Can this new scheme break the “trans-fee mining” model?
During the last week of February, DigiFinex has released a number of great news to our users,
- Launching a new derivative trading platform DigiDeriv!
- DigiDeriv platform token DRV for sale.
After the official opening of DRV purchase activity at 10:30 on March 1, it triggered a rush to buy. According to DigiFinex data, the total of 600,000 DRV in the first three rounds have been oversubscribed, and the first two rounds of subscription activities have recorded over twice the outstanding results in over 2 hours. As of 4:00am on 4 March, 4,533 people have participated in the subscription activities.
In order to help users better understand the DRV’s token economic model and the DigiDeriv platform development plan, at 20:00 pm on 3 March, DigiDeriv ’s contract business leader David live broadcasted and shared in the DigiFinex community, and the theme is: “Launch of new DigiDeriv Platform Token DRV. Can this new scheme break the ‘trans-fee mining’ model?”.
Here is the full transcription of David’s live stream:
My name is David. I am in charge of the marketing operations at DigiFinex, such as crypto-to-crypto trading, margin trading, OTC trade desk and new crypto contracts business. I joined DigiFinex in March 2018 while the company was still growing. Back then, we were only working in a small team. After just two years of establishment,, we have already expanded to offices in Hong Kong, China, Italy, Iran, South Korea and Malaysia.
List of activities launched over our years of establishment:
- Community token listing in March 2018
- Transaction fee mining on 16 April, 2018
- A series of marketing operations afterward
Our crypto contract trading platform has been in research and development since last November, and it’s one of our top priorities this year, which is set to launch in March.
We believe that many participating users have made a lot of money previously during the “trans-fee mining” period. We did two rounds of trans-fee mining with different game plays. As I have had experiences in multiple transaction mining and a deep understanding of the crux in the trans-fee mining model, I decided to participate in the event to get a first hand user experience of our own platform in order to better understand our users.
We will be launching DRV, a crypto derivative product on our brand new independent platform in March 2020. We hope to improve on the model of transaction mining, by executing a different path. I will now introduce more about the DRV token.
DRV is a platform utility token with a total supply of 100 million. The DRV Issue Method: 2% private placement + 2% public subscription + 96% activity rewards (including transaction mining events, friend referral rewards, trading competition rewards, etc.)
How can the DRV be used?
- Users can enjoy transaction fee discounts for contract trading just like how DFT works.
- Higher discounts are available when applying for weekly/monthly/quarterly VIP upgrades.
- The DigiDeriv platform will also launch a DRV Fund product, whereby 50% of DigiDeriv transaction fees income will go to the fund. DRV holders that fulfill the stipulated requirements (such as having a 30-day daily avg. position amount larger than a specified amount) will be eligible to own DRV fund shares.
Users who have bought quant funds on DigiFinex should know that when you buy funds, you will receive a quant fund token, and this token is a redeemable asset invested for you. In the same way, the DRV that meets the requirements will be able to redeem the 50% of the processing fee injected in the platform. If you summarize the characteristics of DRV in one sentence, it would be similar to the “Profit Sharing’’ with transaction mining, and mining without transaction.
There are two ways we can release the DRV tokens over time:
- The Redemption Method:
There are transaction mining type “profit sharing” of the DigiDeriv platform, like the transaction mining gameplay, takes out the transaction fee income and distributes it to DRV holders.
- DRV Issue Method:
2% private placement + 2% public subscription + 96% activity rewards (including transaction mining events, friend referral rewards, trading competition rewards, etc.) All token issuance is to help promote the growth of DigiDeriv business, so it won’t be like trans-fee mining, when there is profit, the miners would wash trade to cause DRV inflation.
This release method can effectively control the volume of DRV issued to avoid excessive inflation & maintain its value.
Releasing DRV by through events and activities, to produce unconventional output (but 50% of the transaction fee injection is conventional), and the other is to release control according to the pace of platform development. For example, if the platform believes that there is no need to do operating activities this month, then the output of DRV will be 0, but it will still inject 50% of the fee income. Different output methods and different value withdrawal methods are the biggest differences between the DRV token innovation itself and the transaction mining model.
Speaking of trans-fee mining, let me share with you some of my personal understanding and experience from working at DigiFinex. Trans-fee mining is believed to be the hottest game in the market throughout 2018. Many people have tried trans-fee mining, such as:
- Token holders
- Short term speculators
In simple terms, miners are the producers, while token holders are demanding supply, and short-term speculators are facilitators. The miners are very special. If I could describe it, they are basically the “clients”, and the biggest gainer in the entire game play.
The miner’s game play is to constantly make transactions, get coins, set them aside after receiving them, and continue earning rewards through trading. As long as the cost of trading is lower than the market, they do not stop, and once there is no profit, they leave immediately.
This action helps lead to bigger income, and the platform divides the profits, to make it look attractive. Therefore, the second type of role of token holders appeared. The miner calculates the profit margin between the daily mining cost and the market price, and the token holders calculates the payback period based on the current profits shared. Because in the early stage of the entire model, a large number of users hold coins to receive profit sharing, and as the output of miners are limited, it will continue to rise. Short-term speculators will enter the game based on this expectation.
We all know that value is determined by scarcity. For example, if there is a bottle of mineral water, if everyone in the group thinks it is a magical or holy water, then it could even be sold for $10,000. But prices are determined by supply and demand. Too much of the same product will naturally cause prices to fall. So in crypto, when miners continue to produce more currency than market demand, and no more funds are available, transaction mining ushers into inflation.
Before this inflection point was a positive cycle, the currency price went up, miners worked hard to dig, profit sharing were high, token holders kept accumulating, short-term speculators bought low and sold high, everything was perfect. But after the inflection, because the demand was even lower, the price fell, the miners stopped mining, the fees were reduced, the dividends were reduced, and the token holders were trapped. Go in the negative loop and everything is terrible. The first movers made lots of money, and the later comers became bag holders. This is the entire life cycle of trans-fee mining.
Therefore, only when the price of the crypto keeps rising, trans-fee mining can continue, and if it falls, then it’s game over.
The 3 biggest mistakes to avoid:
- When the issuance of crypto is too fast, or in an excessive large amount. Which equivalents to the bank desperately printing money. It is a matter of time before supply exceeds demand and in time, the money would be worthless
- Investing in the wrong platform, if you want to grow steadily, you need to retain long-term users, not short-term profit-seeking miners with low loyalty.
- Giving out profits too quickly, resulting in weak subsequent growth of the platform and inability to reverse the situation when entering the bear cycle as there are too much circulating supply.
This is why DRV stood out in terms of issuance, incentive and operations.
Token Issuance: Is done through a reward system that is conducive to promote a healthy development of the platform. Unconventional, it can be adjusted according to operating conditions and help curb or prevent rapid inflation.
Incentive Rewards: Does not encourage meaningless transactions making and self-dealing, but guides users to experience products in depth through understanding and promotions.
Profit Sharing: Saving the daily transaction fees and profits, then distributed rationally to our DRV holders.
The token issuance will not be similar to trans-fee mining, the platform would be controlling the supply. The fees saved will be issued to the long-term loyal users.
Why is DRV sold at 1 USDT?
Our vision for DRV is not to consider DRV as the engine for platform development, but to use it as a booster and fuel. The token holders paid the funds to grow with the platform, and finally received the bonus injected by the platform development. This is why the value of DRV is 1 USDT. Although the total supply of DRV is 100 million, if the token issuance is very slow, the circulation will increase at a slower pace.
Next, I will talk about the vision of DigiDeriv’s platform.
DigiDeriv is a derivative trading platform. DigiDeriv will provide contracts such as futures and perpetual swap, and 100x margin trading. While I was in the OTC business, I have done hundreds of trading on OKEx. I have experienced Huobi and OTC products on other platforms. The same is true for this contract. Thus I have developed a deep understanding of the market. I firmly believe that the first step in operating a product is to fully understand the product. And there is no other way than to operate and experience it personally through a business.
More importantly, I need to understand the products completely and know how everyone plays. The contract business is a money printing machine. For example, if you operate it at $10,000, trade at 20x leverage or 100x leverage, you can easily multiply your capital, so you also pay a lot more transaction fees. Then the fees injected into the DRV fund pool will be considerably with the development of the platform. The issuance is slow and the value is growing fast. After all, there will be an inflection point. This inflection point is that the net value of the DRV fund is greater than the market price.
There are 2 ways you can earn with DRV:
- Buy low sell high, and make money by trading.
- Like redeeming the fund profit, you can share 50% of the transaction fee revenue.
When the market price is $10, and the fund’s net value is $15. Most people will choose to redeem DRV for $15. After redeeming DRV, the DRV you hold is gone. You get $15. At this time, you can go to the market and buy DRV for $10. The market will automatically form a positive pull until the market price matches the real value. However, it’s worth noting that the transaction fee revenue is continuously added. It’s like you keep stepping on the accelerator of a car, so it will continue to accelerate until the platform stops growing.
DigiFinex has progressed steadily over the years, even during the crypto bear market, and gaining many global users over the past 2 years. I have a lot of experience in contracts trading. Because DigiDeriv is an independent operation, it is not subject to the restrictions of our main brand. In addition, DRV will also have a repurchase (token burn) scheme. DigiFinex: crypto-to-crypto exchange, low-leverage margin trading. DigiDeriv: crypto futures, options and other derivatives trading, so it has a different positioning with a different development direction. DigiDeriv will soon launch its own app, and users can transfer assets from DigiFinex accounts directly to DigiDeriv and receive them within seconds.
DigiFinex has a solid and stable team, the launch of a crypto derivatives trading platform is also after careful deliberation and planning. DigiDeriv is a collaboration between us and a third-party team, which we spent months selecting from a few potential partners. This team has well developed execution plan and good business experience working with the top five exchanges in the market, so their product is battle-tested. In addition, we have constantly monitored and studied what’s available in the crypto industry right now. So we are confident to build a top-notch crypto contracts trading platform. In 2020, we will also expand our global market share strategically and DigiDeriv is one of our top priorities.
That’s all for today’s sharing, thank you everyone for joining our AMA live broadcasting!