Token Economy

To further fund the development of the network, COTI may occasionally initiate additional token sales from the reserve.

Lock-up periods will commence once the tokens have been issued.

To provide the network with stability and flexibility, an additional 2,000,000,000 COTI will be generated and stored sterilized in the reserve.

At COTI, we are designing a cryptocurrency based on definitive market rules and fundamental economics principles. COTI reconciles a high performance protocol with an efficient dispute resolution system, integrated KYC/AML/CFT compliance and price stability features.

Token allocation

Token supply

COTI coins are created during the network’s genesis transaction, which makes COTI a fixed-supply DAG-based cryptocurrency. Following the network’s inception, there is no possibility to create or destroy COTI tokens as there are no mining activities associated with the COTI network.

The total supply of COTI to be distributed during the launch of the main net is 2,000,000,000 COTI. COTI protocol-based applications have the ability to support additional types of tokens, although they are not considered COTI tokens and do not impact COTI token supply and demand.

Introduction

COTI Token Economy 2

COTI Token Economy 3

*For further information on the lock-up periods and respective bonuses, please refer to page 5. ** As bonuses impact token pricing, we estimate that the amount of tokens sold in the token sale will range from 350,000,000 to 550,000,000. Unsold tokens will be allocated to the reserve.

COTI can best be described as a multi-layered system as depicted in the chart below:

COTI’s economic model has been designed to be equitable, efficient and economic incentives-based. It is comprised of a transparent and pragmatic mechanism for rewarding users for running nodes and arbitrators for participating in dispute resolution procedures.

Transaction fees are the main income source for a sustainable economy. A payload-agnostic fee is either equal for every transaction, or case-specific, but is only possible for non-payment applications. In the case of payments, we cannot define fees both large enough to recoup the system and small enough to make micro-payments possible. For this reason, COTI PAY, COTI-X and the COTI Arbitration Service use value-based pricing.

Protocol economy

COTI’s Full Nodes are fee collectors

In the COTI ecosystem, the stakes and interests of users with different roles in the network are well defined and equitable. The COTI network core is made up of a constellation of user-run Full Nodes, DSP Nodes and Trust Score Nodes. COTI Full Nodes can define their own price list and compete for users based on their performance and price. Consequently, COTI Full Nodes are responsible for collecting fees for protocol usage and transferring the network fee to the COTI network pool.

All fee collections and payment distributions are denominated in COTI tokens.

COTI Token Economy 4

It is the responsibility of Full Nodes to perform PoW in order to create transactions. The amount of PoW performed is extremely negligible compared to standard mining.

Example:

Full Node P&L statement for the year, bearish scenario: 1000 users and 10 merchants per node.

Revenue

Fee for trade payments is 0.1%, but not less than 0.0001 COTI and not greater than 10 COTI, merchant yearly fee: 100 COTI.

Please refer to the COTI Nodes Model Business Plan Book for details

15 800 COTI $7,900

Expensest

Potential profit/loss before tax $3,800

Infrastructure: 2 servers * $100 * 12 $2,400

Yearly certification fee 1,000 COTI $500

Redistribution to the network pool: 0.05% for trade payments 2,400 COTI $1,200

COTI will allocate up to 45% of the issued coins to the incentive plan

*All COTI amounts included below are solely provided as suggested examples

Token utility and value

The value of any commodity-type currency arises from its usage as a means of payment and exchange. The greater the utility, the more valuable and stable the currency will be. The COTI network offers a wide spec-trum of possible payments and other applications. Payment usage contributes directly to COTI’s utility, while running COTI network infrastructure requires depositing a network fee in COTI and, in some cases, staking a sufficient amount of COTI.

Example:

Full Node P&L statement for the year, bullish scenario: 10000 users and 100 merchants per node.

Expenses

Potential profit/loss before tax $61,800

Infrastructure: 4 servers * $100 * 12 $4,800

Yearly certification fee 1,000 COTI $500

Redistribution to the network pool: 0.05% for trade payments 24,000 COTI $12,000

Revenue

Fee for trade payments is 0.1%, but not less than 0.0001 COTI and not greater than 10 COTI, merchant yearly fee: 100 COTI.

Please refer to the COTI Nodes Model Business Plan Book for details

158,000 COTI $79,000

COTI Token Economy 5

Incentive plan for consumers:

Open a COTI wallet and receive the first 100 COTI for free

Get another 100 COTI for each referral that subsequently opens an account

Cash back program – receive COTI for each transaction you make when 1,000 COTI or more is staked

Special discounts and unique co-marketing plans with merchants (loyalty plans and offers on special products etc)

Special yearly bonuses for maintaining a high Trust Score

be possible for additional COTI tokens to be created following the genesis transaction.

Incentive plan for merchants:

Open your COTI wallet with the first 10,000 COTI for free

Get another 5,000 COTI for each merchant you refer that opens an account

Merchants will receive 1,000 COTI for each user referral that signs into COTI for the first time

Monthly and yearly bonuses for processing a high volume of COTI and maintaining a high Trust Score

Fee discounts for staking one million COTI or more in a merchant wallet

Incentive plan for partners:

Receive one million COTI for becoming a primary channel partner

Service discounts when processing high coin volume

Incentive plan for node operators:

Node operators collect service fees from transactions that are processed through their nodes

COTI will reward node operators with 10,000 COTI for each node that is run for more than a year, along with 100,000 COTI staked in their account

Special yearly bonuses in line with transaction volumes and the node operator’s Trust Score

COTI Token Economy 6

Price stability model

To build a COTI token price stability model, it is necessary to estimate the possible number of users and the market share that is feasible by the payments system.

For the purpose of the model, it can be assumed that the COTI network will be able to achieve up to a 1% share of online retail transactions, or proportionately lesser share of all retail transactions. Per the charts above, this connotes a yearly turnover amounting to approximately 40 billion USD and ten million customers. It is COTI’s objective to attain this level three years following the COTI main net launch.

COTI Token Economy 7

Token utility and value

As previously mentioned, the main source of COTI’s coin value lies in its usability as a payment means. As such, monetary theory suggests the simple exchange equation MV=PQ.

In this equation, PQ is the value of goods and services traded for the payment means or the market share. V is the money velocity. Using conservative suppositions (see below), we can evaluate the money velocity to be approximately 20 times per year. Using the market share from the ‘COTI adoption estimation’ and this veloci-ty evaluation we can say that the required amount of COTI will be equivalent to M=PQ/V = 2 billion USD three years following the main net launch. This is the intrinsic value of the currency given only by its usage for payment purposes. To this effect, it is a very conservative estimation, not taking into account any speculative or staking demands, which can be substantial.

According to the COTI token allocation (see above), the amount of COTI in free circulation is estimated to be approximately 1-1.5 bln tokens. This estimation provides us with token price equilibrium that will not be less than 1.3-2.0 USD after three years if no additional reserves are released.

Another estimation we have is the amount of required reserve tokens to be sold in order to stabilise the token price at the desired levels. For example, to quell excessive demand and maintain the median price of 1.0 USD, we need to sell up to 500 million tokens. As a result, tokens in free circulation will be approximately 2 bln, and not less than 200 million USD will be fed back into the fiat reserve.

COTI Token Economy 8

Token velocity evaluation

Currency velocity is one of the most significant economic variables that cannot be directly measured, as there is no reliable estimation of this parameter for cryptocurrencies. Notwithstanding the foregoing, it can still be evaluated compared to other currencies.

Rate stability

As previously mentioned, COTI will have both an additional token reserve and substantial fiat reserve.Our analysis of possible attack scenarios shows that these reserves are sufficient for the winning strategy to withstand any possible attack or unexpected market event. COTI will implement a floor and ceiling strategy so reserves can be used within supported levels.

As such, COTI cannot be considered a stablecoin, but is rather a standard cryptocurrency with limited volatili-ty. According to our forecasts, the COTI price corridor can be ±20% of the price (e.g. EUR/USD three month volatility).

To execute this in a decentralised way, COTI will use several independent market-makers for the strategy outlined above.

According to this data, we can assume that the possible velocity value for an efficient cryptocurrency is approximately 10.0-20.0 times per year. In the evaluation above, we have used the most conservative estimation at 20 times per year.

Currency type

USD M2 1.5-2.0

Second-rate free convertible currency (RUB) 3.0-5.0

USD M1 5.0-10.0

Cash, large bills ($100) 20.0

Cash, small bills ($1-$5) 100.00-150.00

Velocity, 1/year

COTI Token Economy 9

Competitor economy review

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