Perpetual Coin Offering (PCO)

From Minter Wiki
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Perpetual Coin Offering (PCO) - "eternal" sale of coins, an innovative idea of the Minter network on the proposal of the project's coin to the investors. In the Minter network, anyone easily and quickly can release their own coin, personal, or for a project, for calculations, voting, loyalty program, as game currency, for a draw, etc. After the issue, all coins of the network obey to the same rules - PCO.

General principles and terms

The creator of the coin must select ticker, CRR, issue amount and reserve size in BIP. Further issue and burning of coins take place regardless of the coin creator.

The "Ticker" is a unique coin identifier, ranging from 3 Latin characters; the ticker price ranges from 100 to 1,000,000 BIP; the ticker is selected by the coin creator. Examples: TEAM, DEC, MSCAN, KARMA, etc.

Initial Issue is the number of coins issued at creation; only the one who creates the coin receives them. The rest of the coins, even of his own project, will have to be bought on general terms.

CRR - the constant reserve ratio, defines the curve of the coin's value growth when receiving an investment; the lower the CRR, the greater the price change.

BIP Reserve is the number of base coins in the Minter network that provides the liquidity of the coin. The initial reserve is paid by the creator of the coin. All the investor's funds paid by them buying a coin go in coins reserve that also the place from where the paid came when the coins are sold. In fact, the coin reserve is the seller and buyer of the project coins. When the reserve falls below 1 BIP, the coin will be destroyed by the network.

Coin Price is the initial price determined by the amount of reserve, CRR and the number of coins issued. Then the price of the coin rises when investors buy it and fall when investors sell it back.

By buying a project coin, the investor increases its reserve and, accordingly, the price. As a result, all holders of this coin earn more delegation rewards.

When selling coins, the investor receives them from the BIP reserve, and the coins sold by them are burned.

Coin Quantity Calculation Formula

The basic formula for calculating the number of BIPs that can be obtained from the sale of a custom coin:

Coin formula.png
E - number of BIPs received, C - number of BIPs in reserve, W - percentage of collateral (CRR), S - number of coins in circulation, T - number of coins sold 

CRR on the graphs

An important characteristic of the coin, which in many ways indicates the purpose of its creation, is CRR. The CRR can be between 10 and 100%. Depending on the CRR value, the degree of change in the coin price when buying or selling coins by investors changes. The lower the CRR, the stronger the price change and vice versa.

Dependence of the coin price on CRR at the same issue volume:

CRR.png

Dependence works on both buying and selling coins: the more coins purchased after the creation of the coin, the higher the price; the lower the CRR, the harsher the chart of the price increase.

When investors sell a coin, the price changes according to the same schedule, but from right to left: the higher the CRR, the smoother the price change. The charts clearly show that with high CRRs it is more profitable to buy coins immediately after creation, and with medium (40-60%) this dependence is not so pronounced.

Stake Evaluation upon the delegating

Delegation in the Minter network is a profitable investment, and if we take into account the unique feature of this network - the ability to delegate custom coins, the prospects of investing through the delegation of promising project coins look even more attractive. But it is necessary to take into account the peculiarities of the evaluation of the custom coin delegated stake.

The evaluation of the coin stake in the process of delegation depends on the size of the reserve (i.e. the total number of sold coins) and the share of the delegated coins in the total issue. As a general rule, the stake is overestimated every 120 blocks and the sum of the evaluation is equal to the number of BIPs that would have been received if all the delegated coins had been sold at the same time. Therefore, the valuation of the stake depends on what percentage of all purchased coins is delegated, if part of the coins is purchased but not delegated, the value of your stake can be significantly higher than the purchase price. It is worth noting that coins with low CRRs are usually not worth buying for the purpose of delegation due to the specifics of stake evaluation. With a high percentage of delegated coins, the cost of the stake will below. And coins with a CRR above 70% most often give a more attractive assessment as the delegation stake.

Risks

Investors should carefully assess investment risks. Minter network has its own specific risks:

  • Risk of penalties;
  • Risk of decreasing coin value;
  • The risk of destruction of the coin.

The main number of coins in the network is delegated. Delegated stakes serve a guarantee, so the participants are interested in complying with the rules of the network. The result is the financial responsibility of the delegate for the actions of the chosen validator, i.e. the person to whom the participant has given their votes. For inaccessibility of the validator, the network imposes a fine of 1% of all stakes, and for double signature - 5%. Therefore, anyone should choose validator cautiously.

A coin value drop is possible if investors or the creator of the coin sell their stakes. Such risk can be avoided by carefully choosing the object for investment and buying coins at a low price at the start of a promising project, while the investors are few.

The risk of destruction of a coin is an extreme risk of falling value. It occurs when a very large number of coins are sold, for example a coin with a low CRR has more than 40% of its value sold.Selling 40% of coins with a 10% CRR reduces the reserve to 1 coin:

CRR10.png
The Minter network has a rule of clearing the network from coins with an empty reserve: if there is less than 1 coin in circulation or the price of the coin is less than 0.0001 BIP, the coin is destroyed.

PCO examples

The parameters of the coin issue are selected according to its purpose.

Examples:

  • Unbond coin is designed to bypass the 30-day locking rule when withdrawing the stake from the delegation. Parameter: 10% CRR; delegate 50% of the issue, the remaining 50% sell when the money is needed. Risks - the fine imposed on the validator for double signature will lead to the loss of 22% of the stake.
  • Project Investment Coin - is designed to collect investments for the project implementation. Parameters: CRR from 70%; delegate 90% of the issue and more; the income from delegation partially reinvest by buying their coin. A high percentage of delegation guarantees investors that the creator's coins cannot be suddenly sold; a high CRR attracts investors at the start of the project.
  • Voting coin - CRR 100%, the number of coins is equal to the number of votes, the price of the coin does not change from the number of buyers.

Advantages and disadvantages of PCO

PCO offers fair and transparent terms of sale, availability at any time and guaranteed liquidity of the custom coin, which is an important advantage compared to ICO, IEO and STO.

The disadvantage may be the uncontrollability of the issue volume, which makes it difficult to use Minter coins as investments on SAFE terms.

References