The Importance of the TEA Utility Token
The TEA Project features two tokens, TEA and Camellia (CML). The CML token is an NFT that, besides functioning as a store of value for investors, is also used by miners to activate their mining nodes. CML can therefore generate TEA through mining, and CML holders can use their NFTs as collateral for TEA loans from the genesis bank. Much of the value of a CML seed is related to its capacity to generate TEA. Let’s take a closer look at the supply and demand for TEA as well as its role as a utility token in the TEA ecosystem.
Supply (and Demand) of TEA Tokens
The supply of TEA is generated completely by the miners. There’s no measurable TEA in the genesis block (aside from a small amount of TEA for gas) to go alongside the 10,000 CML that are minted. The generation of TEA comes from either miners (who mine TEA with their mining machines) or farmers (who stake their CML into running mining machines to earn TEA). The miners earn rewards from the execution of tasks the TEA consensus algorithm assigns them. All TEA in the TEA Project ecosystem is generated through public service rewards by miners on the blockchain and the rewards are paid in TEA tokens.
When we say that TEA is a stablecoin pegged to the price of computing, that doesn’t mean the price will be stable relative to the dollar. It instead means that the price of TEA is pegged to the consumption of computing resources; consuming a TEA token will always result in a fixed consumption of computing services (CPU time, network traffic, and storage). A consumer using a TApp must pay TEA that is used in part to pay miners for using their hardware. And if a developer chooses to pay their hosting miners in TEA, then each day of hosting will cost a certain amount of TEA. This amount required to run the TApp doesn’t change. That’s what we mean when we say that the TEA token is stable relative to computing costs.
What About Positive Demand Factors on the TEA Price?
The TEA Project’s miners are primarily interested in being compensated for joining the network. If TEA farming is profitable, then more miners will likely want to jump into TEA farming, but they will need TEA to buy Camellia seeds. So the TEA price will benefit from more miners coming on board.
Keep in mind that CML seeds take time to germinate and grow into a productive tree. That means the productivity of TEA mining machines will be small during the initial stages of the first miners coming onboard to mine the TEA token. This will result in relatively small TEA harvests that will keep the supply of TEA low as the network is just starting to develop. As more TApps enter the ecosystem, there would be more demand for computing resources resulting in the price of TEA going up.
When we consider how TEA is generated (mining) and burned (when miners or investors purchase CML with TEA), we can start to see how the circulation of TEA tokens starts to look like an infinite support loop:
- Miners buy more seeds to do more mining.
- The TEA used to purchase CML is then burned by the DAO, introducing a decrease in the supply to bump the price of TEA.
- Miners wait for their planted Camellia to mature and produce more TEA tokens that are useful for buying more seeds.
Miners want to purchase seeds because mining TEA is profitable, which is another feedback loop keeping upward pressure on the price of TEA. Additionally, the TEA output of these early-stage CML mining machines will be low relative to more mature mining nodes. And the regular DAO burning of TEA will add periodic supply shocks that will also help the price of TEA.
Why Won’t Miners Dump TEA?
While there’s always the possibility that miners will dump TEA, there are reasons why this is not likely to happen.
In the early epochs, the TEA harvests will be minimal. There shouldn’t be too much farmed TEA available to be sold on the market. This limited supply would make it much easier for market makers to buy and keep the price stable. These early investors are accumulating valuable assets at the early stage of the project. Since they know the TEA Project’s value, they’re not likely to dump the TEA on the open market.
But they know, by design, TEA isn’t a store of value. Knowing that TEA is a stablecoin pegged to the cost of computing and the cost of computing always goes down, this implies that, over time, TEA itself will buy more computing power. But a miner could be worried that their TEA is less valuable the longer they let it sit in their wallet.
So early investors looking to support the ecosystem will either buy CML (which results in the TEA being burned) or purchase TApp tokens (which results in the TEA being locked in the TApp token’s bonding curve). Whether purchasing CML or TApp tokens, these actions will have a positive effect on the price of TEA. Another choice is to buy other miner’s staking slots. In this case, the staking slot investor would gain shared revenue from other miners according to the strength of their CML (because every Camellia is a different NFT) and their staking slot (because every slot has a different weight when figuring revenue share).
The only scenario where a dump would likely occur is if there was a major loss of confidence in the project by its token holders. It stands to reason that the TEA token price, just like CML, will remain healthy as long as all the participants in the TEA ecosystem beleive in the project.
No matter how well we design the miners’ economy to boost TEA initially, it’s still a short-term solution. In the long run, the key rests in the demand for the usage of TEA tokens. The TEA project team has started working on so-called rich TApps that run on the TEA network. Building the ecosystem, especially leveraging the existing FIL, ETH, and DOT ecosystems, is the team’s main goal for a sustainable future.