Today I’d like to share with you a brief article about some of the advantages Cobinhood has acquired because of their choice to vest 10% of the tokens over time. To understand the fundamentals we need to take a look at token distribution, so let’s take a look at the white paper and token distribution metrics Cobinhood have laid out.
A total of 1 billion COB tokens will be issued.
As you can see Cobinhood will own a minimum of 40% of the tokens but it’s quite likely they will own quite a lot more. At the time of writing this article Cobinhood have sold 218 million COB, now let’s say Cobinhood end up selling 250 million COB that will leave them with another 250 million COB from unsold tokens on top of the other 40% totalling 650 million COB that they will be able to vest (sell) 10 % every year, year on year.
So as you can see it is very beneficial for them to vest (sell) the tokens but is it wise to do this, what’s the alternative?
The alternative is to reduce the supply of the tokens by performing a token burn, in other words sending the tokens to an unused wallet and destroying the private keys. In doing so that creates more demand, basic supply and demand economics suggest that the value of COB will rise because there is less COB to go around. This is actually true, so why vest (sell) won’t this devalue the token? Yes, the short term price of COB will definitely fluctuate slightly on the markets during the period that Cobinhood decide to sell but overall the answer is no, because all Cobinhood company tokens require a strict vesting period of 10 years at 10% per year, so these tokens can’t be sold all at once. Still 65 million tokens sold in one hit might cause a bit of a stir this time next year so hopefully Cobinhood are mindful and gradually sell the allocated share over a period of time.
The real kicker for Cobinhood and COB holders is the vesting mechanism actually reduces circulating supply. Their business model is geared towards the vesting schedule, every time a COB token holder decides to use COB to purchase new tokens from one of the ICOs Cobinhood underwrite or use the margin lending facility, the COB used will go back into the vesting pool. Basically this means there will be less COB available which will increase the demand and hopefully price of COB. This is a win win situation, the users of the exchange win because it allows Cobinhood the fiscal freedom to provide a great zero fee exchange and Cobinhood obviously win because they earn money over time from the appreciating COB held in reserve.
Overall this token strategy works for this ICO, Cobinhood needed a sure fire way to stay liquid so they could provide a fee free exchange and this token strategy goes a long way to paying those bills, essentially it is a very innovative way to increase demand and liquidity whilst the circulating supply of COB remains low.