In 2017 and 2018 many projects were launched using Ethereum’s ERC20 token and subsequently scheduled token swaps onto their native tokens once their own blockchain was ready.
They launched using ERC20 for several reasons, including:
- Ease and speed to launch
- Access to funds during the ICO craze phase
- Exchange Listings: ERC20 token means all exchanges could instantly list new tokens with no additional tech requirements and associated costs
- The use of ERC20 makes tokenization less risky for everyone involved since the tokens adhere to the same standard.
Asides ERC20 tokens, the Ethereum network offers other types of tokens for projects including:
- ERC223: which allows users to send their tokens to either wallet or contract using the same function transfer. Thus, eliminating the potential for confusion and lost tokens. Examples include ChainLink (LINK) and ShineCoin (SHC)
- ERC721: they are usually non-fungible tokens such as Decentraland (MANA) and 0X Protocol (ZRC)
- ERC621: This token standard is an extension of ERC20 and allows projects to modify the total supply of the tokens they created.
- ERC 1155: allows developers to issue multiple types of tokens as fungible, non-fungible, and semi fungible. An example of the ERC 1155 is the Enjin multiverse where the items created in the game can be both fungible and non-fungible tokens.
- Other token standards including ERC735, ERC865, ERC725, ERC1400 and more. (They are extensions that serve different purposes to the ERC20 and ERC721 tokens)
What is a token swap
A token swap is a process whereby a cryptocurrency is transferred to another blockchain at a predefined rate. Token swap usually occurs when a crypto project launches its own blockchain and wishes to move its tokens from another blockchain (like Ethereum) to its new network. In some cases, the projects don’t have their own blockchain but decide to move their tokens to another platform, such as Mithril (MiTH) moving from Ethereum to Binance Chain. After the token swap, the ETH pairing of the tokens is usually removed from exchanges and only that of BTC is left.
Token Price Influences
My intention when I started researching this question was to confirm the best time to buy or sell tokens for projects heading into a token swap I researched over 20 projects, some that are still in various stages of their token swap.
It is important to note that external forces can have significant impacts on the outcomes of a token swap. These include bull/bear market stages; the marketing and communication quality, duration, budget and success at attracting enthusiasts; the number, and relative quality, of the exchanges that listed their ERC20 token and if/how they supported the token swap and the enabled native token trading; the tokens liquidity; the market cap of these projects; the level of short term speculation activity prior to a token swap, etc. This is not an exhaustive list of external factors, just a list of several variables that also influence the token price.
I found that the primary driver that dictated token price success are the exchanges. Specifically:
- Will the exchange support the token swap
- Will they list the new native token (note: some exchanges can only list ERC20 tokens e.gIDEX)
- When will they list the native token
I will leave it up to you to consider and evaluate the influence other variables that I mentioned above may have had on the projects that have already completed their token swap, and the projects that you may be evaluating right now.
Should I Sell Before Or After The Token Swap
Firstly, this is not financial advice. I am sharing the process and results of my research to make my own decisions. Again, this is not financial advice.
From the 20 projects that I researched I divided them into two groups and then compared the results:
- Group 1: This group comprised native tokens that were listed on exchanges immediately after the token swap.
- Group 2: This group comprised projects were there were, or still are, delays in listing their native token on exchanges.
One of the key criteria for a token swap to be successful is that the exchanges that already list the ERC20 token needs to support the token swap and confirm a date that they will enable trading of the new native token. The difference between Group 1 and Group 2 is influenced directly by the exchanges, so it’s critical that the project management team have a good relationship with the exchange and manage all communications with their token holders and the crypto community.
If an exchange does not enable trading of a native token after the token swap, then effectively, token holders are now holding a non-tradable token. This situation is exacerbated when a percentage of tokens have not participated in the token swap and continue to trade on the exchange. We have found examples of token swaps where this happened and the negative impact on their token price was significant.
We have provided a matrix below comparing 15 projects comparing token price over 4 data points: First 24 hours, 3 days, 7 days and 30 days post the token swap date. The projects include EOS, Tron, Icon, Aion, WeOwn, Binance Coin, Augur, VeChain, PundiX, IOST, Tomochain, Mithril, Matrix AI, Zilliqa and CyberMiles Token.
The two most successful token swaps to date are EOS and VeChain. EOS, which is currently the sixth-largest cryptocurrency went up by 26.4% (24 hours), 17.5% (3 days), and 12.7% (7 days) after its token swap.
VeChain recorded similar success, going up by 23% (24 hours), 22.6% (3 days), and 3.4% (7 days) following its token swap.
With their native tokens listed on exchanges immediately after their token swap, both these projects recorded significantly more favourable price performance. However, the success level of these two projects could also be attributed to the marketing hype surrounding them. EOS had the biggest ICO in the history of the crypto space, generating roughly $4 billion in the process. EOS mainnet launch was also eagerly anticipated by the crypto community since it was going to provide competition to Ethereum by offering a faster and more scalable blockchain compared to Ethereum.
As an ERC20 token, EOS was listed on 34 cryptocurrency exchanges and the eagerness of most of the exchanges to partake in the token swap would definitely have contributed to its success. The token swap was also immediate, with tokens frozen as soon as the mainnet was launched. The token swap ended on June 2 following the mainnet launch, with unswapped tokens lost afterwards.
Vechain was designed to boost transparency and product management in the supply chain sector, which saw it generate a lot of interest from shipping companies and other businesses in the industry. The team allowed the token swap for 6 weeks, from July 21 to September 1st, 2018. Vechain was listed on 26 exchanges prior to its token swap and 19 of them participated in the swap process.
CHX has been the worst performer on the list. While the token swap began on June 1, 2019, 30 days later their native coin is yet to be listed on any cryptocurrency exchange. Although BitMax helped with the token swap and WeOwn have stated that BitMax will list their native token, as of 4 July, almost 5 weeks after freezing ERC20 tokens, BitMax has not enabled their native CHX token to trade.
After 30 days of not having their native token listed on any exchanges, the CHX token price has dropped by 50% since the start date of token swap on 1 June. According to the team, there is no time limit for the swap as users are allowed to do so whenever they wish. This decision may also have impacted price as it removed any sense of urgency for token holders to migrate to a native token.
Whilst comparing multiple token swaps helps identity projects with better metrics it is important to research what other factors influenced these results, and if there are patterns to help identify what has impacted success across more projects. The most successful token swaps on the list had a well-defined timeline, making it a matter of urgency for holders and exchanges to carry out the process. Projects with open-ended token swap dates such as Own, and Zilliqa performed negatively by comparison in the days and weeks that followed the toke swap initiation.
The two most successful projects, VeChain and EOS had very good products and excellent marketing team. Some of the tokens that performed negatively on the list like Cybermiles and Mithril are less popular and known in the crypto space. So their lack of market presence could have played a role in their price action post token swap.
With the exception of CHX , as projects reached the 30-day mark post token swap the price of the tokens tended to follow the market trend. EOS, for instance, dropped by 28% 30 days after its token swap, implying that the positive impact of the token swap had waned and the general market conditions affected the price performance.
Most of the token swaps were carried out between last year and this year. However, token swaps carried out last year had more significance to those conducted this year. In 2018, EOS, Tron, Icon, Vechain, AION, and Pundi X all went through a token swap. This year, the biggest names are Binance, Zilliqa, and IOST.
The stated purpose of my research was to identify if I should sell before or after the token swap. My research showed that a few weeks after token swap projects tended to return to following the market trend, which means that any potential price benefit needs to be looked at over a shorter time frame. I chose a 3-day time period after the token swap.
Token BTC price 3-Days after tokenswap
When I look at both EOS and VeChain I note that at the time they both had considerable brand recognition, market presence, and well communicated token swap. The market was also still relatively favourable.
When I remove both EOS and VeChain from the 3-day results above, it is clear that the potential gain of a few percent is not worth the risk of engaging in a token swap, especially as over half of the projects showed negative results and also carry the risk of delay native token listing.
Britain launches new pandemic loan support scheme
LONDON (Reuters) – Britain’s finance minister Rishi Sunak on Wednesday launched a new state-backed loan scheme for businesses hit by the COVID-19 pandemic, replacing existing programmes that have seen struggling businesses borrow some 73 billion pounds so far.
The new scheme will offer loans from 25,000 to 10 million pounds, with an 80% state guarantee, replacing the previous ‘bounce back’ scheme aimed at small businesses and programmes for larger firms.
Sunak did not give details on the interest rates or eligibility criteria for the new scheme, with media reports ahead of his Budget plan suggesting they are likely to be more stringent.
Sunak is trying to reduce companies’ reliance on the previous state-backed lending schemes as Britain prepares to ease lockdown restrictions which should lead to an economic recovery.
More than 45 billion pounds had been borrowed by over 1.4 million companies under the so-called Bounce Back Loan Scheme for smaller businesses, which allows banks to lend up to 50,000 pounds with 100% state backing.
The country’s leading spending watchdog last October warned more than half of that money may never be repaid due to fraud and defaults, given the limited checks banks were required to do.
A further 27 billion pounds has been loaned via two schemes for medium and large-sized companies, with 80% of the lender’s exposure backed by the state.
The lending support has helped defer or even prevent bankruptcy for many companies in hard-hit sectors such as retail and travel, meaning Britain’s banks have yet to see much impact on their loan books from the pandemic.
But the support has sparked concerns that the loans are propping up ‘zombie’ companies that will collapse as soon as the life support plug is pulled.
(Reporting By Lawrence White, Editing by Iain Withers)
EU should keep borrowing limits suspended in 2022 – Commission
By Jan Strupczewski
BRUSSELS (Reuters) – The European Union should keep borrowing limits for governments suspended in 2022, as it has this year and last, to help the 27-nation bloc’s economies return to pre-pandemic levels, the European Commission said on Wednesday.
“The general message is that we are keeping a supportive fiscal policy,” European Commissioner for Economic and Financial Affairs Paolo Gentiloni told a news conference, adding the EU would, in this way, be in line with the major world economies.
“Today, the Commission states clearly that pulling back support too quickly would be a policy mistake. The best way to secure public debt sustainability is to support the recovery,” he said.
The commission, which is in charge of enforcing EU rules that cap government budget deficits and debt to safeguard the euro, said current forecasts showed the EU would only reach its 2019 level of economic output in mid-2022.
EU finance ministers suspended the bloc’s budget limits rules, called the Stability and Growth Pact, last year when the COVID-19 pandemic started, using the “general escape clause” put in the rules for such emergencies.
“Current preliminary indications would suggest to continue applying the general escape clause in 2022 and to de-activate it as of 2023,” the commission said in a statement.
The recommendation is meant to help EU governments draft their fiscal strategies for the next two years by April.
In May, the commission will issue its new economic forecasts for the bloc’s growth, inflation and public finances and finance ministers will then take a final decision on whether to keep borrowing limits suspended in 2022.
If any EU country recovers more slowly than the rest and is still in trouble in 2023, the commission will take that into account in its view of its continued borrowing, it said.
“In case a member state has not recovered to the pre-crisis level of economic activity, all the flexibilities within the Stability and Growth Pact will be fully used, in particular when proposing fiscal policy guidance,” it said.
Commission Vice President Valdis Dombrovskis also said that while fiscal polices would have to remain supportive next year, EU governments should gradually differentiate them.
He said countries with strong economies and relatively low debt could afford a more supportive policy, taking into account the impact of the EU’s recovery fund that has both grants and loans for every EU member. Those with high debt, should be more careful, he said, and use the EU grants to fund investment.
(Reporting by Jan Strupczewski; editing by Philip Blenkinsop and Bernadette Baum)
Consumer Financial Protection Bureau Issues Disclosure-Focused Final Rule on Fair Debt Collection Practices Act
On December 18, 2020, the Consumer Financial Protection Bureau (CFPB) issued the second of two parts of a final rule revising Regulation F, 12 CFR part 1006, which implements the federal Fair Debt Collection Practices Act, 15 U.S.C. 1692, et seq. (FDCPA). The CFPB issued the first part of the final rule revising Regulation F on October 30, 2020. Our previous Alert provides a summary of key changes from the prior issuance.
There are several key changes that debt collectors, creditors and financial institutions should note. As further detailed below, the rule:
- Clarifies the information that a debt collector must provide to a consumer at the outset of debt collection communications, i.e., in a validation notice;
- Mandates that debt collectors take certain actions before furnishing information about a consumer’s debt to a consumer reporting agency; and
- Prohibits debt collectors from bringing or threatening to bring legal action against a consumer to collect a time-barred debt.
Although the rule expressly applies only to “debt collectors,“ states may extend the rules to apply to creditors. Furthermore, creditors themselves may elect to adhere to the new standards in an abundance of caution, or stay informed of the rules that apply to their debt collection vendors.
Compliance Time Frame
The rule becomes effective on November 30, 2021.
Information Debt Collectors Must Provide to Consumers at Outset of Debt Collection Communications – Validation Notices
Section 809(a) of the FDCPA requires a debt collector to send a written notice to the consumer with certain information about the debt and the actions the consumer may take in response (known as the “validation notice”) within five days of the initial communication, unless such validation information was provided in the initial communication or the consumer has already paid the debt.
The final rule clarifies the information that must be provided to the consumer at the outset of debt collection communications regarding the debt and the consumer’s rights―including, if applicable, on a validation notice.
Clarified Validation Notice Requirements
The new rule clarifies that the validation notice must clearly and conspicuously include:
- “Mini-Miranda” warning: The statement that the debt collector is attempting to collect a debt and that any information obtained will be used for that purpose;
- Debt information: Specific information about the debt (e.g., debt collector’s name and mailing address at which the debt collector accepts disputes and request for original creditor information, name of the creditor to whom the debt is currently owed, itemization date and amount of the debt on the itemization date and the current amount of the debt);
- Information about consumer protections: Specific information about the consumer’s rights and protections (e.g., the date that the debt collector will consider the end date of the validation period and a statement of the consumer’s rights to dispute the debt or request the name and address of the original creditor during that time); and
- Prompts for consumer response information: Specific prompts for the consumer to dispute the debt, request information about the original creditor or take certain other actions. Further, the prompts must be segregated from the validation information and option information, and must be located at the bottom of the notice under the headings “How do you want to respond?” and “Check all that apply.”
Model Notice and Safe Harbor
The final rule includes a first-of-its-kind model validation notice and provides a safe harbor for debt collectors who use the model validation notice or certain variations of the notice.
Disputes and Requests for Original Creditor Information
As before, the final rule states procedures for responding to a dispute or request for original creditor information within the 30-day period following a consumer’s receipt of the required validation notice. During that 30-day period, a debt collector may not engage in any collection activities or communications that “overshadow or are inconsistent with the disclosure of the consumer’s rights to dispute the debt and to request the name and address of the original creditor.”
Also as before, on receipt of a request for original creditor information, a debt collector must cease collection efforts until it sends the name and address of the original creditor to the consumer, in writing or electronically. Similarly, on receipt of a dispute of the debt, a debt collector must cease collection efforts until the debt collector sends the consumer a copy of the verification of the debt or copy of a judgment, or, if the debt collector reasonably determines that the dispute is duplicative, notifies the consumer in writing that the dispute is duplicative.
Definition of Consumer Extended to Include Deceased Consumers
The final rule expands the definition of “consumer” under the FDCPA to include deceased natural persons. The rule further provides that if a debt collector knows, or should know, that the consumer is deceased, and the validation information has not previously been provided to the deceased, then the debt collector must provide such information to the person authorized to act on behalf of the deceased’s estate.
Mandatory Communications Prior to Furnishing Information About Debt to Consumer Reporting Agency
The final rule prohibits a debt collector from furnishing information about a debt to a consumer reporting agency before engaging in specific outreach to the consumer about the debt. The specific outreach required includes either speaking to the consumer about the debt in person or by telephone, or mailing a letter or sending an electronic message to the consumer about the debt.
Prohibition on Collection of Time-Barred Debt
The final rule prohibits a debt collector from suing or otherwise threatening to sue a consumer in order to collect a time-barred debt (i.e., one for which the applicable statute of limitations has expired). This rule does not apply to proofs of claim filed in a bankruptcy proceeding.
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