using the Rate3 network, it will cost him 0% exchange rate mark-up and 0% transaction fees to send either fiat (in Singapore Dollars) or RTE tokens to the seller, who accept it in fiat (in USD) or RTE tokens. Instead, both the buyers and sellers commit that there will be network fees paid to a network pool and locked up a reserved account. More will be explained on this network pool.

Second, RTE tokens serve as a staking mechanism for participants to stake their tokens to votes that impact the progress of the Rate3 ecosystem. Building an ecosystem is multi-faceted and requires the prioritization of different focuses. For instance, some ecosystem questions include:

  • Is building a blockchain gift card mechanism more urgent than creating a loyalty scheme?
  • What should be the variable bonus be for cashback?
  • Which corridor should Rate3 support next? (Singapore-USA, Korea-Japan and so forth.)

At the end of every month, 50% of this transaction pool will be locked up outside of the circulating supply. The other 50% will be distributed back to RTE holders after they have staked and voted, according to a function of how much RTE tokens they hold and the duration of RTE. So, if a participant holds 10% of the total RTE tokens in circulating supply, he will be entitled to 10% of the votes in this staking mechanism. This % will be subjected to community staking in the future as well.

RTE is not simply a medium of exchange, but the native fuel that is demaned and used by all participants to interact and add value.

RTE aligns the incentives for all different groups of participants:

For merchants:

  • Require RTE to participate in the network: issuing gift cards, issue credit loans to buyers through our RTE consumer financing schemes, give RTE rewards to users for completing reviews and feedback
  • Require RTE to stake their votes for important ecosystem decisions
  • Hold a pool of RTE tokens themselves — they have the incentive to increase the value of the ecosystem and the value of the token

For buyers:

  • Require RTE to stake their votes for important ecosystem decisions
  • Hold a pool of RTE tokens themselves — they have the incentive to increase the value of the ecosystem and the value of the token
  • If they require credit, they need to stake their peers’ RTE to increase their Rate for more favorable conditions

For lenders:

  • Lenders include both financial institutions and peer-to-peer lenders
  • Pay RTE to access credit reports from borrowers — lenders have to pay a small RTE to access these information
  • Through the Rate3 peer-to-peer loaning mechanism, lenders can loan RTE tokens to borrowers as well

For borrowers

  • Borrowers include both merchants and consumers. Merchants require credit for cash advances/working capital loans, while consumers require credit for product purchases
  • If they require credit, they can stake their peers’ RTE to increase their Rate for better credit terms

For RTE investors:

  • Incentivized to make good decisions to improve the ecosystem, so that the ecosystem will increase in utility. As the transactional velocity of RTE increases in the ecosystem, the value of the RTE token will increase in a linear fashion as well — benefiting these investors

Does a rise in the price of RTE defeat the “zero-cost” advantage of the Rate3 Network?

The rise in RTE price does not affect the “zero-cost” advantage of the Rate3 Network. The price of RTE is not the key issue for it to be a medium of exchange. What matters more would be the time taken for RTE to faciliate a transaction. The time determines the price fluctuation and in short, we are able to faciliate transactions within 3–5s using Stellar.

Within this short period of time, there will not be as much expected volatility.

Learn more:

Like what you read? Give Official Rate3 a round of applause.

From a quick cheer to a standing ovation, clap to show how much you enjoyed this story.