What Are The Benefits of a Token Conversion Model?
Recently we announced that Bitrue would be conducting a token sale of FinNexus (FNX), a coin that can be converted into UM1S. But what are the benefits of a convertible token, and why should you care?
First, let’s look at how regular token sales work. Recently many projects conduct their first round of token sales to the public in conjunction with an exchange. The exchange assures the credibility of the coin and helps promote it, and in return the coin project gets a large amount of exposure to help it raise funds for its continued development. Simple!
The token sale of FNX follows the same principle, but the difference is the sold token can then be converted to an asset-backed token at a later stage.
Bitrue users will be able to purchase the coin FNX. FNX is a token that will be used for FinNexus projects in the future and will have an initial value of 0.1 USD.
You can convert your FNX into UM1S at any time during the 3 months from when the sale begins. 1 FNX will convert into 0.1 UM1S, and then the FNX that was used in the conversion will be burned. UM1S is an asset-backed token, meaning that it represents an asset that exists in the real world.
So why does it matter to you which token you hold? Each token has different uses and returns. While FNX behaves like a traditional utility token that can have significant fluctuations based on the uses developed by its parent company FinNexus, UM1S instead offers a fixed return that will be sent to holders at the end of the maturation period (which is the same time that conversions end — 3 months after the sale begins). UM1S will return the principal of the token plus a variable amount of interest that depends on when the token was converted. Early converters will get a higher interest rate and will be able to generate interest for longer. In general, you can expect an average 10% APR on the UM1S holdings.
The fact that UM1S has a fixed return means that it also supports the price of FNX. If the price of FNX were to suddenly fall below 0.1 USD, sharp-eyed investors would spot an opportunity to buy FNX cheaply and convert it to UM1S, guaranteeing themselves a profit. This effectively ensures that the price of FNX will not drop below 0.1 USD during the period of time that conversion is open, but may have significant profit potential as FinNexus deploys further plans, developments, and use cases for FNX.
Moreover, the conversion will act as the market adjusting mechanism to balance the issuance of the FNX in circulation. The converted FNX will be burned and cease to exist on the market, which will decrease the amount of FNX being traded. This burning mechanism will shrink the supply and largely benefit the remaining FNX holders on the market. FinNexus will let the market decide how much FNX will be left.
Ultimately you can choose which coin better suits your own investment strategy — if you’re seeking high rewards then FNX has the potential to go up in price significantly as the circulating supply shrinks and FinNexus grows. On the other hand, if you’re after stable rewards then converting to UM1S guarantees a return on your principal and a certain amount of interest once it matures. The earlier you convert the better as the interest rate will be higher for you, but you are free to convert at any time during the 3 month period. Note however that conversion is one way — UM1S cannot be converted back into FNX.
If you wish to purchase some FNX, it will be available on Bitrue starting on May 11th.