This tutorial provides a detailed explanation of how the Creator Coin and Founder Rewards work on the DeSo blockchain.
What is a Creator Coin
When you register a DeSo account, your social token is automatically created. This token is known as a Creator Coin, and it can be bought and sold by yourself and any other account.
The name of the Creator Coin is identical to the account's username, except that it's prefixed with a $ sign.
What is the purpose of a Creator Coin
Creator Coins are tied to the reputation of an individual and are used for trading social clout as an asset. This means that a coin's value should rise and fall along with a person's popularity. Many use this to invest in Creator's coins for the opportunity to buy low and sell high, very similar to trading on the stock market.
All trading aside, though, there are other innovative uses for the Creator Coin. For example, offering coin holders private meetups or access to premium content.
Vibehut, a 1-on-1 social video platform, randomly matches users in video calls and includes an option to filter users based on their Creator Coin price.
CloutPub is a publishing network that allows one to earn crypto as a writer. Using Creator Coins, CloutPub enables writers to decide if their articles can be accessed by everyone, those willing to donate crypto or those who are coin holders.
The mechanics of a Creator Coin
At first, zero coins exist for a DeSo account. Only once a coin is purchased, is it then created. This process is known as minting. Similarly, when coins are sold, they are destroyed or burnt.
This means that buying and selling a Creator's coins determines the number of coins in circulation and the coin's price. The more coins that exist, the higher the price. When coins are sold and destroyed, the coin price drops.
The $DESO currency used to purchase coins gets locked in the Creator's profile. The $DESO being held will be unlocked and paid back when selling coins. However, the amount of $DESO paid back is determined by the price of the Creator's coin at the time of selling. More on this later.
It's important to note that a fraction of a Creator's coin can be bought or sold, a common practice with cryptocurrencies. This means that if a coin's price is $2, but you only have 50c, you will be able to purchase 0.25 of a Creator Coin.
What is Founder Rewards
Let's take a moment to understand Founder Rewards before moving on. It is possible for a Creator to keep a percentage of the money used when purchasing their coin. This is achieved by setting their Founders Reward percentage, which can be accessed by editing their user profile.
Example: You set your Founders Reward to 10%, and a user purchases your coin for $10. They would only receive $9 worth of coins, and you will receive the remaining $1, which will be sent straight to your wallet.
A Creator's Founder's Reward is set to 100% by default. This means that only the Creator themselves will be able to purchase their coin. Their Founders Reward must be set to anything lower than 100% to allow others this option.
Two crucial points to keep note of:
- If you set your Founders Reward to 0%, the buyer will receive your coin to the total value of the purchase amount. You receive nothing.
- Suppose your Founders Reward is set too high. The chances of people investing in your Creator Coin will most likely be slim, depending on your popularity and reputation. The end of this tutorial provides a good practice for setting your Founders Reward.
How to buy and sell Creator Coins
To trade other Creator's coins, launch Diamond App or any similar DeSo-based application and navigate to the Creator's profile. Select the Buy button, which will launch a popup. Here is where you can buy, sell or transfer the Creator's coin.
In the Buy tab, provide the amount you wish to spend. Note that while you have the option to specify the amount in $DeSo or USD, the transaction will be made in $DESO. Below the amount is where you will see the number of coins that will be purchased and the estimated price per coin. These values will refresh every time you change the amount.
To complete the transaction, select Review, followed by Confirm Buy.
Selling or transferring coins is very similar to buying coins. The difference is that when selling, you'll specify the number of Creator Coins you wish to sell. When transferring, you'll enter the recipient's username and the number of the Creator's coins you want to transfer.
To buy, sell and transfer your own Creator Coin is identical to trading with others. Simply navigate to your own user profile and select the Buy option.
Important notes about Creator Coins and Founder Rewards
Many will want to trade your Creator Coin frequently, vs. holding on to it long term. Do not take offense when one sells. It's all part of the investment process, and if your Founders Reward is set correctly, you'll benefit as well.
Because of the bonding curve formula, your Creator Coin's price will increase exponentially as more of your coins are minted. Your first coin might cost $1, but your 2nd could cost $7, your third $24, and so on. This price growth creates an opportunity for buyers to purchase much of your coin during the early stages when its price is lowest. Once a few others have bought your coin, early buyers could sell theirs for a high return. This could cause rug pulling, negatively affecting any buyer who purchased your Creator Coin at a high price.
A good strategy is for you to be the first to purchase 5-15 of your own coins, depending on what your budget allows. Doing this will help prevent rug pulling and show other potential investors that you are investing in yourself.
Note: Attempting a rug pull as a Creator is not recommended. Should you need to sell some of your coins, inform your Coin holders at the very least, and try to work out a win-win strategy.
Finally, the suggested Founders Reward for new users is between 0% and 10%. Suppose you are a recognized user who's consistently adding value. You could increase your Founders Reward up to 20%, and many would still consider investing. However, setting it higher might deter potential investors, depending on your reputation and popularity.
