You remember the high school days, sitting there in economics class listening to the teacher ramble on about supply and demand?
While you may have sat there bored out of your mind with nothing better to look at than your teacher’s crusty nose hair, you probably already have a head start with understanding basic tokenomics.
Nope, tokenomics is not some rip off of an early 2000s John Cena catchphrase.
Basically, tokenomics is the fundamental analysis of a blockchain project. Tokenomics examines the economic policies that govern a blockchain project’s production and distribution of its tokenized currency.
There are three types of supply used to examine a project’s tokenomics: circulating, total, and maximum supply.
In this article, we’ll be focusing mostly on circulating supply, its effects on a project’s token price, and how it relates to the UBXT token.
In this article we’ll cover:
What is circulating supply?
The textbook definition of circulating supply is, the number of a project’s tokens/coins that are currently on the market. Quite elementary.
Circulating supply takes into account the number of tokens created at a project’s inception all the way to how many are currently available to buy/sell on the market right now.
A project’s circulating, maximum, and total supplies are detailed in their smart contract, allowing transparency for anyone looking to track it. These smart contracts provide those evaluating a project’s tokenomics with data insights on time periods where circulating and total supply experienced increases.
Evaluating a project’s circulating supply through smart contracts can allow the examiner to view how inflation may affect a project’s future token price.
For example, let’s say circulating supply for a token is 10 and max supply is 100. Now the project decides to increase the circulating supply of their token from 10 to 30. It would be somewhat safe to expect the price of the token to fall due to inflation in the circulating supply.
Now pretend I am that economics teacher of yours with the crusty nose hair.
*calls on you randomly* What are some factors that influence price?
Price determination is closely related to market conditions, such as how desirable a good is and the number of buyers/sellers in the market for this good.
This ideal is similar with crypto. If a blockchain project appears to solve a specific issue or offers some sort of high value, you might reasonably think the demand for the token will be high.
Some observations to note about projects (not financial advice). Projects with a high supply typically have a lower token price than projects with a low supply.
Projects that have a high supply and low demand for their token, usually do not reach a high token price.
Projects like these are typically ones to avoid, until Elon Musk tweets out about it and demand magically skyrockets. Please do not take this as financial advice.
Can circulating or maximum supply be changed?
First, let’s compare the differences between max and circulating supply so you can avoid confusing the two.
Maximum supply is the total number of tokens/coins that can be generated for the specific cryptocurrency. The maximum amount a cryptocurrency can create is written into their smart contract. Once this number is defined, it will not be possible to produce more than the max amount specified.
Circulating supply is the total amount of cryptocurrency possessed by exchanges, token holders and DeFi solutions. Smart contracts can define a period of time where circulating supply is permitted to increase through minting, unlocking tokens, and/or mining. However, once the total amount of tokens/coins reach the maximum supply, no more coins/tokens can be produced.
Does that mean maximum supply cannot be changed? In theory, yes, the maximum supply cannot be increased or decreased.
But…let me blow your mind here. Actually, through burning tokens/coins, maximum supply can technically be decreased.
Token or coin burnings are the process of sending an amount of coins/tokens to a wallet address (burn address) that has no private key.
The coins for all intents and purposes go spiralling into the void where they can no longer be transferred or retrieved from.
While burnings do technically decrease maximum supply, the maximum supply designated in smart contracts remains the same. These wallets have no private keys, so the public will be unable to access the funds.
So while the tokens aren’t “actually” removed from the smart contract, they’re thrown into the crypto abyss never to return.
A look into UBXT Token Distribution
Hopefully that’s shown you a bit about tokenomics. So now we’ll provide you with a breakdown of our UBXT token distribution.
If you check the UpBots’ UBXT smart contract, you can see that the maximum supply of the UBXT token is 500 million UBXT.
Now, let’s take a look at the UBXT token allocation.
Breakdown of UBXT token allocation
Team: 10% of the tokens belong to the UpBots team (50 million UBXT).
With UpBots the team has a proven track record in the crypto space and are invested in UpBots long term. Also these tokens are locked and are only being unlocked progressively (but equally) every 2 weeks over a period of 2 years. This is the slowest release of tokens in the whole token distribution.
Why? Because the UpBots Founders started this business as a long term business that would help bring wider adoption to the crypto currency space by newbie traders.
Crypto presents the greatest opportunity to grow and re-distribute wealth to the little guy in the history of mankind, and Ben and Julien want to make that door easier to open.
Liquidity: 60.98%. 304.905.122,91 UBXT is the total amount of tokens sold in the IEO stage, private sale and providing liquidity to exchanges combined.
UBXT Development Fund: 14%. 70 million total UBXT is allocated to UpBots development. Not a single one has been spent so far. These tokens are locked until September 2021.
Reserve: 15.02% 75.094.877,09 UBXT left as reserve for future partnerships, paying for providers and new hirings, and adjusting the liquidity on UBXT markets by providing liquidity for market makers.
UBXT’s total circulating supply is 319,393,984 out of 500,000,000 maximum supply. This makes UBXT’s Circulating/Maximum Supply ratio 0.6387, or 63.87% of maximum supply currently in circulation.
Why UBXT holders should care
Now that you see how circulating supply and tokenomics work along with the breakdown of our UBXT allocation, why should all of this matter to you UBXT holders?
Here is why you should care, we’re going to be implementing our own token burning program.
Once we kick start our platform performance fees, we’ll send a portion of the fees collected to be burned until maximum supply hits 250 million UBXT.
Yep! We’re aiming to reduce our total supply from 500M UBXT to 250 million. As we’ve learned previously, using token burns can help a project’s tokenomics avoid inflation in the market.
Through our own token burn, there will be less supply of UBXT in the future. The deflated supply should help stabilize.
The wrap up
Circulating supply is the current number of coins/tokens from a project’s inception to the amount currently available on the market.
A high demand and low supply of a project’s coins/tokens does not necessarily mean that it’s a worthy investment. Investors should always DYOR (do your own research) and look into their business model and what the project’s goal is.
Through the process of token burnings, maximum supply can decrease but will remain the same in smart contract details.
It’s ideal for newer blockchain projects to keep a low circulating supply in order to maintain a stable value for their token.
We hope you enjoyed this little walk down tokenomics lane.
And now a meme from our community…
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