Can you seal the fate of your PoS coin even before you start with the project?
Do you think you can actually seal the fate of your Proof-of-Stake coin even before you launch the project? Do you think you can regulate the generation of your coins in a smart way? Yeah, those are the same questions I was thinking about. It is actually quite interesting that this can propel the coin value sky high or slam it into the ground. Both propelling and slamming are primarily caused by the people using, trading or holding your coin. So, one of many factors influencing whether the coin (and the project behind) will be a success is the reward system. What people are usually looking for is a high rewarding POS coin in the early stages of the project - that means that they'll be able to get their money back because they either invested or mined. Either way, which types of investors do you want for your project? So, by determining your rewards system in the early stages, you will influence which types of investors will be drawn to your project. I believe that is particularly important and that's why I analyzed a few coins to see how the coin supply is actually developing through time.
The analyzed coins are: APR coin (APR), Deviant coin (DEV), Dystem (DTEM), Ignition coin (IC), Parlay (PAR), Printex (PRTX) and ZEST coin (ZEST). I've chosen these coins because behind each of them is a solid project which already underway for some coins and only in the startup phase for some coins.
I have taken coin specifications for each of the coins and calculated the coin supply during time. You can do this yourself provided you have: amount of premine, block reward structure, block time and the total supply. It's easy, but it takes some time. Anyways, here comes the first chart! This contains information for all the analyzed coins from start to end, i.e. projected maximum supply.
DEV will take a long, long, long, long time to reach maximum supply. You can read about the DEV coin specifications here. The situation is similar with APR (100+ years) and you can read about the APR coin specifications here. So, you can see that we reach maximum supply on the visible area of the chart for all coins except DEV and APR. And notice that I've limited the x-axis to 60 years in the next chart to make things better visible.
Perhaps you have noticed three different reward specifications used in the analyzed coins:
- Linear growth (DTEM, PAR) - coin supply grows in a linear fashion (or very close to linear) and hits the maximum supply relatively fast
- Asymptotic behavior (APR) - closes to the maximum supply but takes a long time to reach it due to reward halving every 1 mil. blocks
- Asymptotic+linear behavior - closes to a certain percentage similar to the asymptotic one, but then proceeds to reach the maximum supply in a linear fashion.
Which one of these is the best? That is certainly the 1+ million dollar question. Let's see how these more established coins are doing, e.g. IC, DEV and APR as the youngest one. IC has been quite stable in the range from 40-60k satoshis, while DEV has had a real price upswing from 10-60k satoshis. APR has had a modest start but has since that start grown to 25+k satoshis. So, all of these coins have a really long time span to reach the maximum supply. Which means that they're not over-saturating the market, but going in line with the planned project developments. This again translates into price stability and growth. ZEST is a relatively new project, but has gone with the same strategy as the previous ones. I'm gonna call this the high price strategy.
The newer coins which I've analyzed here (PRTX, PAR and DTEM) which reach the maximum supply much faster (within the first 5-10 years) have solid projects on the forefront. And as you can see, these projects expect to generate the need for their cryptocurrency really fast, therefore the whole coin supply will be released really fast, at least compared to the coins in the high price strategy. In these cases, I do not expect to see prices as high as with the high price strategy coins, at least until the maximum supply is reached. If these projects continue successfully, while at the same time aiming for the global adoption, their price should surge sooner or later. I'm going to call this high supply strategy.
Let's explain this through Microeconomics 101.
In the case of high price strategy, we will have a low supply of coins and with the number of hodlers growing, a faster increasing demand. High demand and low supply means higher price. You can expect price developments in this case to be very stable and persistent during a longer period of time (I'm not talking about 1 month or even 6 months).
In the case of high supply strategy, we will have a high supply of coins and a growing number of hodlers, but the rate at which the supply grows is much faster than the demand. High supply, lower demand means lower prices. High supply strategy projects must build a quality community really fast in order to maintain the price. This is also related to the quality of the underlying projects and the pace at which they are developing. Once they reach maximum supply, there are no more shifts of the supply curve. In that case, only the change in demand will drive the price. If the project lives long enough to reach that phase where the maximum supply is reached, the price will grow. And that should happen in a much faster pace than with the high price strategy. However, here it is particularly important to observe the first few months. Let's zoom in on the chart again.
What we can conclude is that high supply projects (for the analyzed coins) typically release 40-80% of their supply within the first two years. High price strategy projects vary from 10-35% of maximum supply within the first two years. The difference is quite big.
So, which way do you think is the best to go? For now it seems that highly valued coins with long-term developing supply, or high price strategy projects are doing better. That does not automatically mean that the other strategy is doing worse. Price wise, it might be true, but if you'd take time and research, I'd say that the new coin generation in the case of high supply strategy coins is properly suited to the projects. Take for instance PRTX dealing with printing. If the project continues developing at this pace, the community and the demand will expand really fast. If that happens, your coin generation pace should at least try to match that expected demand development. Otherwise, the project might be endangered. All in all, I'm really interested to see how the new projects will stand once they reach the maximum supply. If they manage to reach it. If crypto survives. If the Earth is not hit by a meteor.
Over and out!