Binance founder Changpeng “CZ” Zhao has proposed a new way to issue tokens, laying the plan out on X. According to the CZ proposal, token unlocks will be tied to price performance and time intervals.
In his proposal, CZ mentioned that tokens should be unlocked in stages and only if the token doubles and stays above the price mark for more than 30 days before another unlock happens.
CZ proposes a new system of token issuance
The new mechanism is expected to stop projects from flooding the markets with tokens, which sees most tokens endure price spikes before they suffer crashes. “Each future unlock must meet ALL of the following conditions: 1. Six months after the previous unlock. 2. ONLY IF the token price has sustained above 2x of the previous unlock price for more than 30 days immediately before the unlock. 3. Up to 5% of tokens maximum each time,” he said.
In his model, if a token begins the year at $1 with an initial 10% unlock, the only way new tokens should enter the market is if the price has stayed above $2 by June. If it reaches that level and holds it by August, then the project can release 5% more tokens into the market. If the price hits $3 on August 3, then the next possible unlock would happen on March 3 of the next year. But this will only happen if the price has reached and stayed above $6 for another 30 days.
“The project team does NOT have the discretion to shorten or increase the size of the next unlock. The tokens shall be locked by a smart contract where a third party controls the keys. This avoids new tokens flooding the market when prices are low. It also gives the project team incentives to build for the long term,” CZ added.
Token issuance has always been a big subject in the crypto industry, with most projects issuing tokens depending on the blockchain. For instance, Bitcoin has a fixed supply of 21 million tokens, while Ethereum does not have a fixed cap, with its economic model mandating that they continue to issue tokens.
However, projects must spell out the mechanism adopted to issue their tokens and under what system. While there are various consensus mechanisms in the industry, different tokens have different setups to approach token issuance. CZ’s model will ensure that tokens are not just released for fun, following due process and depending on the price of the token.