Token Economics Chapter 2 Several Common Token Supply and Demand Models (1)
In any economic theory, the relationship between supply and demand is the primary issue of research, but this does not apply to the currency circle. Why? Those who have read my last article will know that ARB and OP can be used to vote and can be regarded as simplified decentralized equity. However, there are many air coins in the currency circle without any supply and demand relationship. The only driving force for the rise is speculation. , or even without any meaningful technological breakthroughs or application scenarios.
But the initial tokens were not like this. The earliest Bitcoin and Ethereum were value tokens based on proof of work (POW). Generally speaking, they were offline computing power mining. There is a cost to obtain these tokens. If If the income is less than the cost, then the miners will stop mining, that is, they will no longer produce tokens, and the supply of tokens will decrease. Generally speaking, we call the price at which income is equal to the cost the miner's shutdown price.
Of course, this is a very simplified theory. Due to the existence of scale effects, as well as differences in electricity costs, equipment, and regional policies, this shutdown price should be within a range.
Then let’s talk about needs. The demand for Bitcoin is self-generated. So far, and perhaps within the next hundred years, people have always been arguing about this issue. It is also the biggest problem on the way to Bitcoin becoming a compliant financial transaction market. The SEC, courts, CME Group, currency gambling dogs, black marketeers, Bitcoin believers, and financial investors have all given different definitions to Bitcoin. I personally think that this huge difference is the root cause of Bitcoin's sudden rise and fall. Everyone wants to "centralize" this "decentralized" token and make Bitcoin only for their own use, rather than just based on speculation. Come and participate in the market. (The only debate is about betting on dogs. Assuming that betting on dogs really makes hundreds of times the assets in the currency circle, and stops in time without losing all, then should he hold mainstream currencies, or withdraw into legal currency to purchase real assets? )
Human nature is always selfish. But no matter what, there is indeed a demand for Bitcoin, and everyone wants to own Bitcoin; it is precisely because the demand for Bitcoin cannot be measured, so the general equilibrium theory does not apply, so the shutdown price has become the only measurable support. .
How to calculate the shutdown price of Pow type tokens? What significance does the shutdown price have for future price trends?
Taking Bitcoin as an example, according to cost = benefit, the following equation can be listed:
Number of Bitcoins mined every day * Bitcoin price = Daily mining cost
The number of Bitcoins mined is divided into two parts: block reward and miner fee reward. The cost of mining is electricity fee, depreciation of fixed assets and other commissions. For simplicity, only electricity fee and mining machine depreciation are considered, all in US dollars. calculate.
The current mining difficulty is 57TH, the computing power of the entire network is 470EH/s, the mining machine is based on twenty Antminer s19 Pro (110TH/s, 3000 US dollars, 3250w, phased out in five years), the electricity bill is 0.08 US dollars, and the daily income is calculated to be 0.0049 Bitcoin, the daily electricity bill is US$126.5, the daily depreciation of the mining machine is US$1.65, and the miner shutdown price is US$26,153.
And 26153 happens to be the bottom of the range that was repeatedly tested in the third quarter.
I calculated the above costs based on the lowest price that can be collected at present. You can imagine how difficult mining would be without the support of local governments or local policies.
This is a market where the strong take all. Mining companies with large scale and resources squeeze retail investors who work alone. Only by expelling the natural short sellers who do not obey orders can we have a chance to promote the bull market. In the subsequent market, it is possible to temporarily break through 2w6. Once it hovers below the cost line for too long, it will cause irreversible damage to the encryption industry.
Whether it is the SEC trying to regulate arbitrage, the big investment banks investing in mining company stocks, or the natives of the crypto industry, they will not let this happen. This is a shot in the arm for crypto people and a stabilizing rod for the market.
There are many supply and demand models for tokens. We will continue to introduce game output, liquidity mining (staking), and some tokens with special supply and demand relationships in the future.
Original statement: BinanceSquare Token Economists team
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