In early July, the developers of blockchain-project U Network suddenly announced that they were out of tokens UUU. Now they plan to buy back the coins from early adopters of the project, which received their tokens via airdrop in February.
In the beginning of the way U Network limited issue of tokens UUU 10 billion (worth approximately $ 15.6 million. USA), leaving 40 percent (about 6.2 million) for the founding team and future development.
However, because of the growing number of strategic partners and interest in the token, the project announced:
“The demand for tokens UUU exceeded our current dedicated reserves. Before the team faced the question: if we leave the ecosystem of tokens without changes, as we will be using the new opportunities to develop ecosystem Network U?”
The result is a situation that had no precedent.
The structure of the ICO and airdrop on different projects may vary greatly, especially it concerns issue volume and the distribution of tokens. Although some projects do not limit the number of tokens that can be created within their blockchain ecosystem, others such as U Network, go the other way.
For U Network issue 10 billion has been implemented, because the project focused “on using content online platforms to better meet the interests of their users” wanted “to provide sufficient incentives for members of the community.”
Incentives are particularly important in blockchain systems, and there is still no established methodology by which projects can define how many tokens they need to produce and store.
Joshua Gans, Professor of strategic management at the University of Toronto says:
“If you want to use tokens as a way of motivation, such motivation will directly depend on the price of the token. In the beginning it is difficult to predict”.
According to Katherine Tucker, Professor of management and marketing at mit, the projects face an ambivalent situation in a highly skilled industry. They not only have methodologies for determining the appropriate issue tokens, they also have to predict how their actions will be perceived by the community:
“If they keep too many tokens in reserve, they are often accused that they are greedy. But if they throw too many coins, then they lose the main leverage they need to entice people to use your platform or service in the future.”
Thus,the increase in the number of tokens is a slippery slope. Such decisions may affect the value of the token and to threaten investor confidence in the project.
So instead U Network plans to update its reserves, having “redemption” coins. In practice, this means that during several stages they will buy from early users UUU totaling about $ 284 million.
As for how the project determined the necessary number of tokens for re-procurement, the representative of the U Network explained:
“We believe that this is a reasonable amount. Not too high to affect the market price, and not too low to affect the need to expand”.
Economist Joshua Gans Network gave U this advice:
“If I had to give advice to the founders, in cases of high uncertainty it would be better to suspend the ICO as long as the business plan will not be finalized and approved”