Shipchain for Dummies Part 2 — Token economics & governance 2/2
Disclaimer: This article’s author is not affiliated in anyway with ShipChain Inc. He is just a blockchain and logistics enthusiast who owns SHIP tokens. While most of this article was derived from public information, some critical elements are subject to speculation from the community and may eventually turn out to be incorrect. Please take everything with a pinch of salt.
First 2 articles of this series focused on describing Shipchain’s purpose in the logistics industry and on laying the foundation needed for new comers to grasp notions approached in this third and last article.
Now is the time to see how each of these concepts are interlinked and form together what we call the token economics, often shortened to tokenomics.
Never invest in a token whom you cannot draw the token economics.
How is everything tied up together and what is going to bring value into the SHIP token?
Shipchain Inc. earning revenues from its customers
Shipchain Inc. already announced a few customers: Scanlog, Casestack, Keeptruckin… The first 2 are Third Party Logistics providers, who provide transportation, warehousing and more services to their customers while Keeptruckin is a software company who developed the leading fleet management platform for the trucking industry in the USA. One would use the Shipchain dApp within their own fleet, the other would give access to the dApp to a much larger audience (1 mio active drivers use Keeptruckin’s apps and devices).
Our assumption is that Shipchain’s revenues come from charging a Software as a Service fee to these customers - as outlined on the blue side of the chart - primarily in USD but possibly in any other relevant -incl. crypto- currencies.
Shipchain Inc. and other dApps developers:
One box on the left side of the blue chart is important. It places other dApps developers next to Shipchain Inc. The reason for this is that the Shipchain network (described in the orange box on the right) is an open-source project that has the capacity to handle more than one logistics dApps (same as Ethereum is hosting thousands of dApps).
Therefore logistics dApps developers, in need of a blockchain that can achieve scale without abandoning the decentralization aspect so important to build Trust, are welcome to join the Shipchain Ecosystem.
Shipchain Inc. using the Shipchain Network:
We’ve already established in previous articles that one needs to hold and consume SHIP tokens to be able to perform transactions on the Shipchain dPoS blockchain. As the primary dApp on the network, Shipchain Inc. would consequently be the main entity (at least at the beginning) running transactions on the network and thus driving organic demand for the token, directly derived from the amount of transactions run on the network (see Karma section in the 1/2 article).
Hence the link on the chart between dApps developers and public exchanges or OTC deals since, while their revenues may be essentially in USD, one of their operating cost is about buying gas, ie buying SHIP tokens, to enable their customers to use the network without being directly exposed to crypto currencies.
Validators and Delegators acting together in favor of blockchain’s performance and security
While the previous article explained how validators are elected, it did not elaborate on what are the incentives for validators and delegators to behave appropriately.
Actually, delegators and validators’ fate are interlinked since validators’ rewards are calculated according to the total amount of tokens delegated to them (their own + delegators’). So validators consequently have to re-distribute rewards to their delegators (minus a small fee). Once a validator goes offline for more than few hours, it doesn’t validate any blocks nor perceive any rewards. Delegators are consequently not rewarded either.
It becomes easier to perceive why validators better keep the highest uptime and how delegators are incentivized to pick the most reliable operators.
It is important to note that a delegator never loses ownership of his tokens but when voting/delegating, one has to chose a lock-up period(tokens thus get tied up to a smart contract for that period before being released back into their original wallet) from few weeks to a year. Rewards are scaled up so that both delegators and validators have incentives to support network’s performance and security on a long period of time. Staking up to a year may come with rewards as high as 20% p.a.
One can see this staking/delegating mechanism on the chart between Token holders and Validators and the link with the Validator Rewards Pool.
Interoperability with Ethereum:
The top right hand corner of the chart refers to the interoperability with the Ethereum, Binance Chain, Tron and soon Bitcoin public blockchains, each with their pros and cons in terms of throughput/speed and decentralization and some being complementary with the Shipchain Network. This interoperability conveniently enables dApps developers to use each blockchain’s features to deliver their specific needs in terms of speed and security.
Openscale:
The last part of the orange chart that we haven’t touched on refers to an entity that doesn’t exist yet — the non-profit organization, mentioned a couple of times in the official Shipchain blog, in charge of acting as a decentralized governance body for the Shipchain network and its utility token. As outlined on the chart, the idea is about this foundation is to have it operated by a board who is democratically elected by token holders and who takes care of blockchain and token development and promotion, education and partnerships.
It is expected to hear more about this foundation around June-July 2020 at best, within Q3 latest.
Demand vs supply evaluation
Demand
To give you an idea, 1 mio drivers (KT’s consumer base) drive about 2500km per week in the USA. Assuming Shipchain’s app and devices would record data every 5 miles (GPS location, temperature etc…), such user base would represent more than 800 transactions per seconds. This would be x50 what Ethereum performs today and is expected to create a demand significantly higher than the circulating supply. Of course, any speculation on the future price of the token would also add demand pressure but it is rather expected to kick-in when the SHIP token will be available on more prominent public Exchange Plateforms like Binance, Coinbase, Huobi…
PS: worth noting at this stage that a few critical parameters regarding the Karma Contract (black box on the right part of the chart) have not been published yet. Once conversion rate SHIP/KARMA as well as the relationship KARMA/max amount of txs per second are locked, it will effectively enable us to convert this amount of txs/s into a demand quantified in SHIP tokens.
Supply
The total supply of this token is 500mio SHIPs but what really matters is the amount of token in circulation that are truly available to buy.
At the time of writing, only half of that total is actually in circulation since the rest is intended to be allocated to the Validator Reward Pools and Foundation reserves as described on the chart.
Supply dynamics on dPoS networks are interesting since token holders are triggered to stake their tokens (as per the section above), thus locking them up for a certain period of time, which effectively takes them out of circulation. Therefore the % of supply under delegation once Mainnet goes live will be a critical parameter to determine the real circulation.
Another and the most direct way to evaluate it is the amount held on exchange wallets. As of March 2020, tokens free to buy sit on 2 exchange wallets, IDEX and HitBTC and account for less than 12mio SHIPs, ie only 2% of the total supply.
In summary, the SHIP token is already a scarce resource even before staking started and before customers’ transactions are transitioned to the Shipchain network (both planned from April 2020 onwards). This bodes well for future price increases, but time will tell.
Closing words
We have now reached the end of this small series “Shipchain for dummies” and hope that it enabled both new comers and more advanced readers to get introduced to the blockchain technology as well as understand better the concepts behind token economics.
Feel free to tell us what you think or propose amendments on our community channel.
Thank you for reading!
