Hangzhou Blockchain International Week丨Ju Jianhua: The platform token model has entered the 2.0 era

At 9 am on July 5, the "2020 Hangzhou Blockchain International Week" guided by the Yuhang District Government of Hangzhou and hosted by the Hangzhou Future Science and Technology City Management Committee and Babbitt officially opened. Industry leaders, Internet giants, innovative companies, investment institutions, academic institutions, and mainstream media from all over the world will gather together to discuss the problems facing the blockchain industry and future trends.

In his speech titled "The Evolution of HBTC Platform Token Model" in the afternoon, Ju Jianhua, founder of HBTC, pointed out the importance of platform tokens. Ju Jianhua believes that platform tokens form a strong bond between users and platforms, and even traditional giants cannot break such a connection.

Ju Jianhua pointed out that at present, the biggest problem of platform tokens is that part of the revenue is tokenized, there is no pricing model, and there is no targeted incentive, which gives platform token holders a lot of uncertainty. Therefore, when designing its token model, HBTC tokenizes all revenue, adopts a 10x PE pricing model, and uses the Hobbit Captain to incentivize daily airdrops of repurchased platform tokens to platform contributors, that is, it adopts the platform token 2.0 model.

The following is the full text of Babbitt's speech:

Hello everyone! I am very happy to discuss the business of exchanges, where commercial competition is the most intense, with you here in rainy weather. We also share and report our exploration in the past one or two years.

The theme of my speech is "The Evolution of Platform Token Model". Why do I want to talk about this direction? Because HBTC and CoinCore Technology are currently at a very critical juncture. We have become the first in the cloud exchange industry in the past year. Almost all well-known second- and third-tier trading platforms are using our software technology to operate their overseas exchanges. With the development of the business, we found that in order to provide better competitiveness to B-side customers, we must have a very successful exchange in the cloud exchange, so that they can have the same competitiveness as HBTC in terms of liquidity assets and depth. So this year, we began to study how to stand out from the thousands of exchanges in the world and create a head, such as the fourth-ranked exchange in the Chinese region. I believe that such ideas and such practices have some reference significance for everyone to do their own business, do their own design, including issuing their own blockchain projects, or opening exchanges in the field of blockchain and tokens.

The topics of my speech today are: 1. Blockchain economy and platform tokens; 2. General tokenization of platform trading business; 3. Evolution of trading platform token models; 4. Market competition between platform tokens and trading platforms; 5. HBC: a brand-new and original platform token model.

Why is the platform token so important?

Before we begin, we need to review the business logic and concepts of blockchain that many teachers, including Professor Meng Yan, have talked about this morning. The issue we are discussing today is to return to the blockchain segment, that is, the most successful business model of cryptocurrency - exchanges. Exchanges are the most successful business model and the most competitive business model. In such a business model, how can we use tokens to change the business competition landscape? This is a very interesting topic.

We have seen that in the past, countless exchanges have made some attempts through tokens, and the most successful one is Binance, which is well known to everyone. Binance opened its exchange in 2017, and its token model influenced the exchange landscape in 2018. Through a very simple repurchase and destruction model, its platform coin has risen more than 30 times, and a large number of overseas and global users have become holders of its platform coin, so that Binance is still the leader of trading platforms so far.

What is the essence of this? The essence is the blockchain economic model, which is how to make the platform users become the beneficiaries of the platform. In essence, users use services on the platform and are consumers. On the other hand, in the process of contributing fees and value, they obtain the platform or hold the platform's tokens and become the owners of the platform. I believe that there should be many people who have made money on Huobi OK Coin. Compared with hundreds or thousands of other cryptocurrency projects that have returned to zero or broken, the top exchange platform coins have never had such problems so far, and have always been very high-quality investment products. In the end, what is actually achieved is to let the trading platform share its own interests with the platform users, so that the platform users and the exchange form a good interest binding.

So in this situation, let's imagine that, for example, traditional exchanges do not have platform coins. If one day, they start to operate exchange businesses, such as national-level exchanges, will they snatch users from Huobi OK and Binance platforms? Compliant or large exchanges are already listed companies, and it is unlikely that they will issue platform coins, so it is difficult for them to effectively distribute their profits to users. Even in the future, especially with the increase in the number of coin holders, more large companies such as Tencent and Alibaba will enter the exchange business in the future, and there may be no chance to snatch trading users from mainstream platforms.

So I think this is the business change brought by platform coins, which truly forms a very strong interest binding relationship between coin holders and platforms. The reason I say this is because we found that valuable trading users and core value trading users on every trading platform are almost all large holders of platform coins, whether it is Huobi or OK, including Binance. When you want a lower discount, you will definitely hold a large number of platform coins, and because the number of platform coin users holding these platform coins has increased, it is difficult for you to leave or give up the platform coins that are not working and go to the trading platform to trade.

Limitations of common token models on trading platforms

But has the current exchange token formed its final form? This is a question that has been pondered for some time. Since there is such a mechanism, can it be done again? This time we will share with you how to create a new version of platform currency and a new version of the token model, which may reverse the competitive landscape in the fiercely competitive market.

The general tokenization model of trading platforms is like this (Figure 1). This is a very common phenomenon. When each person or each entrepreneur starts to build a token model, there may be differences in different industries, but in fact, the difference is not very big. For example, Compound, which has been very popular recently, has been mentioned by everyone as a liquidity mining platform. The design of its platform coin COMP is very simple. You bring your money here to do lending and borrowing. According to the scale of your loan, you will be directly given COMP platform coins. After the platform coin is invested, there is no repurchase fund support. It only has one function: if you are the holder of this platform coin, you are the holder of COMP, you can participate in the governance of COMP, and you have voting rights. The voting rights also determine who will be the owner of the interest income on Compound. Such a new token model realizes the reward between borrowers and lenders. When you do business here, it will give you air tokens. At this time, we can all say that it is an air coin. Many people are willing to take air coins to make profits. Why? Because the increase in the secondary market of this coin is very terrifying, and it has increased by more than 30 times. Why can it increase by more than 30 times? This is because everyone recognizes the concept of DeFi and believes that this concept may have the potential to far surpass the centralized business transaction model in the future. If DeFi can become the largest underlying lending institution in this industry, as long as everyone votes that 10% of the interest income will belong to the coin holders in the future, the token will immediately become very valuable. Therefore, liquidity mining has become popular all of a sudden, and many projects have followed suit, and the value of the token has risen very high.

You can see that all successful platform tokens are actually very simple, without any particularly complex design. In other words, the simpler the thing, the easier it is to succeed. On the contrary, we have seen many white papers with dozens of pages of very complex token models, but so far we have not seen a successful one. You will find it very interesting that a token model with a particularly simple mining model is actually the most effective. Now when we look at the platform coins of trading platforms, each one may look different, but I have summarized them and they are all very similar. What do you find?

There are several stakeholders involved, such as the platform owner. The value of the interest mainly comes from the platform income, such as handling fees. In general, it is a question of how to distribute the income of a platform and how to make the platform currency truly valuable. Therefore, the final value mainly comes from two points: one is the income of the platform itself, and the other is the interest scenario of the platform itself.

When facing a blockchain project, we need to consider what the project's tokens are used for. As long as they are useful, they must have value, that is, users need to use them when they need to do something. For example, on a trading platform, if we want to get a discount on the handling fee, you must hold some platform coins. You may think it sounds meaningless and has no feeling, but if you calculate it, let's simply calculate that Binance has more than 10 million registered users, it has issued a total of 200 million BNB, and there are millions of active trading users. For example, 1 million of them are customers with slightly larger trading volumes who need discounts. If each of these 1 million users buys 100 coins, its current liquidity will be gone. 100 coins are not many, an average of more than 3,000 US dollars. But what we want to say is that if you calculate it a little, for such a good application scenario for the network platform, the demand for tokens and liquidity, that is, the impact on the circulation of the locked amount is very large, this is only one aspect. It also includes the platform's repurchase and the entire system of employee options involved. So much so that Binance does not even need to repurchase in the secondary market, it can support the price of BNB very well.

If there is such an application scenario in your business model, you need to let users hold tokens to get certain rights and privileges, which will lead to demand. If this demand is still a strong demand, such as a discount on exchange fees, what can be done in your application scenario? If you can find the scenario demand, you will find that you don’t have to worry about any problems with the platform currency model. But if you design it super complicated, but ultimately there is no demand for your token model token, you will find that the more complicated it is, the harder it is to succeed, because users simply cannot understand it, and there is no way to reach a real consensus or understanding.

So most trading platforms, no matter how they are designed, the platform coins are like this. But in fact, we found that there are several variables that can be adjusted. What variables? How much of the overall profit income belongs to shareholders? Because trading platforms, whether centralized or DEX, have operators. How to distribute the interests of operators? For example, do you allocate 30% or 50% to the shareholders of the trading platform? How much profit do you give back to the token holders in the market? In other words, what kind of value do you give to the token. For example, the handling fee is one million US dollars a day. According to the current design of the three major platforms, they are generally between 20%-30%, which means that they will use 20%-30% of the handling fee income to repurchase and destroy platform coins, and the other 70% belongs to the company's profit. At the same time, in the process of repurchase and destruction, it does not set a specification. Anyway, I just need to take out so many coins and destroy them. You don’t have to worry about whether I repurchase them in the secondary market. Invisibly, the benefits of the trading platform to the coin holders are in an unknown state. Therefore, we plan to make changes to this already extreme model, which is the source of the Hobbit HBTC token.

Trading Platform Token 2.0

We believe that the tokens of trading platforms can be divided into three stages. Before 2017, there was basically no platform currency. Since 2017, we can see relatively successful representatives: BNB, HT, OKB, etc. But I call it platform token 1.0. Its core is to use share income for tokenization, giving part of the benefits to users. At the same time, it does not have a so-called pricing model, that is, the price is determined by the secondary market itself, and the platform will not make any design. So we will see that the platform currency at this stage is constantly repurchased, but the currency price will not rise, and may even fall. In fact, there is a lot of room for operation, and there is no targeted incentive mechanism.

What is a targeted incentive mechanism? For a trading platform, 80% of its revenue may come from 20% of its core value users, but in the past 1.0 version of the platform token, there was no effective incentive for the most valuable users. Therefore, we believe this is a feature of the 1.0 version, so we will make three very big changes later:

The first change is that all revenue will be used for repurchase, that is, all revenue will be attributed to the platform currency itself. The benefit is that the interests of shareholders and platform owners are completely consistent with those of currency holders, that is, the entire platform is fully tokenized, taking the ultimate repurchase route.

The second is that through research on the secondary market, we believe that 10 times the PE is a very reasonable repurchase price. We have implemented it for more than two months, and the price basically follows the repurchase price. Therefore, this is a specially priced repurchase model, so there is no way to operate behind the scenes.

Third, we distribute and airdrop the repurchased tokens to users who have contributed to the trading platform, so that they can get more returns and gradually become the largest token holders of the entire platform. In this way, the entire circulating tokens have also been transferred to the hands of many recognized platforms. This is very interesting, including our destruction mode (20% destruction). This is a feature that we think the platform token 2.0 should have. This feature is not only for us, but also for other platforms to follow in the future. However, the top platforms will not follow up, because no one will turn the income they have obtained into a market to distribute to others. No one will do such a Lei Feng.

Now let's look at the development of platform tokens. There are many exchanges on the market that have launched their own platform tokens. There are only a few platform tokens that have not broken their issue price, or many have fallen a lot from their highs. HBC has increased by 5 times from January this year to now, and the highest should be around 8 times, so it is currently consistent with the repurchase price. So we believe that the token model we are involved in is very effective, and we believe it will perform well in the future.

Finally, I would like to take a moment to introduce the model of the platform token we designed. Before understanding a platform, you need to know some of its basics. We are one of the few companies in the industry that is jointly invested by Huobi and OK. We have relatively large opportunities in three business lines: public chain, SaaS cloud exchange and self-operated exchange business. Our platform token has a very wide range of institutional investors, a total of 40 to 50 institutions have invested in our platform token, and it is now in full circulation, and has been in full circulation for nearly half a year.

Our public chain is a very innovative cross-chain hosted public chain, which means that we currently have a huge advantage in this field globally, and the three major exchanges are not as good as us in the cross-chain direction.

We currently have more than 200 cloud customers, covering more than 13 million users covered by coin-side customers, so we are basically close to the user level of the world's three largest exchanges.

Our matchmaking delay is very low, almost close to 1/100,000 of a second. If you trade with us, you will find that the liquidity and depth of the entire spot and contract are very good, basically on par with the first-tier. At the same time, we have also made a 100% reserve certificate, which can truly guarantee the security of an exchange's assets and is a way to prove the security of an exchange's assets.

So our token model is very simple. We return all the platform revenue and token application scenarios to users who contribute to the platform. This is the same for everyone, including shareholders and the team, who make profits through the value supported by the platform token. If the platform token has no value, the team will not make money. Such a model has achieved good growth, and it will eventually show the following state: At present, our average daily income is more than 20,000 to 30,000 US dollars. I can give a data that the daily income of Huobi’s top platforms is about 6-8 million US dollars/day at its peak. If we can reach 200,000 US dollars/day, if we follow our token model and the daily income is 200,000 USDT/day, the price of our platform token can be about 40 USDT, but we are only around 3.3 or 3.5 USDT now, so I think the future is very interesting, and everyone can wait and see.

This is our latest repurchase price and operating data (Figure 2). We are currently in the stage of operation, precipitation and polishing, and our 2.0 trading system is about to be launched. The overall delay of the 2.0 trading system is less than 0.1 milliseconds across the entire link, which will be a very substantial improvement over the original. Such a system will have huge advantages in derivatives, spot trading and other aspects in the future, and we will have 2-3 years of technical opportunities.

Thank you everyone!