What is CDT?
First and foremost, CDT is used to access the various features and functionalities that Blox offers. It also acts as a discount token for businesses and enterprises.
Before we dive into the details, in a nutshell, holding CDT gives you access to blox platform features and use of its full potential, all depending on the amount of CDT and the duration of the commitment. Regardless of the tier of service you select, if you hold CDT and are willing to ‘commit’ it, you can earn a discount up to 75%.
What does staking actually mean?
The term ‘Staking’ derives from the type of algorithm by which blockchains get to a consensus called “Proof of Stake”(PoS). Under PoS, once the staked wallet is validated, the ‘owner’ receives rewards (usually in the form of tokens).
In blox, this is not the case and staking takes on a different form. Essentially, Staking is simply committing a positive balance of CDT for an agreed upon period of time. As a business tier user, you’ll receive a discount on the monthly subscription plan of your choice, while as a professional trader you get extra Tx storage as long as your AUM is below the business threshold as determined by blox.
Why staking for a discount – Value of economic commitment?
For years companies across different industries have come to realize the economic value of their clients’ commitment to a service or product for long-run planning. Knowing that a consumer is committed to paying a certain amount of money for a predetermined period of time, gives businesses the ability to plan ahead without having to ‘chase’ providers, suppliers or clients for recurring payments.
Example – Yearly subscription vs Monthly subscription. A user makes a bigger economic commitment by purchasing in advance, a longer subscription plan at a lower cost (per unit).
Let’s break it down to see how it could benefit a business.
Behind the scenes of any ‘discount’, there is a complex system of risks and rewards driving sellers and buyers to find an equilibrium between the sellers’ fear of customer churn and the customers’ cost of buying (or committing to) a service.
Customer’s risk – to commit (pay) for a service he hasn’t fully tried yet. The longer the commitment the greater the risk.
Customer’s reward – if the client manages to overcome the risk, he will end up paying less per unit of service/ product. Generally speaking the longer the commitment the greater the reward (thus lower the cost for a unit of service/ product).
Seller’s risk – For sellers, the risk actually doubles. Firstly, converting a customer from a freemium model to a paid subscription is a serious friction point. Making the customer commit to a recurring payment, is another undeniable friction point. The more frequent that friction point the bigger the risk. Both cause substantial increases in the churn rate.
Seller’s reward – Lowering the cost per unit of service/ product ‘in-exchange’ for a longer commitment (reducing the frequency of payment friction) the seller reduces the operational overhead and customer churn significantly.
The sweet spot is where those properties converge into a single offering, appealing to all sides.
We will be focusing on economic commitments for a service/ product that require a recurring payment. In particular, online SaaS services.
Executing an economic commitment
Traditionally speaking, service providers and companies are able to obtain a level of commitment from their clientele by offering increasing discount rates for longer subscription periods (yearly vs. monthly subscription).
This sort of commitment constraints the client to more rigid terms, reducing it down to an exchange of goods for payment. Most SaaS services do so via online credit cards payments.
Crypto-based economic commitment
With the introduction of crypto assets, economical commitment can be redesigned and improved to extract greater monetary value for sellers and reduce the main fears for customers.
By staking a crypto asset, a customer expresses an economic commitment to service while still being able to sell the assets on the open market, when he chooses, and discontinue the service without incurring any ‘additional’ financial cost.
In this case, the customer’s fear is reduced to price volatility (in case of the asset decreases in value), as opposed to having to fulfill all payments until the end of the agreed upon period of time.
Real product, real users, a real value
By effectively stating the economic value of CDT in our set of products and services, we reduce the incentive to trade CDT on the open market based on speculation. In addition to the access, CDT gives our users to various features and services within our eco-system, staking CDT adds an additional, unrealized, value to each circulated token1. Token holders that stake their CDT to receive a discount on their service will realize the added value. Simply put, they will ‘get’ more for their tokens.
For those of you who would like a more technical, specific explanation, in the next section, we dive furthermore into details.
Reduced token velocity
The prevalent method in the industry, for describing a token’s “value” is using the exchange equation2 M*V = P*Q .
Detailed specifically by Vitalik Buterin for tokens as a medium of exchange3.
In a nutshell, the higher the velocity of a token (the quicker it changes hands) the lower its price level.
By reducing velocity (in the form of staking) token holders, investors and all ecosystem participants benefit from a healthier token network.
Perpetual discount formula
Discount=(Pcdt*Qcdt / Pplan)*DMax
Pcdt- Price of CDT at staking
Qcdt – Quantity of staked CDT
Pplan – Yearly cost of plan
DMax- maximum discount, 75%
For now, Blox supports 3 different discount levels as stated on the website’s pricing page.
Represents the amount of CDT to stake for a specific discount rate:
Example 1 – a $1,200/ yearly subscription (paid monthly) will require $1,200 worth of CDT for perpetual max discount of 75% (Results in a monthly payment for $25 instead of $100)
Example 2 – Same parameters as above. For a user that staked $600 worth of CDT will result in a 37.5% discount on monthly payment.
One can imagine a more sophisticated way to determine PDI than hard code it.
A demand-based PDI could better predict how much customers are willing to stake for a perpetual max discount. It will also take into consideration what is the conversion point from a customer paying monthly to one willing to stake CDT for a longer term commitment.
The mechanism for a market-driven PDI is TBD.
Staking adjustment over time
As CDT price changes, in the long run, customers who already stake CDT and enjoy a discount on the services can find themselves with a much higher or much lower dollar value than their starting point. In this case, there are two scenarios to take into account:
If the dollar value of CDT drops significantly, the customer will be entitled to the same discount percentage, as long as he holds the exact same number of CDT he entered the commitment with.
If the dollar value of CDT increases significantly, the customer can receive more services/ products with the ‘extra’ CDT he holds, or adjust his staking position by withdrawing from his wallet or exchange.
Why it will work with Blox
Blox is designed to help businesses and professionals overcome day-to-day pain points when handling crypto assets, financing, and bookkeeping. Most of the issues are recurring and require constant attention, not temporary, one time solutions. It’s an ongoing necessity.
Blox is a service which companies will use for their entire duration in the blockchain space.
The more they use Blox, the more they will be inclined to stake CDT for a perpetual discount.
Blox offers a total number of four tiers that users are able to choose from, ranging from solutions for professionals to Enterprise level, with the ability to customize plans for specific clientele, below are the current plans and their specifics.
Introducing a sustainable, efficient and approved token model for CDT, we believe that the product, our users and the entire ecosystem around Blox, will benefit greatly. Not only from the use and direct effect it will have on their day-to-day operations handling crypto assets, but also from stability. Something that our industry is in dire need of.