A REVIEW OF INITIALIZING A TOKEN TO BLOCKCHAIN, LOCK AND VESTING
Authors: Noisy Noah, Thomas Lang
Since many members asked us why don't we lock the token with smart contracts. Our team would like to give an overview about the crypto currency and also review pros and cons of different methods. Locking tokens by smart contracts is one method, but it has its own problem, in the worst case, it could destroy everything and put all investors at risk (1)!
I. An introduction on Coins and Tokens
The market value of the crypto currency industry has been steadily increasing since its inception in 2009. We've seen a lot of effort put into mining native crypto by the community that supports it. Other native currencies were established when Bitcoin became harder to mine. When it comes to Proof of Work and Block Creation, miners and mining pool operators will share a percentage of the reward (native crypto currency). Several storage technologies are also engaged, and the crypto world has a firm foundation thanks to features like Proof of Stake, Proof of Activity, Proof of Burn, and Proof of Capacity.
When a project proposes a new coin, it is common for them to raise money by selling a small number of the coin at a low price. The Initial Coin Offering (ICO) is the name given to this event. One of the first chapters of the Crypto Age is referred to as Chapter 1. It reminds us about people who use computers and mine coins and exchange them.
It takes too long to mine a new coin (Native Crypto Currency), requires too much electricity, and is bad for the environment. Ethereum network is one of the first networks to provide a platform for programmers all over the world to use smart contracts to create tokens and to bring blockchain technology closer to the general public. It is clear from there that projects gradually emerge and, instead of issuing coins, issue tokens on the ERC network.
The creation of tokens and the deployment of initiatives utilizing crypto technology are made possible as a result. As a result, a new set of projects was developed, and so began the second era of Cryptocurrency.
As an alternative to the ICO approach, several projects use Initial Dex Offerings (IDO) or Initial Exchange Offerings (IEO) instead. It's easy to see that the majority of these projects are still in the concept phase, with little to show for it. In certain cases, the crew abandons the project altogether. As a result, investors have taken on increasingly hazardous positions.
Transaction costs on the world's largest blockchain network (ERC) increased to the point that it became prohibitively expensive for many users to utilize at the same time, ushering in the third blockchain era. As a result, other chains seize the chance to lay the groundwork for a project to issue tokens on their own blockchain network. Chains are now in direct competition for the attention of investors.
When it comes to developing for the crypto currency industry, cross-chaining is an enormous difficulty.
Now that we've covered the basics, let's take a look at how a project might begin deploying tokens. Some individuals feel that conducting an audit is sufficient because there is currently no explicit document or guideline, any standard for the token minting procedure.
II. Reviewing different methods that blockchain projects uses to mint and lock tokens
1. Mintable token
A new token type can be created by initializing a new Mint method of ERC-20 standard (2). The Mint function is used to create or “mint” new tokens, and these tokens are stored in Accounts. A Mint is associated with each Account, which means that the total supply of a particular token type is equal to the balances of all the associated accounts.
Some GameFi project uses such an initializing method:
+ Gala: GALA
+ Illuvium: ILV
+ Mobox: MBOX
+ Decentraland: MANA
+ C98 Wallets: C98
Advantages:
Can create unlimited number of tokens in some contexts without spending more energy or cost(2)
Help with a variety of business cases(2)
Creating ownership of an item external to the token
Developing tokenized assets that you are a middle man for
Efficient to apply to cross-chain (mint token on other chain easily)
Disadvantages:
Requires more crypto wallet integration, thus improving the probability of making mistakes in typing the minting amount.
For GameFi projects, owners have to set a threshold for mintable, if not, the owner can create an unlimited number of tokens and get profit from it.
The total supply is not transparent for the community because this supply is not fixed.
If the contract owner’s private key is hacked, the project will fall down immediately.
Smart contract problem, i.e., the mintable has to be only executed by the owner.
Token can mint anytime that the project owner wants!
2. Fixed supply token with vesting-based method through smart contract
Vesting-based token is a certain number of tokens that are held aside for some period of time for the team, partners, advisors, and others who are contributing to the development of the project. Smart contracts lock a certain amount of funds until contract conditions are met.
Some GameFi project uses such a smart contract vesting-based method:
+ Axie Infinity Shard: AXS
+ Star Atlas: ATLAS
+ AURORA
Advantages:
Transparent to community because the vesting time, vesting address, etc. are on the blockchain
Fixed supply of token
Disadvantages:
The token is locked inside a smart contract, therefore, it increases the probability of being hacked even if the SC was audited by a security company (1).
Contract owners can change vesting period, or looking time any time. Even the contract was audited (1).
Cannot change the amount of vesting token because they are locked inside the smart contract (Proxy SC can be a solution).
If the contract owner’s private key is hacked, the project will fall down immediately.
Smart contract problem (1).
It is not completely safe to token holders as they normally thought.
3. Fixed supply token with vesting-based method through a ledger
Vesting-based token is a certain number of tokens that are held aside for some period of time for the team, partners, advisors, and others who are contributing to the development of the project. A cold wallet or a physical ledger locks a certain amount of funds until contract conditions are met.
Some GameFi project uses such a cold wallet or a physical ledger vesting-based method:
+ The Sandbox
+ Enjin Coin
+ WAX
+ Legend of Fantasy War
Advantages:
Highly secure because the token is locked inside a physical ledger. Therefore, it is impossible for a hacker to touch the token.
Flexible to change the amount of vesting token.
Fixed supply of tokens.
Disadvantages:
Not efficient for the community to track the vesting time (i.e., they have to check several address transactions).
Requires physical behavior (i.e., touch the ledger) to transfer the token.
III. Conclusion
As we can see, there are a plethora of options for locking and releasing tokens. Each strategy has its own set of advantages and disadvantages. However, regardless of the approach used, the team will be able to touch the token that has been locked based on tokenomics. Making sure that Liquidity tokens are locked or burned is the most critical thing you can do to ensure that there is always liquidity for the project.
All tokens in the LFW project are minted (200 Million LFW). It is easily trackable for communities. For security reasons, tokens are held in a physical device that can only be accessed by the project's Co-founder & CEO. This assures the security of the token holders. In addition, teams planning to cross chains and participate in additional emission token-related events on other chains will be required to burn an equivalent amount of LFW. To maintain the project's transparency, all events will be made publically available to token holders.
Dr. Leo Vo, a former IBM Senior Scientist on Blockchain, is currently working at LFW as the Chief Technology Officer. The cross chain patterns that have been accepted by the United States will be extremely beneficial to us in our efforts to accelerate this process. Currently, we are collaborating with many chains. Information on the cross chain project will be made available in the near future.
Reference
(1):https://medium.com/daomaker/removing-all-smart-contract-risk-tech-team-tokens-52c55961e986
(2):https://www.developcoins.com/mintable-erc20-token-development
About Legend of Fantasy War
Legend of Fantasy War is a unique 3D turn-based role-playing online blockchain game. By blockchainizing in-game items, the game provides players ownership of in-game items by owning so-called Non-Fungible Token (NFT). With an engaging storyline, players can both entertain themselves and collect valuable items, even increase the value of items while playing games solo or with others. Thanks to the blockchain of items, owners of NFTs can sell, exchange, and auction transparently on the Legend of Fantasy War NFT marketplace. One of the strengths of the game is the nature of the community. Thus, the game offers a fantastic mechanism that the player and their friends can enjoy the rewards together forever. In short, the game is easy to play and collect valuable items.
Website | Twitter | Medium | Telegram | Discord | YouTube | Facebook | Substack | Reddit