The current trend for small-cap cryptocurrency tokens is “utility”. NFTs are an often-referenced low hanging fruit, as is some yet-to-be-developed service that will be paid for with the token. Ultimately, “utility” has come to represent a single core concept: the token is desirable because it is linked to something else that is desirable, and therefore buyers can reasonably assume that the price will go up. But in most cases, the majority of buyers are not buying the token for its utility value. They are simply buying it as a speculative asset. The token’s true utility is that the price should increase, so they can sell at a profit.
StrangerCoin takes a different approach to utility. Instead of linking the token to some external desirable commodity, StrangerCoin dares to say the quiet part out loud: what buyers really want is an ever-increasing price floor. StrangerCoin’s unique endowment mechanism is designed to provide that, through interest-funded buybacks that offset selling pressure and provide price support to the token, forever.
The Endowment Mechanism
StrangerCoin diverts a small percentage of each transaction into a high-yield Mad Meerkat farm pool. Each transaction adds principle to the endowment, and as the principle grows, so does the amount of interest generated by the pool. 10% of that interest is compounded, and 90% is used to buy back and burn StrangerCoin. Each buyback causes an increase in the price of the token.
Because the buyback is funded by endowment interest, it can happen regardless of volume. Unlike other tokens that use a “burn tax” mechanism for deflation, the StrangerCoin endowment can continue to buy and burn tokens forever, even if exchange trading has completely stopped. In addition, the endowment is held in Mad Meerkat farms, which strengthens both Mad Meerkat and the Cronos ecosystems.
The Endowment Effect
To examine the price effects of the endowment on StrangerCoin, a mathematical model was created to simulate the price of the token over 60 months. The model was seeded using data from the first month of trading, and a projection of future trading volume was generated using data from other successful BSC tokens that have been actively traded for long periods of time. To be clear, this is not a prediction of the actual price of StrangerCoin; there are many factors not incorporated into the model that have an impact on the price, such as the price of Cronos and unbalanced buying and selling pressure. A comparison to a standard farm pool investment was also included as a reference point.
Short Term: 12 Months of Growth
Over the first 12 months of growth, the historical token data suggests a rise in volume, followed by a decrease to approximately 10% of the first month’s volume by month 12. The high volume during the initial months of growth provides an influx of principle to the endowment. By month 12, the model predicts the endowment principle to be over $400,000, with over $18,000 of StrangerCoin being bought and burned every month. The effect of this on the price of StrangerCoin is very apparent; over that 12 month period the endowment alone can cause a 5,230% growth in the price of the token.
Medium Term: 24 Months of Growth
Over the following 12 months, the model assumes volume will fall even further to $12,000 a month. For a normal token, that would result in a “dead” chart. In the case of StrangerCoin, the volume from the previous 12 months has already seeded the endowment with all the principle it needs to continue price growth. At the end of this period the endowment continues to buy and burn over $20,000 of StrangerCoin every month. As more and more tokens are removed from the liquidity pool and burned, the endowment effect continues to rise exponentially. After 24 months of growth, the model predicts the endowment effect on the price of StrangerCoin is 33,541%.
Long Term: 60 Months of Growth
After the first 24 months, the pattern is clear: The endowment continues to buy and burn the token, and the price continues to rise. Over this 36 month period the monthly buy and burn increases to nearly $26,000, and at the end of 60 months the total endowment effect on the price of StrangerCoin is 334,690%.
How is this Possible?
The key to the Endowment Effect is that as buyers come and go, they leave behind a percentage of their funds to benefit future holders through the endowment. Any volume, buy or sell, only increases the principle of the endowment and its power to affect the price of StrangerCoin. This reverses the typical price dynamic of a BSC token; instead of relying on buyers holding instead of selling, the initial volume of Stranger, through the endowment mechanism, drives the price growth over time.
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