What is Unisocks?
Uniswap initially minted 500 SOCKS and deposited them into a liquidity pool with 35 ETH. Since its inception, 185 SOCKS have been burnt and taken out of circulation. Today, out of the 315 SOCKS still in circulation, only 14 remain in the liquidity pool. Uniswap initially intended to burn the unsold SOCKS after at least 100 days; however, they never went through with these plans.
When Uniswap released their governance token UNI, they even allocated 220,000 UNI to SOCKS holders and redeemers. Uniswap distributed 1000 UNI to each address that previously redeemed or held a SOCKS token at the snapshot date.
How do Bonding Curves Work?
Instead of selling SOCKS at a fixed price and allowing the secondary market to determine their value, Uniswap chose to utilize a bonding curve for a dynamic pricing mechanism. In short, bonding curves allow for a token’s price to be a function of its supply. Every time a token is bought, the following tokens’ price increases at a rate specified by the curve.
For example, a basic linear bonding curve could be price = supply. For SOCKS, this would mean that the first token could be purchased for $1, while the last token would go for $500. While this example is relatively simple, developers can customize bonding curves to fit whatever strategy they desire.
Developers can also use bonding curves to incentivize early adopters. At the time of writing, SOCKS are trading right around $65,000! That’s more than 5,400x its original price of $12. SOCKS’ bonding curve is pretty extreme since the 499th pair will cost 8,750 ETH, and the final pair will cost more than all the ETH in existence.
SOCKS as ERC20 Tokens
Because SOCKS are ERC-20 tokens, they can be used like any other ERC-20 token on Ethereum. Uniswap created an initial liquidity pool of 500 SOCKS and 35 ETH to facilitate trading; however, anyone can make a pool with SOCKS. Users have already made alternative Uniswap pools, including DAI/SOCKS and USDC/SOCKS. Because of the permissionless nature of DeFi, anyone can take it a step further and use SOCKS across other DeFi protocols.
Redeemed Socks NFT
When a SOCKS holder wants to redeem their token for a physical pair of Unisocks, the token is burned, reducing the number in circulation. While holders might be hesitant to burn their tokens to receive a nondurable good like a pair of socks, Uniswap incentivizes holders by sending them an NFT once they’ve redeemed SOCKS.
Unlike physical items, which really can’t be displayed to a large audience, the Unisocks NFT enables SOCKS redeemers to show their ownership across the internet, especially with platforms like Showtime, Gallery, and Lazy.com building out ways to showcase NFTs.
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