“Why don’t you explain it to me like I’m a nine year old…. Now why don’t you explain it to me like I’m five” — Michael Scott from The Office
We have introduced the Wand Token. The Wand Token will be used in the WandX platform for transacting with any of the WandX APIs. The first WandX Dapp will be the Olio portfolio trading application. This application allows users to create and trade in a portfolio of ERC20 Ttokens. In this article we aim to answer some questions regarding the Wand Token. We strongly suggest users to read the Terms and Conditions of the platform.
One common question that arises before any Token sale is — why introduce a new Token? I like to use this analogy to answer that question
A mall with a lot of shops, analogous to the Ethereum blockchain with many applications built on it’s infrastructure.
Say you enter a mall. The mall has numerous shops that you like to shop in. But the catch is that the mall only lets you use ABC coins to use the escalator, the lift, or to buy food in the food court. Since you love the mall, you change your dollars for ABC coins and you enter. On the right you see a large grocery shop with a lot of gourmet food such as swiss cheese. You see the swiss cheese in the store window, and just as you are about to enter, the manager greets you:
Manager: Welcome to our store sir! How may I help you?
Me: Hi, I would like to buy this swiss cheese please.
Manager: Sure, that would be 3 DEF coins.
Me: Can’t I just pay with ABC coins?
The manager’s answer to this question determines why you should be issuing your own Tokens for a Dapp (the mall is Ethereum and ABC coin is Ether). ABC coin is used in the mall to keep the lights on, pay the guard and the employees, and provide people with new tools to build cool new shops.
DEF coin could be required for any of these reasons as stated by the manager:
Manager: Sir we need you to buy DEF coins so that we can keep this gourmet food available to customers.
Fundraising
Manager: We need the DEF coins to enable our customers to vote on which type of gourmet food they want next.
Governance
Manager: We need the DEF coins to encourage customers to buy our product and spend time in our store.
Incentivization
Manager: Sir, you can enter our store only if you have DEF coins.
The right to use
Salesman asking customers to buy from his shop.
Manager: Sir, in our store, you can buy the cheese or go to the kitchen counter and make another gourmet dish for another customer to buy.
Value exchange
Manager: Sir, the longer you stay in our store, and the more you interact with the other customers, you can earn DEF coins.
Network creation and usage
Manager: Sir, if you have DEF coins and our store starts making a profit, we will re-distribute that profit to you depending on how much DEF coins you have.
Earnings
Manager: Sir, if we decide to move our shop to another mall, then we need to inform our customers that we are no longer here.
Software updates
Manager: Sir, we need the Token as a security deposit, in case you steal something from the shop.
Margin accounts
Manager: Sir, this cheese is only for display. You need DEF coins to pay the delivery boy. He will bring the cheese from our inventory in the warehouse.
Oracle to retrieve data
The reason is usually a combination of the above answers. The key is to have a good fit between the answer and the store issuing the DEF coins. If the store sells gourmet cheese, and the managers answer is “Sir, the longer you stay in our store, and the more you interact with the other customers, you can earn DEF coins.” This may not be a good fit for this store as their main aim would be to sell cheese or get customers to make innovative recipes involving cheese.
WandX is a store that sells kitchen tools, vegetables, meat, and cheese. It has a chef that shows customers how they can create new recipes, and enables customers to create new dishes that they can then sell to other customers in the store. Customers create dishes that are displayed in the store and can trade one dish for another. When a customer enters the store, he/she needs Wand Tokens to either create a dish or buy a dish.
We’re introducing the Wand Token to incentivize creation and trade of ERC20 Token financial instruments.
We’re introducing the Wand Token because:
Value creation — A sandwich is more valuable than meat, cheese and bread. People buy sandwiches from a store even though it’s price could be twice that of it’s ingredients; the reasons for this is convenience.
Similarly, WandX enables users to immediately buy a portfolio of currencies with a single transaction. WandX will enable creation, trade, and settlement of derivatives and other crypto-financial instruments as given in the roadmap.
Fundraising from customers — With the cryptocurrency that we get in exchange for Wand, we will build better kitchen tools, source the best vegetables and expand our store into other malls as well.
We need users of this application to purchase Wand Tokens that can in turn be used in our application for creating and trading in portfolios.
One of the objectives of creating our Token is to enable increased number of trades on our platform.
Margin and escrow accounts — To act as a decentralized clearing house for derivatives contracts, users have to be incentivized to maintain margins and honestly clear the contracts — either as cash settlement or settlement of the crypto-asset. Escrow accounts have to make sure that users act honestly. Updates to the software — If we have to move inventory around in our store, introduce new shelves and new sections in our store, we will need to inform our existing customers in the store as well as direct them to use the new inventory to create dishes.
For updates to our contracts and APIs — margin account contracts, escrow contracts, business model, it is crucial that we can easily identify existing customers and seamlessly transfer existing contracts to the updated contracts on the Ethereum blockchain.
Originally posted on the Wandx blog