DENT Token Velocity
How can DENT Wireless increase token velocity and boost the token price?
As explained in this post “A model to determine the theoretical value of the DENT token“, token velocity is an important factor to determine “the theoretical value” of a token.
For those of you who want to know more about token velocity, read this article.
But to give an easy definition:
“Velocity is the speed at which transactions take place”.
And the higher the speed, the lower the token value.
This is intuitive, because if the transactional activity of an ecosystem is $100 billion (for the year) and tokens circulate 10 times each over the course of the year, then the collective value of the tokens is $10 billion. If they circulate 100 times, then the collective tokens are worth $1 billion. Thus, understanding and calculating the velocity in any token economy is extremely important.
So, let’s first describe Dents ecosystem by the transaction flows.
As all products are nowadays offered solely by DENT Wireless (DW), and DENT App users (in the end) are the only buyers, the main DENT token flows are easy to understand.
- DW buys voice/data from external suppliers (pays in dollars), sells these products to App users and traders who pay in DENT*, and DW sells these DENT via BTC for dollars to repeat the process.
- DW receives dollars from advertising income (image/video ads, offer wall, survey wall), and pays out daily DENT rewards for watching videos or performing offer wall tasks.
- DW uses its liquidity assets (from war chest, selling/trading income) to buy BTC that is being used to buy the necessary DENT on DENT Exchange to fulfill incentives. Plus, DW uses DENT from the war chest every month to pay out its “workers” each month.
*App users can pay with USD for their purchases, but the system automatically buys the necessary DENT (with BTC) on DENT Exchange.
It’s important to understand that DW prefers USD or BTC as their main liquidity as they can’t spend DENT elsewhere (only on exchanges to change into other crypto or fiat). So, all DENT received from selling products are sold sooner or later for ETH/BTC/USDT (mostly on Binance and DENT Exchange) where after it is being converted into USD.
Besides token investors and (arbi)traders, there are other reasons to keep/store DENT as:
- App users who bought more DENT than necessary (friction).
- App users who earned free DENT as incentives (rewards and referrals).
- The deposited DENT in the Afterburner Vault.
- DENT Exchange traders who trade in mobile data and voice packages.
As per October 6, 2020, about 24.8 billion DENT tokens are stored in wallets owned by DENT Wireless on behalf of DENT Exchange and DENT App users. These wallets are kept for “regular” DENT Tokens (for trading on DENT Exchange) and also to cover DENT credits.
(Note: the DENT credits are primarily the free DENT incentives that DENT App users got as referral or Offer Wall reward and which can only be used for in-app purchases and/or deposits into the Afterburner Vault).
So, quite a substantial part of all tokens in circulation are more or less “locked up” into the DENT ecosystem by actual users who have “leftover” DENT (credits).
And as long as the DENT Earn tab and referral system is active, new DENT App users will by definition lead to more DENT (credits) stored in the ecosystem as leftover. Hence, to a lower token velocity.
But for regular telco purchases where DENT app users pay directly to DENT Wireless with fiat, the token velocity is relatively high.
And with the latest DENT App feature that allows users to pay with both DENT and fiat (split payments), the friction or leftover will probably decrease. Hence, the token velocity higher.
So, how can DW decrease the token velocity to boost the DENT token price?
Plus by making the DENT token more attractive to use as the payment method (instead of paying with fiat). Think about extra discounts, DENTbacks (cashback in DENT), auto-renewals in DENT (with discounts).
Or by having more tradeable products on DENT Exchange or the DENT Marketplace. Think about the selling of (unused) eSIM data.
Read our articles about the Afterburner and Earn Tab, for all our recommendations how to improve them. And read our article DENT Wireless Marketing with some tips to improve the referral marketing.
That said, the main cause of the high velocity is caused by DW itself.
DW is the currently the only seller of the “underlying utility” of the DENT token… voice and mobile data. Either as “reseller” of packages of international carriers. Or under private label as MVNO with respect to DW’s International Voice Calling and eSIM.
And the buyers are App users.
Both DW and the App users have no “natural” intention to keep or store DENT tokens.
Or to say it in other words, the DENT token is primarily seen a “payment vehicle” with no other reasons to store the tokens.
But if you think about it…
What does DW want to achieve?
DW wants to disrupt and liberate the current mobile data market by offering everyone in the word access to a platform where the can buy, sell, trade, and store mobile data and use it anywhere they want or send data to anybody in the world while only paying for actual usage (at the cheapest possible price).
But what’s missing?
People really want to pay per use.
However, with all DW’s current and coming products, a user always must buy upfront for a package/plan either in minutes, in MB/GB, or as prepaid (local currency) top-up.
But on the other hand… how do Telcos invoice each other?
Yes, on a pay-per-use model.
So, I’m not sure whether DW pays upfront for data/prepaid top-ups of local carriers or only at moment of activation (or actual usage), but I’m pretty sure, DW pays for their International Voice and eSIM plan on a pay per use base (afterwards after a user actually has made a voice call to a certain local provider or used mobile data offered by a local provider).
So, what’s the point?
Well, suppose that the DENT token can be transferred into a real “utility token” and payments are made on a pay-per-use model, and DW is using the blockchain to register, calculate and “invoice” usage…
So, for example, users can acquire for an X number of DENT an Y number of Voice minutes, or a Z amount of mobile data (MB/GB).
Then there are 2 models:
- The user pays the X DENT upfront, and can use the utility until Y or Z is reached.
- The user pays in micro-payments for each actual usage.
Besides micro-payments vs one single payment, the main difference is that in the first case the tokens are transferred immediately to the supplier who can sell them immediately. While, in the second case, the user has to keep a certain amount of the token for coming micro-payments.
With your new knowledge about token velocity, you now understand that model 2 has a way slower token velocity, hence higher theoretical token value.
For an example of a real “utility token” blockchain model with micro-payments, check out Orchid (OXT), where you only pay for VPN services while you are actually using the VPN.
So, should DW now adopt this model and become a “true and full utility token”?
I don’t think that would be necessary, and DW should keep its current “product line”, but DW can add a new pay-as-you-go product to its product arsenal.
Actual pay-as-you-go product
As extra service to clients, DW can introduce a new pay-as-you-go product.
Actually, there is (at least) one other eSIM provider who offers a pay-as-you-go product… take a look at this “Global Pay As You Go eSIM“- product offered by eSIM.net.
With this product, a user pays $10 upfront, and for every minute or MB data he uses, the related charged dollar amount is deducted from his “balance”.
But eSIM.net is also offering regular specific eSIM data plans (for a specific region/country, amount of GB, and expiration period).
Why do these 2 types of products exist if pay-as-you-go is easier with less restrictions as (number of GB, duration) an no need to select a specific region/country.
Well, it all has to do with the “quantum-discount” system. The more you buy (and pay) upfront the lower the costs per unit (price per MB/GB, price per voice minute).
Also, there is the “duration” effect. The longer the duration the higher the price (per unit) as people have more time to use the data/voice with lower chance to “lose” unused data/voice as the duration has been expired.
So, by having a pay-as-you-go product, the unit prices are “by definition” higher as the duration is longer (often no limit with respect to duration), and there is no real quantum discount as prices are fixed per unit.
Or to say it in other words… a pay-as-you-go user pays for the flexibility with a mark-up on the unit prices.
Hence, a great extra product that DENT Wireless can add to its arsenal. Especially as DW is fully equipped with the right ecosystem to introduce this product: the ETH platform with parachain usage and DENT token to not only register and administrate usages, but it also allows to…
Use DENT for micro-payments
So, instead of asking users to pay (for example $10) upfront, DW can introduce a full pay-as-you-go product, where users got charged by paying with DENT the moment they have used data or voice.
So, without paying upfront!
Of course, users have to keep a certain minimum amount of DENT in their balance (otherwise the services can’t be charged).
Hence, a perfect new product to decrease token velocity as users will keep more DENT in their balance.
To stimulate that users keep even more DENT, DW can consider to allow that users may use the Afterburner Vault for (automatically) pay-as-you-go charges.
Virtual pay-as-you-go model
Instead of launching a real pay-as-you-go product, I think there is an easy solution such that it looks like the Dent token has more “true utility token” characteristics.
What do I mean?
I propose that DW registers their own products as if it’s using a pay-per-use model!
Such that every time an App user buys a voice bundle or eSIM data bundle, the received DENT are locked up into a separate public wallet.
And that after a user has actually used his voice/data, that the related reserved amount can fall free.
Of course, DW won’t do this on an individual base, but say once a day aggregated for all transactions and usages during that day.
Think about it this way…
Now DW receives DENT payments from App users upfront, and (mostly) sells the proceeds for USD (or BTC)…
But there still is a liability for DW to “deliver” the mobile data/voice. Hence, for accounting purposes, DW makes a reservation anyways. This reservation is the difference between received upfront payments minus actual usages. Or to say it in other words “the still to be delivered but already sold data/voice”.
Well, what I’m suggesting now is that DW periodically (preferable daily, or otherwise weekly or monthly), adjust the public wallet to equal the required reservation.
This way the DENT paid upfront (not used yet) by users are locked in this public wallet.
Of course, this wallet will belong to DW but it lowers the token velocity in accordance to usage, so in line with a pay-per-use model.
And DW can even use this new public wallet to pay their suppliers (i.e. the carriers) in line with their invoicing.
Normally, this wallet will grow over time in accordance to expected increasing sales of DW.
Of course, this whole new model, has to be adopted by DW.
And there are some risks.
- The reservation is kept in DENT while the liabilities are in dollars. But with some good treasury policies this can be overcome.
- The DENT deposited in this new public wallet are locked and can only be used to pay suppliers/carriers. I see this a positive as well, as suppliers and investors do now know that DW has enough liquidity to pay for these services.
- This public wallet must be funded, will probably grow, and uses other liquidity resources from DW (but maybe the war chest can be used for this purpose).
- This wallet can in theory grow to billions of DENT. So, maybe it’s better to set a maximum of say 50 billion DENT, just to have enough DENT available in circulation.
But as positive effect, I’m sure the DENT token price will be higher as velocity decreases. Or to say it in other words… the scarcity increases as more DENT are “out of circulation” and locked in this new wallet.
So, for me the perfect simple solution, and I really hope DW’s management will consider my proposals.
After writing this post, in our community, some other tips were mentioned to decrease the token velocity at the moment of purchase/checkout.
- Add discount percentages to the Afterburner Loyalty Program. For example, if you have X amount DENT locked up, you’ll get Y% discount on all your DENT App purchases. Of course, as with the other benefits and discounts, the more you lock the higher the discount percentage.
- Cashbacks or a better name DENTbacks. Free DENT bonuses if you purchase a specific amount in USD. For example, if you’ll spend $10 in the DENT App, you’ll get automatically 2,500 DENT as bonus in your balance (of course, number of DENT depends on DENT token price on the market).
- We created a report with tips for the management how to change the DENT credits system and how to use DENTbacks.
- At checkout inside the DENT App, add a checkbox with option to buy some extra DENT for reasons as:
- depositing into the Afterburner Vault.
- as deposit for auto-renewals or pay-as-you-go minimum.
- to get a discount “deal” on your DENT purchase
- option to send some DENT to family members or friends.