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2KEY Token Circulation System

The 2key economy is based on 2KEY, an ERC20 token. 2KEY will have a finite amount of 600 Million tokens that will be minted and used to operate and maintain the 2key network. (please note that 2key network is with small letters and 2KEY tokens is with CAPITALS).

This is how 2KEYs will be distributed:

Token Distribution and Pools:

(I) Economy Kickstart — 27% (162m 2KEYs):

(II) Team — 16%(96m 2KEYs): Locked for 365 days, then distributed over a 2 year period in 25 equal portions vesting monthly.

(III) Team Growth Fund—4% (24m 2KEYs): Locked for 2 years, will be utilised for funding the future growth of the team.

(IV) Advisors, Partners & Early contributors — 6% (36m 2KEYs): 3rd parties and contractors, advisors and early contributors supporting the development, marketing, and growth of the 2key network. Locked for 90 days, then distributed in 52 equal portions vesting weekly.

(V) Participation Based Mining — 31% (186m 2KEYs): will be used to compensate 2key network users for proactive, positive participation in the network and economy.

(VI) Long Term Growth Fund— 16% (96m 2KEYs): tokens dedicated for future growth of the network and R&D. Might be used in the future for conducting additional token distributions. Locked for 2–6 years.

2key tokenomics are engineered with built-in sources of demand and strength:

Network and product based demand mechanisms-

More on each of these mechanisms later on in this article.

Creating a real and steady demand and value for a utility token is crucial for its long-term success. That’s why we believe that 2key network’s market cap must be based on actual utility-based circulation of the 2KEY token to ensure its value and viability over time. In other words, to create a viable token economy, it is crucial that 2KEY’s actual utility on the 2key network will be a main driver of token circulation on the network.

Towards that end, we’re building both an innovative protocol and autonomous mechanisms for utility token circulation and market-making. This approach is engineered to ensure there’s always a utility-based baseline for 2KEY token demand.

Our goal at 2key.network is to establish real autonomous demand and circulation for the 2KEY token economics. 2KEY’s token economy is based on a supply-and-demand feedback mechanism, ensuring the tokens will bear actual intrinsic value stemming from utility-based trading volume.

How the 2KEY circulation system typically works:

(1) Automatic Token Demand Mechanism: the 2key campaign contracts will automatically send ETH/DAI to the 2key Exchange contract to buy 2KEYs:

(2) Automatic Decentralisation and Hodling Mechanism: The reward 2KEYs automatically purchased by the campaign contracts are then distributed within the campaign contracts to the balance of the multiple referrers within the 2key campaign contract, and kept in the 2key campaign contract until each of the referrers decides to withdraw them.

(3) Rewards can (almost) always be cashed out to stable coin: while referrers looking to cash out 2KEY will have to wait for the public trading release date (anticipated to be coming very near to the network launch), they can always cash out their 2KEY back to stable coin and into their private wallets, as long as these 2KEY originated from an ETH/DAI purchase or stake.

(4) 2key Exchange Contract — Auto-Generating Demand and Stability: The 2key exchange contract automatically hedges every ETH or other volatile currency sent to it into stable coin (DAI), and uses granular balances per campaigns to maintain withdraw rights of 2KEY as stable coin in the pre-hedged rate. This safeguards and incentivises 2KEY hodlers while their 2KEY is held by campaign contracts. In parallel, each time a referrer withdraws 2KEY to their private wallet, the hedged DAI balance is freed up on the exchange contract and immediately used to purchase more 2KEY from DEXs (e.g. Bancor). This way, the exchange contract acts as an automatic mechanism to generate both automatic demand and stability.

It’s crucial to control the release of tokens for public trading so that it coincides with the formal token release in big exchanges. However, we want to avoid being dependent on releasing 2KEY to public trading for the deployment of 2key network to production. Therefore, we’ve engineered the 2key Admin contract to maintain a parameter that will be set to allow withdrawing of 2KEY to user wallets only once a formal IEO or public distribution date has been set. Until then, 2KEY circulation system will work as a closed-loop system between 2key campaign contracts and 2key’s exchange contract, allowing 2KEY to be earned by referrers and incurred in campaign contracts, and also to be withdrawn as stable coin (if they originated from an ETH/DAI purchase/stake). This will allow the 2key network to be released to production regardless of exact distribution date, while safeguarding that the public trade release date will be set to sync with the formal IEO date.

The 2key TDE (Token Distribution Event) will reserve 6% of total supply for liquidity:

Following the opening of 2KEY for public trading (i.e. the IEO date), the 2key exchange contract will determine the current price quotes for the automatic purchases of 2KEY made by campaign contracts, by directly relaying to viable exchanges/dexs with the best liquidity depth for 2KEY tokens, or otherwise implementing a proven algo-based price discovery mechanism (e.g. Bancor)

The 2key exchange contract will not sell 2KEY on exchanges, but only buy 2KEY from exchanges. In this way, 2key exchange contract will only contribute to the demand of the 2KEY token, by using viable decentralised exchanges to fulfil demand for 2KEY. In case the liquidity depth in the decentralised exchanges isn’t enough, there will be an automatic web2.0 process which will purchase 2KEY from centralised exchanges and fill up the liquidity inventory in the 2key exchange contract, so that the exchange contract reserve of 2KEY will always stay at 3% of total supply.

The following are the basic accounting and hedging mechanisms at play in the 2key exchange contract:

The following is a step by step flow of how the circulation system will work for 2key campaigns in which the conversion event is defined as the payment of ETH by the converter.

This step-by-step flow applies to token sale, donations, crowdfunding and patrons campaigns.

(1) Campaign Activation —

(2) Conversion event: The campaign will circulate until it generates a conversion event. In this type of 2key campaigns, a conversion event will be defined as when a converter inserts ETH to the campaign contract. The contract will then allocate the referral reward for that conversion, as a percent of the conversion amount.

(3) Referral reward and the 2key exchange contract: The referral reward for the conversion is then sent to the 2key Exchange Contract — a singleton contract that accepts requests only from valid 2key campaigns. The exchange contract accepts ETH from the campaign contract and then:

(4) Referral reward distribution: 2key Campaign Contract then holds the 2KEY and distributes it internally to the balance of the referrers who took part in the referral chain leading to the successful conversion.

(5) Cashing out rewards as 2KEY: once a referrer wants to cash out their rewards, they can withdraw rewards as 2KEY directly from the campaign contract

(6) Cashing out to stable coin: In cases the rewards are in 2KEY bought from the exchange contract (the common case in these types of campaigns), referrers can choose to cash it out back to a stable coin via the exchange contract. This will be possible in the following cases:

(7) RefillIng the 2KEY reserve by buying 2KEY from dexs: Whenever a referrer withdraws 2KEY from a campaign to their wallet, the hedged DAI marked for that campaign will be used to purchase more 2KEY to fill the network 2KEY reserves.

Many campaigns on 2key network will involve conversion events in which converters don’t insert money into the campaign. Such campaigns include lead generation campaigns, signup campaigns, install campaigns, voting and petition campaigns, information campaigns and more.

Such campaigns will require the contractor to insert the rewards inventory at campaign activation time, this will act as the budget for rewarding conversions in the campaign. In such campaigns, the step by step token flow will act slightly differently, namely:

Moderator Fee

In each conversion there is also a network maintenance fee paid to the 2key.network admin contract as the default moderator. The fee amount is set in the 2key Admin contract and affects network wide, and is currently at 2% of conversion event in campaigns with purchase/donation conversion, or 2% of referral reward in campaigns with non-monetary conversion actions. This network fee is sent in 2KEY form to the admin contract’s balance, upon each conversion event and kept there as network staking. Some of these 2KEY may periodically get sent to 0x (“burnt”). This mechanism basically acts to dynamically reduce circulating supply as a way to positively affect the token viability with each new conversion made on the network.

Integrator Fees

2key.network is open to integrators, which are for-profit service providers which may be elected by contractors to provide services within the campaigns, e.g. KYC, AML, conversion validation for offchain conversions, incentive model optimisation etc.. These integrators charge an agreed fee per-conversion, and thus have a viable business model as long as contractors choose them to serve in their campaigns. The fees may be openly set by the integrators, via supply and demand market forces, as the contractors have to elect integrators to serve in their campaigns, so without competitive pricing there will be little demand. The integrator fees are paid in 2KEY, and purchased automatically from the exchange contract if needed, by depositing ETH or DAI.

Network Tax

From each fee paid to the moderator or an integrator, a pre-set network tarrif in 2KEY is taken and sent to the deep freeze pool which is locked for 10 years. The taarif is defined network wide in the admin contract and is currently set to 2%. This network tax effectively links between the for-profit business model of integrators and the value of the token economy for the rest of the token holders, by taking some of the 2KEY earned as profit by integrators, and putting it out of circulation, resulting in a decrease of tokens in circulation (thus an increase in the value of remaining tokens)

Deep Freeze Pool & Feeding Back into the Community Rewards Pool

The deep freeze pool is locked for 10 years and thus effectively takes all tokens sent to it out of circulation, in a way that any for-profit business models active in the network also produce direct positive effects on the viability of the token, for the benefit of all token holders. After 10 years, the community rewards pool will have dried up, and the deep freeze pool empties into the community rewards pool, so that it pumps the new reserve into the community rewards pool. This has two main benefits:

2key Exchange Contract Fees

The exchange contract maintains a spread between the buying and selling of 2KEY, to maintain its economic viability, and might also adjust rates to safeguard against hedge-risk.

In case we roll out to production before the formal trading release date, there is a special mechanism in place to make sure the 2key network can be used without risking 2KEYs starting to trade prior to the formal release. In short, the 2key admin contract will maintain a parameter depicting the formal release date, and until such date, 2KEY will be able to move only between the exchange contract and campaign contracts, without being withdrawn to private user wallets. In such case, referrers with rewards may either wait and withdraw the 2KEY after it is released to public trading, or withdraw their rewards as DAI in case the originating conversion was hedged via the auto-hedging mechanism on the exchange contract.

If you’d like to read more on the 2KEY Token Economics:

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