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The power of token minting explained

· 7 min read
Felixander

Tokens, a utility you shouldn’t go without

Arguably one of the most core aspects of web3 projects is the ability to mint, disburse and track tokens for your project. Token management is an area that every builder in the web3 space should take full advantage of; unfortunately, it’s also amongst the most neglected tools by new project creators.

At Juicebox, we’ve created a robust and granular token management system that makes token management accessible for our project creators. We’ll delve into this tooling, along with the power of tokens in general. Read on the learn more!

Governance and so much more

One crucial aspect of token minting is how they relate to governance systems within DAOs. While you may or may not be creating a DAO, you should keep in mind that these very same governance systems can also be used informally to gauge your stakeholder interests in an effective and efficient way.

You can choose to give tokens at your own discretion, or set certain metrics and tokenomic tooling to automatically generate and disburse tokens based on contributions made to your project. The Juicebox difference is in the rich tooling our platform provides project creators.

The lifecycle of a token built on the Juicebox protocol

How a token is used within the Juicebox protocol varies on a number of different factors and project creator settings. Let’s take a look at one particular path to help give you some insight into the lifecycle of an average token.

You’ve created a project, and you’ve set a distribution limit (how much funding your project needs in a given time frame to keep the lights on). Let’s say that every two weeks your project needs to be bringing in $5,000. That amount will cover the costs of the team and any other expenses to keep your project running smoothly.

Now let’s say somebody comes along and puts $2000 into your project. In exchange for contributing those funds, they get some amount of tokens (how many is completely determined by you). Furthermore, you may want to keep some tokens every time someone contributes funds, so you set something called a reserved rate, which is what percentage of tokens you keep. Let’s say you do 10%. So now 10% of all tokens created goes back to your project and sits in a treasury.

Now fast forward. Many more people have contributed to your project, and at this point your distribution limit is still $5000 every two weeks, but on average you’re taking in a lot more than that. All those extra funds sit in your treasury. Those “extra” funds are called your overflow.

Now let’s say one of your early investors, who has a lot of tokens for your project, wants to move on and get rid of his tokens. Rather than simply ignoring them, he can claim a percent of the overflow in your treasury proportional to how many tokens he has. If he has a lot of tokens, even though he may have initially just given you $2000 in funding, his tokens could be traded in for far more than that if your overflow is sufficiently large.

What’s unique about this system is that it incentivizes contributors to your project to 1) stick around, and 2) to be actively invested in your success. Some people will never be interested in trading in tokens; they may see more utility in using the tokens for governance, or simply hanging on to them as a trophy and receipt of their contributions to you. However, for those who are hoping to eventually cash out with more than they invested, the token redeeming exchange allows for this scenario if your project has become sufficiently successful.

Let’s say that first investor burns all his tokens, and gets back $3000. He’s made a profit of one thousand dollars. By redeeming the tokens, he has taken them out of circulation and they have been destroyed. He’s made $1000 in the exchange, and you managed to attract an investor early on when you needed funding more.

An overview of Juicebox tooling

Where Juicebox really shines is in its ability to give project creators full control over the tooling they wish to employ in their projects. There is a rich help section along with a glossary on info.juicebox.money, but for a brief overview read on to learn some of the basics.

Distribution Limit

The easiest way to think of this is by answering this question: how many funds do you need to keep the lights on for your project, and how frequently do you need them? Do you have a dev team that needs to be paid, or server hosting fees, a content writer, etc.? Whatever those costs amount to will tell you the amount of funds you need to keep your project stable and going forward.

Do you need $2000 every two weeks? $1000 every ten days? $5000 a month? Whatever time and amount you need is what you will declare as your “distribution limit” when you create a JB project.

Overflow

If your project receives more funds than you declared in your distribution limit, those extra funds will sit in a treasury. These extra funds are called overflow. Token holders can at any time redeem their tokens (trade in their tokens) for a portion of the value of overflow in your project. If your project has huge overflow because it has become very successful, then token holders can get a piece of that success by redeeming their tokens.

Reserve Rate

The reserve rate is what percentage of tokens you keep every time you mint tokens. You can set this anywhere from zero to one hundred percent or in between. Setting a reserve rate allows your project to accrue tokens. Not having a reserve rate means that all tokens you mint will go to contributors.

Redemption Rate

The redemption rate is something you set that determines how much value redeemed tokens will have based on when they are redeemed. If somebody redeems their tokens right away, they will get less proportional overflow value than someone who waits until later to redeem their tokens. A redemption rate incentivizes people to stick around as your project grows, and it disincentivizes investors who are just looking to make a quick buck. You can set an aggressive or weak redemption rate, or none at all, when you create a Juicebox project.

Weight

The term weight simply means how many tokens or other assets, such as NFTs, a contributor will receive for a set amount of contribution. For instance, a contributor who puts $1000 into your project may receive a million tokens (if you so choose).

Burning versus Redeeming tokens

Whenever someone gives back their tokens, those tokens are destroyed permanently. If a token holder gives back tokens for a share of the overflow, we call this “redeeming” the tokens. Let’s say, however, that there is no overflow. In that case, the tokens are still traded in and destroyed, but they don’t yield any value back. When this happens, we call it “burning” tokens.

Putting it all together

The importance of JB really sits with the excellent tooling suite you receive by using it. Regarding pricing, JB takes 2.5% of all funds raised on a project. In exchange for that you receive the JB tooling and use of the protocol which gives you a no-code solution to your web3 needs.

Want more? Come check us out at juicebox.money, and swing by our discord and say hello. Starting a project? Check out our blog and web3 literacy center, Juicebox High.