Populous is like your bank account and the liquidity pool the amount of funds you have at your disposal. When your bank account is filled with fiat you will have “money” to spend. You can go out to buy things and make investments to grow the amount of fiat you have.
If you want to invest in products A, B and C, you need enough money to fund those investments. The more products you want to invest in the more money you will need to make those investments. This is no different from the way Populous operate but on a much larger scale unless of course you are a Mega Whale!
PPT and Fiat investors
There is no difference between a PPT and Fiat investor on Populous. Both PPT and fiat investor have access to the same invoices and receive the same interest depending on the winning bids.
When a fiat investor invest in invoices, fiats are exchanged for Pokens and these are then given to the invoice sellers. The invoice seller who receives the Pokens then exchanges them for fiat from the liquidity pool after which the seller can then use to pay employees, purchase raw material, etc…
The process is exactly the same as that for PPT investors but with a difference. PPT investors cannot exchange PPT tokens for Pokens because PPT investors do not contribute to the liquidity pool. PPT investor depends on the liquidity provided by fiat investors. The liquidity pool is what makes PPT viable and without sufficient liquidity, Populous cannot fund invoice purchases even if the PPT price goes "to da moon".
PPT Price and Liquidity Pool
When PPT finally get on one of the main crypto-exchanges demand due to desirability will play a part in the PPT price. Demand constitutes one part of the PPT price with the other being the size of the liquidity pool. As the demand grows and liquidity pool grows in size, the higher the price PPT will be.
The price of PPT is not just determined by demand or the size of the liquidity pool but also the yearly buy back and burn which is common to many tokens but especially due “The Secret Sauce” which is unique to PPT.
What Happens If the Liquidity Pool is Empty!
It is not a good sign if the liquidity pool springs a leak because without the liquidity pool there would be no PPT Secret Sauce.
However that is not to say that you cannot invest in Populous without a liquidity pool because fiat investors can still invest. That is also not to say that there will not be PPT because PPT will then act as any other tokens where people will buy PPT for price appreciation and speculation purposes.
Without a liquidity pool Paul Fiat would win hands down and Peter PPT will only gain from price appreciation.
In Conclusion
Unless investors lose confidence in Populous and starts pulling their investment out, the price of PPT should go up as the liquidity pool grows. The liquidity pool grows when profit is rotated back into the liquidity pool or more fiat investors are found.
Populous can only have fund invoice purchases depending on the size of the liquidity pool. If there is a huge demand for PPT resulting in the PPT price going very high then the discount factor will be adjusted to suit to ensure that there is sufficient liquidity to back the invoices on the Populous platform.
Populous is not just a one trick pony but has a bag full of tricks pulling them out one by one at the most opportune time. The real work lies ahead for the Populous team to find more investors to expand the liquidity pool and therefore grow the PPT price.
Like all cryptos in the crypto-space and which many may not want to hear but in short PPT is backed by fiat for the time being.
Other Populous Posts
My other posts can be read by clicking the links below.
Populous – Clash of the Titans!
https://steemit.com/populous/@marcusxman/populous-clash-of-the-titans
Populous – Counting Beans!
https://steemit.com/populous/@marcusxman/populous-counting-beans
Populous – Size Does Matters!
https://steemit.com/populous/@marcusxman/populous-size-does-matters
Populous – PPT Price Updated Forecast, My Take!
https://steemit.com/populous/@marcusxman/populous-ppt-price-updated-forecast-my-take
Populous – Breaking “NOT OFFICIAL” News!
https://steemit.com/populous/@marcusxman/populous-breaking-not-official-news
There are more posts on Populous and you can find them here.
Should you have any questions concerning Populous you can approach Populous through their Slack Channel, Bitcointalk forum or Twitter Account for answers and clarifications.
This is NOT Financial Advice
In my humble opinion, the risks to the downside are small compared to the potential upside rewards. This should not be construed as financial advice but an opinion only. As usual do not invest more than you can afford to lose as these investments can go to zero and always do your own due diligence.
Feel free to comment as you see fit below.
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Live Long and Prosper
I wrote this article myself and it expresses my own opinions. Computer literacy is crucial in this day and age. Just because someone tells you it is good does not mean that it is good for you.