When the rug gets pulled out from under your feet

by Adam Waldenberg 2 years ago 3 min read

Recently, we have observed competing projects having serious issues with price stability. In the last few months, many millions of tokens have changed hands in some competing projects, completely destroying their price. Unfortunately, this might not even be the end of it.

That sinking feeling when the rug gets pulled from under your feet. Many have been in this exact situation. While the people in control look for a quick return on their investments, the smaller investors get stifled as the price of the asset keeps crashing.

While we generally want to avoid making very public posts naming other projects, some of these examples are especially painful to watch.

A recent ICO released onto the market. Not a pretty sight. In this case, most investor funds are locked while evidence points to the fact that either early investors or the foundation itself is dumping on their own market. In this example, the token has lost 96% of it's value since launch. (source: coinmarketcap.com)

This is a big problem with many ICO's and cryptocurrency projects. The projects often do not have any defined rules as to how tokens can be distributed and what the company behind the token is allowed to do. Some bigger projects even have investors that hold 50% of the total supply or more. This is obviously a recipe for disaster and won't benefit the general investor nor the project itself.

When things go south. In this case the investors got an amazing return as the ICO climbed in value during the Bitcoin bull run. However, the cryptocurrency had no utility and no use cases. In many ways, it was a disguised pyramid scheme. When the bubble popped the price went from $449 to under $5 in under a month. Today, the project is discontinued with an effective price of $0. (source: coinmarketcap.com)

When the price pops, these projects go from huge market caps down to almost nothing. Many people that believed in these projects lose more than they can afford to. People get hurt. Projects need to consider how the investor and the community can be protected. How do you make a sale that works out long-term?

Maybe one of the more extreme examples. This was an Indian cryptocurrency that popped completely during the 2017 Bitcoin bull run. As the token went from $1.87 to $0.00034, it lost 99.9998% of its value. (source: coinmarketcap.com)

How the foundation protects itself, the investor and the community

The Unigrid Foundation and the Unigrid token in particular has a small supply that is spread out among our community members and early token holders. This adds up to around 4% of the total planned 150 million supply. Furthermore, the charter of the foundation prohibits the board (or board members) to take actions that would be detrimental to the network or the value of the Unigrid token. To prevent a situation where a lot of tokens outflow from the same investor or entity, we intentionally limit the amount that can be bought up by a single investor.

Steve makes a good point here. Decentralization is the answer. Not only decentralization from the perspective of the network, but decentralization from the perspective of who holds the supply.

Thinking long-term

While The Ungrid Foundation is limiting the investment amount per entity, we also employ long-term thinking and try to consider how our actions influence the market and the network long-term. Will our decisions benefit the network and token? We may not always make the right decision - what you can be sure of is that we will try.

Adam Waldenberg

Enterprise Java/Jakarta EE developer. Advocate of Bitcoin, blockchain technology and a free and open Internet.