Collateralized Tokens: Unlocking the Value of Locked Tokens
Kaizen.Finance is the first cross-chain platform for token creation and management. A unique commercial advantage of Kaizen.Finance, beneficial to both projects issuing tokens and to token buyers alike, is its ability to collateralize locked tokens.
Collateralization of locked tokens enables buyers to use their future value prior to full unlock!
To understand collateralized tokens and what benefits they provide, we must first consider how collateralized tokens are created.
What Are Collateralized Tokens?
Collateralized tokens are Kaizen-minted tradable tokens that represent an ownership claim to an underlying locked token held in by smart contracts.
When issuing collateralized tokens, locked tokens are used as collateral.
Unlike the common practice of withholding tokens after purchase and only distributing them to buyers after they are unlocked, collateralized tokens are sent to buyers immediately ensuring ownership and providing grounds to claim their token in due time.
Here is how this works.
When a buyer purchases a token, the payment is received and the buyer is given a collateralized token representing their claim to the yet locked token. Because the token the investor receives is backed one-for-one by a corresponding locked token (i.e. collateral), the issued token is referred to as a collateralized token.
In other words, holders of collateralized tokens hold the right to unlock tokens in accordance with their vesting schedule.
What Are the Benefits of Collateralized Tokens?
The unique and innovative aspect of the feature is that collateralized tokens can be bought, sold, swapped, or staked while locked tokens cannot provide any of such benefits.
Because collateralized tokens use locked tokens as collateral, their value is defined as the price of their underlying asset. Prior to the official listing and without a public market, the value of the token remains speculative.
Notably, collateralized token feature unlocks locked token liquidity to buyers without impacting the market trading price of the token used as collateral. There are several ways the user can use collateralised tokens to get additional income:
In addition, although collateralized tokens are not registered or tradable on any DEX or public exchange (and therefore cannot impact the locked token’s price), Kaizen created its own decentralized exchange (kDEX) as a dedicated marketplace for trading of collateralized tokens.
This enables projects issuing tokens to provide their community of buyers with the opportunity to trade the value of locked tokens even before a public offering. When a collateralized token is sold or traded to another holder, or staked, the locked token’s vesting schedule continues unaffected allowing the new holder to claim underlying tokens when unlocked.
Understanding Collateralized Tokens Using $SCOTTY as an Example
Let’s take a closer look at collateralized tokens using ScottyBeam’s SCOTTY tokens, the most recent partner of Kaizen.Finance.
On November 8, 2021 ScottyBeam hosted a Community Sale on Kaizen.Finance. Participants bought $SCOTTY tokens, which according to their vesting schedule are locked, with 5% unlocking at TGE and the remainder — with a linear monthly unlock over the period of 12 months.
To ensure these terms are followed through, all buyers have received collateralized tokens — SCOTTY Private Locked ($SCOTTY.PRIVATE).
As the name suggests, these tokens confirm buyers’ ownership claim to SCOTTY tokens. More specifically, $SCOTTY tokens that have been sold during a Private token sale round (i.e. Community Sale), which are currently locked in smart contracts following the vesting schedule defined in ScottyBeam Tokenomics under Private round terms.
Instead of being left with the promise of getting $SCOTTY when unlocked, buyers receive $SCOTTY.PRIVATE tokens as proof. $SCOTTY.PRIVATE tokens will be used to claim unlocked SCOTTY tokens on the ScottyBeam website.
Conclusions
Kaizen’s unique ability to issue and trade collateralized tokens provides token issuers with the ability to create new opportunities for their community of buyers and investors.Part of Kaizen’s mission is to help the crypto industry to free up the liquidity locked in vesting schedules and return it back into the market.
