Token demand is a key factor in increasing any token value. Yet, a sound tokenomy must rely on factors directly engaged with token usage in order to ensure continued demand. This can only be achieved by integrating token demand in the very use of the product behind the token.
2key architecture is designed from its inception to generate organic token demand and expand the token reach as a direct result of creating, referring, and using SmartLinks.
Below, we will explore in detail how 2KEY tokens demand is organically generated, how hodling and token burns are integrated, and how token reach expansion and token distribution to users is an integral part of the SmartLink product line.
To understand the many layers involved, we will analyze the entire process delineated in the graph above by digging deeper into each section, starting with SmartLink creation.
For clarity, it is important to establish the basic vocabulary used here.
- A Contractor is any person creating a SmartLink, regardless of the type of SmartLink created
- A Referrer is any 2key account holder sharing a SmartLink
- A Referral Budget is the amount provisioned by a PPC SmartLink Contractor to cover the rewards to Referrers
- A Contract is a smart-contract
- A Converter is any person generating a Conversion
- A Conversion is the action defined in the SmartLink smart-contract as the desired outcome
What constitutes a Conversion is defined by the type of SmartLink. Rewards distributed to Referrers emanate either from a Referral Budget provisioned by the Contractor before deploying the SmartLink or from a percentage of the payment of a purchase or a donation. In addition to referral rewards within the campaign scope, both Contractors, Converters, and Referrers earn reputation points for positive actions within the campaign (creating a SmartLink, successfully referring it, or producing the conversion event, respectively). Those reputation points also earn them 2KEY within the weekly epochs of the Participation Mining program’s Mining Pool.
Stage 1: SmartLink Creation
- When a Contractor creates a SmartLink, it activates the Campaign Contract on 2key Layer 2, without incurring any Tx fees.
- The Contractor can then add a Referral Budget in any accepted stable coin to Campaign Payment Handler Contract, a singleton contract on the main chain.
Stage 2: Incorporating the Referral Budget in the System
- The Campaign Payment Handler Contract then transfers the stable coins to the 2key Exchange Contract, where those stable coins are used to purchase 2KEY tokens. This is the first point that creates automatic 2KEY Token demand. The Exchange Contract auto-hedges the funds deposited as Referral Budget to safeguard Referrers against token volatility. These funds are used as collateral to enable the campaign budget handler to purchase more 2KEY come withdrawal time, in case the price of 2KEY has dropped by then, to ensure referrers and contractors which cash out in 2KEY don’t lose value respective to the quoted stable currency (USD). This is the first point that creates an automatic anti-volatility mechanism for 2KEY Token.
- The purchased 2KEY are sent back to the campaign’s budget handler contract and auto-staked there for the duration of the campaign, until the referrers can withdraw their earnings once the campaign finalizes and signed into finality state on the layer1. This is the first point that creates automatic 2KEY Token HODLING.
Stage 3: Managing the Reward Distribution within each campaign/SmartLink
(5)Before the campaign can be activated, a validation process takes place to ensure that all required budgets and rates have been accounted for.
(6) The campaign then starts spreading from the Contractor to the various referral chains en route to find valid converters who are willing and able to produce the required conversion event for that specific campaign. The RefChain 2key Protocol tracks the referral path from one Referrer to the next until a Conversion occurs. This process takes place on a Multi-Party State chain mechanism across browsers, in a decentralized, off-chain, and private manner.
(7) When a Conversion occurs, it is recorded in the Campaign Contract, undergoes validation to exclude fraudulent and out-of-target audience clicks.
Once a Conversion is validated on the campaign contract, the amount due to each Referrer in the referral chain is distributed to their account on the campaign contract internal accounting system and HODLD there.
(8.1) If the Conversion is valid, the reward’s value due to each Referrer is distributed to their account within the campaign contract. 90% of the Contractor’s Referral Budget per conversion is distributed to Referrers. This auto distribution means that the network becomes more distributed with each and every conversion, thereby expanding its reach organically as the 2KEY tokens purchased by a single Contractor are distributed across a large number of Referrers. As this process is repeated over and over, the number of 2KEY holders grows, 2key economy becomes stronger, more resilient, and more likely to grow. It is also possible to show via the standard formulas of currency that as the economy becomes more distributed, it makes the token stronger. Thereby, this atomic mechanism whereby the economy becomes more distributed with each and every conversion is an atomically strengthening force making the 2KEY token stronger with each conversion on the network. This is the first point of the auto-decentralization in the economy taking effect with each and every conversion on the network.
(8.2) The remaining 10% of the Referral Budget is collected by the 2key Admin Contract as Network Fee. Of these 10% Network Fee:
(a )25% finance the ongoing maintenance of 2key Network
(b) 25% go in the 2key Deep Freeze Pool Contract where they are frozen for 10 years.
This is the third point that creates automatic 2KEY Token hodling.
When the 10 years have elapsed, these funds are sent to the Participation Mining Pool Contract and distributed to SmartLink Contractors and Referrers according to the reward distribution model. The Reputation Mining pool is then dissipated between 2key users, again increasing the spread of 2KEY Tokens and strengthening the network’s economy.
Stage 4: Token Burn Auto-Mechanisms
(8.2 continued) From each conversion activating the referral rewards, a network fee in 2KEY is taken and sent to the admin contract. This fee is defined at the network level on the admin contract, currently set at 10%, and works equally on all campaigns and SmartLinks launched on the network.
Of these 10% Network Fees:
(a) 25% is taken out of circulation and into the deep freeze pool contract, where it is locked for at least 10 years, after which it may be used to replenish the participation mining pool, which will deplete gradually over a decade according to the Reputation Mining program. So both the taking out of circulation is complete and sudden, creating a supply shock (immediate removal of supply). Once it is rereleased into circulation, it is very gradually redistributed back into the hands of positively participating members, which continuously help build the economy’s strength. This is the second point of Auto-HODL created by the token economic engineering.
(b)Another varying percent of the network fee is actually burnt (e.g., sent to 0x address). In this example, we gave 50%, but for regulatory reasons, we cannot commit in advance to the number of tokens which will be burnt. The main idea, however, is to allow any integrator, and the 2key.network as the base integrator, to effectively dissipate value back to the network at large with each and every conversion made. This is the first point that creates automatic 2KEY Token burn.
(c)The remainder is used to finance the continued R&D of 2key.network and the 2key project.
Stage 5: Withdrawing Your Earnings
Each campaign’s earnings become eligible to withdraw once the campaign ends and finalizes on the main chain. Each Referrer in the network can separately request to withdraw all the earnings collected to date from all the campaigns they participated in. Until then, all the rewards are held in escrow in the Plasma Budget Campaign Payment Handler Contract. This is the second point that creates automatic 2KEY Token hodling.
The withdrawal process is as follows:
(A) The Referrer makes a withdrawal request.
(B) The referrer receives a withdrawal signature from the Plasma Budget Campaign Payment Handler Contract and (C)submits it to the Budget Campaigns Payment Handler Contract on the mainchain.
(D) The Budget Campaigns Payment Handler Contract then sends the rewards earned to the Referrer’s wallet on Ethereum Mainnet, minus a $0.50 fee collected in 2KEY Tokens to cover part of the Ethereum Tx fee.
Stage 6: Integrating 2key Tokenomy in DeFi
(9) The Stable Coins sent by the Contractor to the internal exchange are automatically re-injected into the market through the Uniswap StableCoin/ETH Relay Contract and then into the ETH/2KEY contract. This is the auto organic demand relay mechanism, which directly reflects the utility-based demand created on the network as demand on the markets where 2KEY is freely traded.
The purchased 2KEYs go back to the internal exchange contract to make sure it maintains a steady liquidity depth to continue serving campaigns and SmartLinks on the network.
All these automatic demand, demand relay, hold and burn mechanisms strengthen the network, and the more the system is used, the stronger the effect on speculation about 2KEY, hence the higher its value grows.
Listen to 2key CTO Eitan Lavi’s explanations on YouTube.