The Economics of Seasonal Tokens

In September of this year, the Winter halving will take place, marking three years since the tokens were launched. When this happens, the tokens will have gone through their first full cycle. As that time draws near, let’s have a look at the tokenomics, how the system has performed so far, and what we can expect in the future.

Proof-of-Work Mining

Like Bitcoin, each of the four tokens is mined by proof-of-work and undergoes regular halvings that produce increasing scarcity as time goes on. The chart below shows how the rates of production change over time.

As the rates of production have cycled around each other over the previous years, the effect of supply on the market has caused the prices to cycle around each other:

The cycles in the prices provide opportunities for profit. By trading the more expensive tokens for the cheaper ones, investors can guarantee that the number of tokens they own increases with every trade. This makes it possible to trade for profit without risking a loss measured in tokens. The profit can be taken in the form of more tokens, or it can be taken in any other currency, while the number of tokens owned is kept constant.

Time Economics

When mining started, there were:

• 168 Spring
• 140 Summer
• 120 Autumn, and
• 105 Winter

tokens mined every 10 minutes. Now that we’ve gone through the first Spring, Summer and Autumn halving, there are:

• 84 Spring
• 70 Summer
• 60 Autumn, and
• 105 Winter

tokens produced every 10 minutes. This means that, today:

• A Spring token is worth about 7 seconds of mining time,
• A Summer token is worth about 8.6 seconds of mining time,
• An Autumn token is worth about 10 seconds of mining time, and
• A Winter token is worth about 5.7 seconds of mining time.

This establishes natural exchange rates between the different token types. For example, an Autumn token is naturally worth about 10/7 ≈ 1.4 Spring tokens. Historically, the relative market prices have tended to fluctuate around these natural values.

After the Winter halving later this year, it will take 11.4 seconds to mine a Winter token. Winter is expected to become the most expensive of the four tokens over the following months as the market adjusts to the reduction in supply.

Today, it takes about 1 day of mining to produce 10,000 tokens of each type. As time goes on, the value of 10,000 tokens in mining time will increase:

• 10 years from now, it will take about 10 days to mine 10,000 tokens.
• 20 years from now, it will take about 3 months.
• 30 years from now, it will take about 3 years.

Based on the economics of time, a reasonable investment strategy for someone who wants both an income stream and a long-term investment would be to hold 10,000 tokens and use them to get money in the form of USDT or Bitcoin over the years. As time goes on and the tokens become scarcer, the value of the 10,000 tokens measured in mining time will increase.

Dollar Economics

The market price of each of the tokens will naturally trend towards:

Dollars spent buying tokens each day / Number of tokens sold each day.

We can approximate these variables:

• Dollars spent each day ≈ Number of regular buyers × Average daily spend, and
• Tokens sold each day ≈ Number of tokens mined each day.

So the price of a token will trend towards:

Regular buyers × Average Daily Spend / Tokens mined each day.

If the amount of money spent on tokens every day remains constant over time, each token’s price will double every three years, as the supply decreases.

With 10,000 tokens of each of the four types being produced every day today, it would take about $40,000 of investment each day to support a price of $1 per token. In ten years, it would take $4,000 per day, and in 20 years, it would take $400 per day.

Profits Achievable

It’s possible to make three trades in each season, while trading tokens for more tokens each time. For example, Autumn is currently the most expensive, followed by Summer, Spring and then Winter. Someone who holds Autumn tokens can:

• Trade Autumn for Summer
• Trade Summer for Spring, and
• Trade Spring for Winter.

After that, the investor would hold Winter tokens, which are the cheapest, and would need to wait until after the Winter halving to trade again.

If an investor trades 10,000 tokens for 11,000 tokens in each trade, and then sells 1,000 tokens for USDT, they would get 1/11th of the market value of their tokens in USDT approximately every three months, since each season is nine months long.

Today, 10,000 tokens is worth about $40, and an investor following this plan would get about $4 each time they trade. As time goes on, the prices of the tokens are expected to increase because of:

• Community growth, which will lead to more regular buyers, and
• Decreasing supply, with halvings taking place every nine months.

Mining Statistics

About 37 million tokens of each type will be produced in total, and about 19 million tokens of each type exist today. When mining started in September 2001, Spring was produced at the fastest rate, and Spring tokens were the most plentiful. As we approach the end of the first complete cycle, the numbers of tokens of each type that exist become approximately equal.

Winter tokens are currently the least plentiful, but are being produced at the fastest rate, and are catching up with the other tokens. When the Winter halving takes place in September, the rates of production of the four tokens will return to their original ratio, 84:70:60:52.5 = 168:140:120:105.

Liquidity and Regular Buying

There’s about 1/6th of all the tokens that exist currently on the market, either on Uniswap on the Ethereum or Polygon chains, or on the centralized exchanges, Coinsbit.io and Coinstore.com.

There is plenty of token liquidity, and people can easily swap 10,000 tokens inside MetaMask without having a big impact on the price. However, the prices of the tokens are low, and so buying large numbers of tokens in a single transaction will have a big price impact.

In these market conditions, the optimal way to buy is to buy regularly in small amounts. On Discord, there is an Investors Club server for regular buyers, which provides access to a bot that makes purchases 5 times a day and distributes the tokens bought among the investors.

If we assume that the club members are the only buyers (although in reality there will be other buyers outside the club), and that they each spend the same amount every day, then the price of a token in N years will be approximately:

(Number of club members in N years / Number of members today) × 2^(N/3) × Today’s price

Once-Off Purchases

The analysis above ignores the effect of once-off purchases, which will contribute to demand for the tokens in addition to the effects of regular buying.

With 10,000 tokens of each type being produced every day, it takes 100 days of mining to produce one million tokens. If purchases of 1 million tokens occur every 100 days, those purchases would completely absorb the supply from mining, and the prices would increase over time, as the combination of regular buying and once-off purchases would together exceed the mining supply and reduce the number of tokens on the market.

Summary

The token prices have behaved as expected, and the token economy, while still small, is functioning correctly and allows investors to make profits, without losing any tokens or spending any more money.

The profits achievable are small today, but can be expected to grow as the combination of once-off purchases, regular buying, and decreasing supply puts upward pressure on the token prices as time goes on.

Disclaimer

This blog post is not intended to be financial advice, and does not make any guarantees about future prices. It is intended to allow the reader to understand the market forces that affect the relative prices of the four Seasonal Tokens. There are unpredictable elements that influence the prices, making it impossible to make guarantees. Markets can behave irrationally, even for long periods of time, and so it is possible that the future prices will not behave as expected.