The mechanics of frozen tokens in blockchain projects

Kick Ecosystem was the first in the history of blockchain projects to develop and implement a model of the frozen tokens economy. Read how it helps to attract users and develop Ecosystem's products effectively. Also learn what Frozendrop is and how to conduct it wisely.

Frozen Token Economics by Kick Ecosystem:
Theory and Practice
During the process of the FrozenDrop, many users and members of the Kick Ecosystem community have accumulated a number of questions. We consider it extremely important to answer them and clarify the details of our economy. We have prepared this article to maintain maximum transparency and openness, as well as to help those who was a participant in the recent FrozenDrop and received frozen KickTokens.

You will be able to find the necessary foundations of the theories that will help to understand the fundamentals of the FrozenDrop economy below.
About Kick Ecosystem
Kick Ecosystem is a set of synergistically interacting fintech tools that form a "single window system" and cover all the financial needs of each user from all over the world. The project was developed by the KickICO team, leaders in the crowdfunding, investment and asset management market.

Kick Ecosystem is comprised of 12 different services, each of them fully functional both as a standalone solution and an organic part of the environment. Kick Ecosystem approach enables a seamless 360 degrees interaction between all the elements and ensures instant execution of user requests combined with effortless user experience.

Its mission is to create a new reality accessible to every person on the planet — modern, convenient and rapid, at the same time safe, transparent and adjustable, taking the best of the cryptocurrency and fiat worlds.

What is a token and how does it differ from a coin?
A token is a unit that is used to represent the digital balance of an asset. Tokens are recorded in the blockchain technology database, and they are accessed via special applications using some digital signature.
How does a token differ from a cryptocurrency?
Token pricing may depend not only on the basic mechanics of supply and demand but also on some additional aspects such as (backing to an external asset, terms of token emissions or rewards). In addition, unlike the cryptocurrency, the token does not have its own blockchain. The "Coin" always operates on a separate blockchain protocol in a distributed database. However, both the "coin" and "token" can be cryptocurrencies (dependent on the desire of the project creators). In other words, a "coin" is a currency that uses its own power to operate, while a "token" operates on some other external blockchain. KickToken is also positioned as a cryptocurrency, which is what it essentially is: KickToken (KICK) digital ERC20 Ethereum token is a virtual currency, which is used by project authors and backers for mutual settlements inside KickICO.
Where to store tokens?
When it comes to transferring and storing, tokens are similar to cryptocurrencies. For these purposes, there are special wallet applications that are used, which store and process the private keys, as well as form and sign the transactions. Typically, these applications are part of the tokenization platform infrastructure.
Freeze and Frozen Tokens
  • What is a «frozen token»?
    A frozen token is a token that is created but cannot be transferred to another address until certain unlocking conditions are met. There are certain mechanisms and methods to freeze and unlock the tokens.

  • How does «unlock» mechanics work?
    The unlocking of the tokens is carried out automatically, using a smart contract or by a command that the token creator (owner) can set. A smart contract — a computer algorithm designed to generate, control and provide information. It is only written once, it cannot be changed once it has been published on the network. No third party has the authority to change or falsify it. Thus, the information in the smart contract is absolutely transparent and available to the public. A smart contract is a kind of ledger where all transactions and balances of user tokens are displayed.
  • For what and why do you need the frozen tokens?
    The process of freezing — locks all current tokens that are in circulation. All tokens can be frozen for a variety of reasons i.e. a ban on certain token transactions in general, a ban on certain wallets or a ban on wallets with a certain amount, and so on.
The difference between ordinary tokens and frozen tokens
How do frozen tokens differ from ordinary tokens?
The process of freezing and unfreezing tokens is only possible if such an option exists in the token smart contract in advance. Frozen tokens cannot be transferred anywhere, but they can be unlocked after certain FrozenDrop conditions are met (airdrop with frozen tokens is a free distribution of tokens to everyone in a limited amount. The process often aims at promoting a completely new coin before or at the initial stage of its listing on exchanges).
What is the difference between freezing and frozen tokens?
Say, a project is still being developed, but users are willing to acquire its tokens in advance. It is wise to make the tokens temporarily not tradable but frozen. Thus, interested users will own the coins, however, their price will not begin to fall due to the lack of real demand until the real launch of the business model of the project. Here is one of the reasons why so many ICOs failed — the tokens sold were not frozen, thus forming a large gap for market speculation. Many creators of ICO projects spent a significant amount of the funds received from investors to support the price of their tokens, trying to meet the expectations of ICO participants. At the same time, they invested very little in the development of their products, which quickly resulted in the collapse of many projects. The only question is whether the ICO participants are ready to acquire the frozen tokens and wait until they are listed on exchanges after the launch of the project's products. Freezing tokens for the project development stages avoids the negativity and failed expectations from project participants.
Airdrops & Bounty
Airdrop is a free distribution of tokens to everyone for registration. Tokens can be used to promote a completely new coin, which has not yet been listed on the exchanges, and so far, only preliminary token sales are carried out. Furthermore, token developers can distribute free tokens to existing cryptocurrency holders in a certain proportion. Of course, the distribution of tokens is limited..

Bounty — an opportunity to receive tokens from blockchain startups without investing their own funds. To undergo the process, the company that is about to do an ICO (Initial Coin Offering), offers to perform certain actions aimed at popularizing the startup and attracting new users and pays for the performed actions with tokens. Usually, each task is very specific and is valued in a fixed number of tokens. Many ICO projects either did not freeze tokens at all or froze them for a short period of time, as a result of which bounty campaign participants immediately sold these tokens on exchanges, which contributed to a fall of prices and negativity in relation to the projects themselves.

Frozen Token VS Not Frozen
How does the emission of new frozen tokens affect the price of tokens that are already traded on exchanges?
Technically, it does not affect the price in any way, since tokens cannot be sold. However, an extra emission of tokens can lead to some token price drawdown, since most of the current token holders do not understand the difference between frozen and not-frozen tokens.

A lot depends on the terms & conditions for unlocking the tokens. If all tokens are set to quickly unlock all at once, then the current token owners will seek to get rid of the asset, and this will provoke a massive dump (dump means lowering quotes due to numerous sell orders) and panic sale (panic sale means a sharp decrease in the cryptocurrency price for mass sales due to the panic behaviour).
What are the terms & conditions for unlocking?
Kick Ecosystem Team is absolutely transparent to its users, therefore, we openly bring your attention that during the FrozenDrop, the received tokens are frozen. The know-how unlocking conditions have not been officially published yet and will be available after KickEX cryptocurrency exchange launches. We assure everyone that there will be no mass unlocking of the tokens and, therefore, there will be no dump. We plan to distribute the tokens gradually so that one huge wave of extra emission does not cause panic. There is a planned strategy that explains what will happen to frozen tokens later, who will buy them and why.

If the token is already being traded on exchanges, it is important to make sure that the extra emission of the frozen tokens will not be mistakenly counted as a deposit. If such a problem arises, then all participants face some problems: for buyers — they will not be able to withdraw; exchanges — will be due to buyers; the founders will have a problem of having to delist the token from the exchange.
Why are frozen tokens good?
Frozen tokens are the key to success because if the project has not yet been launched, then its economy does not work, and the demand for the token is not formed. The era of speculative tokens has long passed. FrozenDrop is an extremely powerful tool for promoting the token and forming a starting audience. The right "unlocking conditions" is central to the successful use of both the FrozenDrop mechanics and the initial token sale, if there is one. FrozenDrop, if implemented incorrectly, can cause huge (possibly even critical) damage to the project's economy and its reputation, exchanges and users.
How to carry out the FrozenDrop correctly
Noted recommendations and risks for the specialists:
If you send frozen tokens before they are traded on exchanges, are findable in a cryptocurrencies catalogue and have some market value, then the distribution can be perceived as spam, and the token will be marked as "spam" in Etherscan (block browser, service for viewing Ethereum network statistics) and other browsers;
Tokens that do not have a market value will not excite the recipients since they do not understand whether the amount is too high or too little, as they regularly receive such useless tokens;
Tokens that are already traded on the exchange and have a market value, and users can understand how much they are worth, if the amount is over $50 then this might work well. However, in this case, as mentioned earlier, there is a risk of panic sales and a slight downturn in the current price;
If the speed of unlocking the tokens exceeds the rate of revenue for the business, the price will inevitably fall. But if the buyback is faster than unlocking, then the price of the token will rise;
It is possible to redeem frozen tokens without serious consequences for the business if for each unlocked token the business receives a greater income. For example, a project user unlocks tokens worth $1, and as a result of his actions, the project earns $1.5. It turns out that for $1 the project buys out unlocked tokens, and $0.5 remains as profit;
Users must clearly understand the rules of the game and the terms for unlocking when it becomes available. Until this moment, the rules can be kept secret if they are know-how, if not, it is recommended to disclose them to users, as this will be a very common question and a reason for doubting;
it should be understood that not all 100% of the receivers of frozen tokens will do the terms to unlock and then sell them. Rather, the conversion will be relatively low: at 1-2%. However, this method of customer engagement is many times cheaper than contextual advertising, banners and the like. These 1-2% are actually targeted and active participants in your project. And if your project does not yet have a community, these people will come as a foundation for it and will develop the project further along with you;
FrozenDrop, on the Ethereum blockchain, is not free. If you want to include 1 million addresses for your FrozenDrop, be prepared to pay around $50,000;
Prior doing the FrozenDrop, carefully calculate the expected conversion and how much a single user will cost you, how much bring profit the user will bring, and how much it will cost to buy back the tokens unlocked by the user. If your calculations are incorrect, you can rapidly reduce the price of your token to almost zero.
Additional information for
developers and exchanges
  • How to properly issue frozen tokens:
    • be transparent with the current token holders and explain that these are frozen;

    • "unlock" conditions should be easily understood by the receivers. In our case, defrosting the terms are know-how, and we don't reveal the details, however, we assure our community members that there will be no mass unlocking and there will be no dump;

    • distribute the tokens gradually so that one huge emission does not cause panic;

    • present the strategy of what will happen to the frozen tokens later — who will buy them and why (this is rule #1 of tokenomics: who will need the tokens, who will buy them, why, how exactly the demand will form because the price of the token depends on its demand and its deficit)

    • if the token is already being traded on exchanges, make sure that the issue of frozen tokens will not be counted as a deposit.

    If this happens, then all participants will have problems: for buyers — they will not be able to withdraw; exchanges — will be due to buyers; your project (token) is most likely to be delisted from the exchange.
  • Recommendations for exchanges:
    • when listing a token on the exchange, check its contract for the methods of freezing and unfreezing. If such data are available, all conditions should be specified in the agreement in detail, and it will not be possible to ban frozen emissions;

    • be able to handle such process, if necessary, and be able to distinguish between the emissions and the ordinary token transactions

    • do not store user deposits for a long time on the exchange wallets, but transfer them to their main wallet, if there is one. Deposit tokens to the user's internal exchange balance only after the tokens have been successfully transferred to the main address of the exchange. If there is no modifier: whether it is an extra emission or not, tokens that cannot be transferred will not be credited to the users.
  • Insights for exchanges
    Consider the tokens that are sent via the following ways. If transactions are generated this way, the system will automatically add them to the wallets:

    • airdrop (0x65216a41);
    • distributeTokens (0xcc254bdd);
    • distributeWithTransferFrom (0xb0885dd6);
    • multiSend (0x9ec68f0f);
    • multiTransferSingleAmount (0x61c847ae);
    • sendMultiSig (0x39125215);
    • sendMultiSigToken (0x0dcd7a6c);
    • transfer (0xa9059cbb);
    • transferFrom (0x23b872dd);
    • transferTo (0x2ccb1b30);
    • withdrawToken (0x9e281a98).

    All other methods, unless specified in the token smart contract, should not be considered as methods for depositing the account balance.
How to earn money with KickEcosystem
This piece on Frozen Economics is based on the unique development experience and marketing activities of the Kick Ecosystem team. KickTokens are cryptocurrency tokens used in the Kick Ecosystem.

In addition to the bonus part in the form of frozen tokens, users have the opportunity to earn BTC, ETN and USDT using the KickRef referral program which is part of the KickEX, our soon to launch cryptocurrency exchange. Registration at KickRef is free and does not require any upfront investment. Anyone can build a multi-level referral network on KickRef and receive a form of passive income from commissions of invited users that trade on the KickEX exchange. A multilevel program of 10 levels increases the likelihood of having active traders on your list, which makes it unique on the fintech market.

Unlike other referral systems, you do not need any upfront investments or buy-ins to participate in KickRef. On the contrary, when registering through a referral link, you are rewarded with 50,000 KickTokens. You will need to be active when you see that your referrals have generated some income for you. It means that they have either invited new users into your network or have traded on the exchange. For example, you see that the potential income is $300 this month. In order to receive it, you need to make a certain trading turnover on the KickEX exchange and pay at least $5 in total trading commissions.

What is unique about the KickRef project
by Kick Ecosystem?
  • Free interactive and accessible training on the cryptocurrency exchange platform. Also, learning the essential skills for network marketing and the development of a referral network.
  • Easy withdrawal of earned funds.
  • An additional opportunity for stable and partially passive income in the emerging industry of financial technologies and digital industry.

Launched in Q4 2019

KickRef is a referral program, allowing any member of Kick Ecosystem to create their own referral links to establish a network.

Start earning now!
Launched in Q2 2020

KickEX is an advanced-trading crypto exchange with the lowest trading fees and the most profitable referral program.

Join the test!
Launched in Q4 2019

KickAcademy is an institute that provides exclusive data about academic researches in crypto exchanges, and fintech.

Read more!