Premiums & Discounts
When crafting an offer, you'll encounter a field labelled “Premium/Discount”. While exploring offers, you might come across terms like “5% discount” or “5% premium”. This feature is an optional setting that users can apply when they have chosen to utilise Dynamic price.
This concept is quite straightforward, but to avoid any potential confusion, we'll clarify what Premiums and Discounts entail and how they function.
If a creator of an offer uses Dynamic price and applies a 5% Premium, the offer's price will be the market price (according to the Oracle) plus 5%. For instance, if the Oracle price of ETH is $1000 and a 5% premium is added, the buyer will pay $1050 per ETH. Conversely, if a 5% Discount is applied, the buyer's price will be $950 per ETH.
Naturally, since this feature is exclusively available with Dynamic price enabled, if the ETH price changes (according to the Oracle), the offer's price will adjust accordingly. For instance, if the Oracle price for ETH increases from $1000 to $2000, the offer will adjust to $2000 minus 5%, which equals $1900 per ETH.
Benefits of Premiums & Discounts
This optional setting can be employed in various ways and could work especially well if combined with vesting.
Let's illustrate the advantages through practical examples:
Example 1 - Bob the Strategic Seller
Recalling example 1 from the vesting section, you know that Bob amassed a considerable holding of a small-cap token that experienced substantial price growth. His goal is to realise profits while retaining a portion of his tokens for future gains.
Knowing that selling on Uniswap will adversely impact the price, Bob opts to create an offer on Eve Exchange with a vesting schedule. But in this expanded example, Bob takes it a step further…
He realises there are other investors like him interested in the token, and their sizable buys on Uniswap would inflate the price so he decides to not only implement vesting but also apply a premium.
Observing the Uniswap market, Bob knows a $50,000 buy could drive the price up by 20%. He decides to sell $50,000 worth of his tokens at the Market rate plus 10% with a 3-month vesting period. This enables long-term bullish traders to purchase his tokens at a lower cost compared to Uniswap.
By offering this deal, Bob benefits by making the purchase price more attractive which may increase the likelihood of finding a buyer, and the buyers who come along pay less then they would for the equivalent amount of tokens on Uniswap.
Example 2 - Project XYZ's Calculated Sale
Let's further illustrate the value of premiums & discounts by expanding on example 2 from the vesting section, this time focusing on discounts.
Like Bob, Project XYZ also explores a more sophisticated approach to selling their tokens. Instead of solely implementing a vesting schedule, they decide to offer three deals with vesting and discounts.
Offer 1: Sell 1,000,000 tokens at market rate minus 5% with 3 months vesting.
Offer 2: Sell 1,000,000 tokens at market rate minus 10% with 6 months vesting.
Offer 3: Sell 1,000,000 tokens at market rate minus 15% with 9 months vesting.
Do you see the possibilities here? Project XYZ can set up offers similar to their ICO approach, aligning discounts with longer vesting periods.
Remember, to utilise discounts, Dynamic price needs to be enabled. However, even if there's no Oracle available for Project XYZ’s token, they could still achieve similar results…
Project XYZ can apply this strategy with fixed pricing. They set up three offers: the first at a higher price with a short vesting period, the second at a slightly lower price with longer vesting, and the third at the lowest price with the longest vesting period.
Summary
In summary, the combination of vesting and premiums/discounts provides a powerful toolkit for executing various strategies, each with its own advantages. The choice of how to use these settings is entirely yours. Our role is not to dictate your strategy but to provide the technology. So go ahead, explore and determine what suits your needs best!
In the remaining sections of this Smart Trade category, we cover a few miscellaneous items which are not settings as such but may require some clarification.
Continue to the next section to find out more about:
Why there is a field for slippage on a protocol that eliminates price slippage.
Why “USD” is displayed in certain places as opposed to stablecoins like USDC or USDT.
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