The company recently stopped buying and selling its own cryptocurrency, Nucoin.
Nucoin Nubank
Initial note: I do not have any access to data about Nucoin or any privileged information about the project. My opinions and conclusions below are based on my experience in the crypto market.
In recent years, the creation of digital currencies for technology projects, mainly fintechs and video game companies, has become a reality.
The most emblematic case is the BNB token, created by the Binance exchange. In this way, the token must fulfill 4 main functions:
First, the company used the token to raise $15 million from investors to develop the first version of its products.
Later, the same currency began to function as an incentive program for the entry of new customers into the platform.
It was then used to distribute part of the company's earnings among all token investors globally.
Finally, the token became the currency of the blockchain created by Binance itself.
And along the way, the token went from a market value of USD 30 million to something like USD 80 billion. An appreciation of approximately 470 thousand percent (472,866.73% as I write)
Based on my experience creating Digitra.com’s token, DGTA, launching a new digital currency that is both consistent and long-term is one of the hardest things I’ve ever done.
In terms of software, it is becoming increasingly easier and there are already many websites where you can create tokens without knowing how to program. The tricky part is creating the economic incentives around them, called tokenomics. Satoshi's genius in creating Bitcoin lies precisely in solving this aspect.
When you create a token to attract and engage customers, like Nucoin or DGTA, the tendency is to have initial success and then the token dies.
This dynamic happens because the more successful the token is, the more customers want it and the more people have access to it. As these tokens start to have a market value, they are “free money” and many customers come in just to be able to sell them immediately.
Sales from these new customers create a selling pressure that only increases as more customers join the platform.
The creator of a token typically guarantees a certain price level by purchasing the tokens that have been distributed to customers so that the tokens remain attractive. However, the selling pressure typically becomes uncontrollable and the company runs out of money to purchase tokens.
To avoid falling into the trap of having to guarantee a price and running out of money, the token issuer can choose not to interfere in the market. In this case, the issuer lets the price of the token float freely, sales of new tokens issued to new customers increase progressively and the price inevitably tends to zero.
This dynamic is already very strong just with the sales pressure of new legitimate customers.
But to complicate matters, there is another figure in the ecosystem, which we know as Looters here at Digitra.com, who are people (and even companies) whose modus operandi is to maximize earnings from tokens launched worldwide, either by developing techniques to earn more tokens by exploiting flaws in tokenomics, or through some type of fraud, such as using fake or shell accounts.
Looters act on a much larger scale and have a very destructive impact because as soon as they receive the tokens they sell them and do this with hundreds or thousands of accounts.
Nubank is one of the companies that created a token to encourage customers to engage in certain behaviors within its app. This seemed to work initially, but people quickly started creating videos on “how to make money for free with Nucoin” and a looter industry was created, which took advantage of the possibility of exchanging new Nucoins for reais.
This possibly depleted the company's cash flow for purchasing Nucoins and it found itself between two possible solutions: stop buying the coins or change the essence of the program and transform it into a traditional points program. Nubank chose to stop everything and stop the cash drain.
Thus, to lessen the impact on the image, they transformed it into a points program where the equivalence of points for products is controllable by the issuer, possibly locking the currency conversion price for those who want to leave the program and creating raffles for capitalization bonds.
Creation, death and resurrection of DGTA, the Digitra.com token
When we launched the DGTA token, we were originally going to raise an estimated $10 million globally to finance the construction of the projects, as Binance did. However, due to the regulatory uncertainty surrounding raising funds of this type in Brazil, we chose not to raise funds using the token and launched it as an incentive program for customers to join Digitra.com and other partner companies in the future.
At Digitra.com we were not familiar with this selling force dynamic, but we chose to let the token float from day one instead of making purchases. The result was that this killed it with the price going from USD 0.10 to zero, more precisely USD 0.001, the lowest possible price on the platform.
To resurrect it, we made several attempts at improvement that generated a major change in the entire tokenomics, which is what exists today.
In short, the solutions we basically found are: making it a points program with a fixed amount of DGTA tokens issued per day and making repurchases using part of the revenue.
In summary, the programs were as follows:
Registration and KYC program, which distributes DGTA to all new customers. The quantity is fixed at 100 customers per hour.
New Customer Referral Program. 5,000 tokens are distributed daily among all those who refer customers and 1,000 tokens are distributed among those who were referred.
Trade to Earn — 200 tokens are distributed, in each trading pair, among everyone who trades in each order book on the day.
Crypto Dividends, where we distribute 20% of the revenue the company receives in DGTA, to all DGTA holders on the platform (Bitcoin holders receive Bitcoin, and so on)
Liquidity Provider, in which we distribute 10% of the daily revenues we have with DGTA to everyone who has orders open in the DGTA book.
Fixing the number of tokens issued by token programs, as we are doing with DGTA, has a very good stability effect. Taking the case of cryptos for new registrations as an example: today 100 DGTAs are issued per hour.
If we get to the level of only one customer entering per hour, they earn the 100 DGTAs each, which possibly encourages new customers to come in to share the pie.
If for any reason 1000 customers enter in an hour, each one earns 0.1 token, possibly this incentive will be small and in the next hours the number of new customers will decrease.
New customers joined or stopped joining depending on the amount of new tokens each one received, and the price of this token on the market.
Finally, buying back tokens from the market, without giving a buyback guarantee, and destroying these tokens, another program from Digitra.com that is a great idea. We are testing it at Digitra.com and the future looks promising.