DEXToken protocol explained to primary school children

DEXToken protocol explained to primary school children

By SirGerardThe1st | Tokenomics | 18 Oct 2020


I have a problem. I am a teacher. Then, every so often, the professional deformation of teaching escapes me.

My teacher, unfortunately now gone, told me many years ago that a concept is burned to fire if you can invent a little story that describes it. People do not forget the stories.

I have read the posts of other talented Publish0x bloggers describing the operation and vision of this new protocol called DEXToken, focusing their posts on the action of traders, developers, arbitrageurs and other players.

I decided to face a different approach for this #DEXTokenDeFined contest, thinking about the kids who are being born today and who will have tokenomics as part of their daily code of life.

After all, if you can’t explain something to a child, do you really understand it?

I mean, my focus is, how would I explain DEXToken Protocol to my two year old granddaughter?

This way.

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Once upon a time, in a sea of a very distant kingdom, there was an amusement water park called “ContradictionPark”. It was inhabited by small fish of various species, which lived together and had fun.

There were two types of fishes, which were distributed in a perfect relationship. Those of the same species that were outside the park and wanted to enter, had to do so in such a way that that relationship was respected. That is, if there were two yellow fish, and four green, that relationship should be maintained. That were the rules of the Park.

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Unfortunately for those fishes who wanted to enter, there was only one very small door on the far left, and each time they entered, they had to pay a toll. When one of the fishes decided to leave “ContradictionPark”, they also had to pay a toll. The toll was used to manufacture and distribute new food to the starters and those who were already there.

But why were the fishes in the park, and why were others wanting to enter? For a good reason. In addition to having fun, the park promised them free food and large payable food earnings to take with them when they wanted to leave. In fact, the fishes owned a part of the park, at least in theory, in the percentage in which they participated, and according to that, they received their profit.

So the incentives to enter were great.

But “ContradictionPark”, (you always have a but), was controlled and guarded by huge "whales", who were at the entrance door. Nobody could pass through there, except the “arbitrageur killer whales”.

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Every time new fishes came in or out of the little door of “ContradictionPark” and paid the toll (this process was called AFM, Automated Food Maker), extraordinary things happened.

First, there was a widespread concern, will food be enough for everyone?

Second, did the fishes that were already inside still have the same percentage of shares as they did before?

Third, the “ear”, that was outside the park appeared on the scene. The “ear” had an open channel of information that the whales closely monitored. The fundamental task of the "ear" was to inform about the prices of food in the outer ocean.

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In fourth place, and due to the commotion that was beginning to be generated, two bugs woke up from their naps, considering that normally, when all was at peace, both remained sleeping in their underwater caverns. The first bug was a spider known as the "impermanent loss spider." It was a fearsome demon that tried to hoard food before the fishes could eat it. Every time the “impermanent loss spider” appeared on the scene, the fishes wondered if the park was worth entering or if they had more food and fun out in the vast ocean. The second bug that appeared was the "slipagge octopus", which annoyed the fattest and thinnest fishes, asking them why they had eaten so much or so little, with the suspicion that some got the food easier than others.

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Finally, in fifth place, the “whales” were quick to call the “arbitrageur killer whales” to come see what was happening with the food in the park, and to see if they could somehow do something to hoard the food, as much as possible. The "arbitrageur killer whales" entered "ContradictionPark" through the front door, took all the food they could and quickly escaped to sell it in other remote regions, later sharing the profits with the "whales". The food that was left was what the fishes would eat from then on, until the next fuss over the fishes's entry or exit.

Happiness was not complete in "ContradictionPark". From time to time, discontent was widespread. The fishes felt that they did not control their livelihood and their entertainment, and that there were others who, although they reported by all means that they loved “ContradictionPark” and their community, actually controlled everyone's livelihood from the outside and from within. The fishes began to distrust the fact of being "owners" of a part of "ContradictionPark".

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While these wonders were taking place in “ContradictionPark”, in a nearby kigdom ruled by a kind and generous king, much loved by his people, a group of fish farming scientists were working on a revolutionary invention that, they thought, had the potential to change the way the Automated Food Makers (AFM) worked.

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Gathered in a community called Flowchain, the scientists believed that to change the current methodology used in all fish food production chains, it was the machines that needed to be changed, not only the procedures. That is, they believed that new machines had to be invented, specialized machines, and not only work on new procedures, using current machines that were quickly becoming obsolete.

The Flowchain scientists had published their first work a couple of years ago, which had been read by the "whales" and the "arbitrageur killer whales", and which had given them a lot of worries and headaches. Would the current AFMs network they had set up in all the water amusement parks be modified one day?

After much research work, the Flowchain community commissioned its subsidiary Flowchain Shipyards to build the first whaling ship "DEXToken Whaling Ship", whose mission would be to bring the first machines to "ContradictionPark", to test the operation and then think about distribute it all over the world.

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When the ship was ready, it set off on its baptismal voyage to ContradictionPark.

The intention was not to kill anyone, only to scare away the "whales" and "arbitrageur killer whales" so that they would go to another park, or to the vast ocean to live their lives, and let the fishes of "ContradictionPark" live in peace and smoothly.

When the "whales" saw the ship approaching, they walked away, called out to their buddies, killer whales, spider, octopus and ear, and they all walked away without making the slightest objection.

Flowchain implemented a number of big changes to “ContradictionPark”.

First, they allowed the fishes to enter through the large door. Now it was much easier to get in or out.

Second, they implemented a much more elaborate and transparent food creation model, a new AFM, so that everyone could have access without inconvenience. This model was truly revolutionary. It was based on a totally different concept, which was supported by new machines that interconnected with each other, optimizing and making food manufacturing and distribution more efficient. Previous technical analyzes were replaced by new techniques that were based on the characteristics of “ContradictionPark” and not on the ambiguities of the gigantic ocean that surrounded it. The new AFM connects directly to other devices outside, so you don't need an “ear” to know what's going on outside. Now the fishes have first hand information. In addition, its operation does not depend on a "constant product" like the previous AFM, so the inputs and outputs of the fish are much smoother and do not disturb the harmonic sweet charm between them.

And third and last, Flowchain gave all the fishes the possibility of having some very precious “rings”, which allowed them to have decision in the things that should be implemented at "ContradictionPark", thinking of the future and the well-being of the community. In addition, Flowchain created a special box outside the park, the "Box of Happiness" so that all those who wanted to, deposit their “rings” in that box, and in this way, earn extra food quotas so that they could do with these surpluses what they wanted. Flowchain would use these “rings” to generate a series of new entertainment that would make “ContradictionPark” an increasingly attractive place. A really decentralized place, where all decisions depend on the community and not just some bigger guys.

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And many years of happiness were lived in “ContradictionPark”, and great wonders were created, and all the kingdoms of all the regions began to copy the model, and a new oceanic organization replaced centuries of centralization, corruption and excessive cravings for greed and wealth.

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I don't want to end my short story without giving some more technical information to my granddaughter's parents, Mom and Dad both engineers. I know that it is not usually the style of Publish0x to incorporate formulas, but my intention is only to base some of the things that I told in my little story.

 

1) In the Tokenized Hardware White Paper published by the Flowchain Foundation in February 2018, the abstract reads:

“There are various types of tokens currently existing in the cryptocurrency economic, such as utility token, security token, and coins…

In this paper, we propose the tokenized hardware, another new viable way to hardware manufacturing and production for open hardware economic. Tokenized hardware can ensure the assets of the hardware rights, data privacy, and data security by hardware tokens. Accordingly, we also propose the concept of Initial Mining Offering (IMO) to generate such hardware tokens in-place, this way, the tokens will be pre-mined for a few amount of tokens which need to be agreed by the tokenized hardware ecosystem including manufacturers, developers, and consumers. We consider that the tokenized hardware technology will represent a revolutionary innovation to build more trust and secure hardware”.

 

2) The DexToken - Protocol White Paper published in September 2020, establishes a new pricing model called "Universal Price Valuation Model" that describes very succinctly:

The following model can show that the dynamics of the token price (Pt) is determined by user base (Nt), aggregated transaction needs (St), platform productivity (At), and total token supply (M).

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Furthermore, CoinMarketCap proposes that Circulating Supply is a better methodology than Total Supply to determine the token market capitalization. Therefore, we propose that the total token supply M can be replaced with the token circulating supply Ct. Thus, the model becomes:

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In summary, the Speculative AMM utilizes this model to determine the total amount of minted tokens that can be issued at a time. The DEXG holders can provide liquidity by depositing their DEXG tokens and other collateral tokens to the Staking Pool.

Adding the expected token appreciation (u^p) and risk-free interest rate (r) to this model, and under the condition of full adoption, setting (alfa) to a constant between 0 and 1, then:

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Furthermore, the mintable tokens have a circulating supply (Ct) at time (t). We have shown that (Ct) should be used to replace the total supply in the above token price model. Thus, the market price of the DEXG token at time (t) becomes:

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Regarding the concepts of Pool Value, Impermanent Loss and Slippage, I strongly recommend this article published by Fernando Martinelli on Medium.

I quote from that article the main paragraphs:

 

3) A simple invariant, which we call the Value Function, ensures all the interesting self-balancing properties that Balancer pools have:

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where Bi and wi are the token balances and weights respectively

 

4) Impermanent Loss

By definition, impermanent loss (IL) describes the percentage by which a pool is worth less than what one would have if they had instead just held the tokens outside of the pool. In other words:

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if the liquidity provider removes their liquidity when all the relative token prices are the same as when they added liquidity, impermanent loss will be zero: they will have exactly the same amount of tokens they've invested.

5) Slippage

By definition, slippage is the percentage change in the effective price paid in a trade relative to the spot price. The spot price is defined as the limit of the effective price as the amount traded tends to zero.

We can define slippage as the percentage by which the effective price exceeds the spot price. It's a function of the amountIn traded (Ai) as it influences the effective price:

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So if the effective price of a trade is 102 and the spot price is 100, then the slippage is 2%.

 

Ok, thanks for reading this story!

 

I want to make it clear that the composite graphics are my own, which makes it clear to everybody that I will never be able to earn a living as a designer (HaHa)

 

 

You can follow my blog Tokenomics here.

 

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If you have any questions or comments, please feel free to leave them down below.

You can also contact me at gerardo.saporosi@gmail.com.

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SirGerardThe1st
SirGerardThe1st

Franchise veteran, Dapps developer, DeFi evangelizer, Bitcoin and Ether since a long time


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