Let say a random person make 100 tokens called, qtc. They throw 50 qtc and 50 eth into the liquidity pool, so one qtc is worth 1 eth. If a person buy it, they are getting it from the pool. What happens to the 50 qtc in the developer wallet, because on paper, it is worth 1 eth each?
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well, if someone made random tokens they’d be pretty much worthless. there would have to be way, way more tokens circulating over a period of time for those coins to reach even near where ETH is.
but to answer your question, the coins in the developers wallet would be the price of the coin. they wouldn’t be valued less. they would just be the normal price because theres no variation of price. its the same as dollars, if someone had 50 dollars they would have the price of 50 dollars no matter what it is
The value of crypto is in its use (same with any currency really).
So the eth is only worth anything because people use it for transactions.
Qtc wouldn’t have any noticeable value because no one would be using it.
So on paper you’ve made qtc = eth but if you tried to sell the 50 qtc being held, you’d be better off with monopoly money.
I create 100 Bison-dollars, sell 50, and keep 50 for myself
I declare that 1 Bison-dollar is worth 5 British pounds (because that’s the exchange rate they will set when I kidnap their Queen!)
So long as people are willing to pay what the Bison dollar is worth, I have 50 valueable Bison Dollars I can sell whenever I want.
But since most people feel that Bison dollars aren’t worth the money they are printed on, they are worthless.
That’s the crux of the entire Crypto currency market, it’s entirely a question of whether people are willing to respect a particular value on the token.
It’s crypto, it’s all scams built on top of crazed massively manipulated speculation built on top of ponzi schemes.
So, in answer to your question, when someone creates yet another pointless blockchain with tokens, they con people into buying it and then try to manipulate the price upwards so they can sell out and get real money.
On paper, the currency that was set aside is worth 1eth each because the trading price of qtc is equivalent to 1eth, assuming that the currency is actually seeing some trade to begin with. On paper isn’t necessarily reality though, obviously if those coins were introduced to the supply it would tank the price.
What happens to that crypto is it sits there doing nothing until the creator decides to do something with it. Which in this scenario is probably to wait until they think the hype for the coin has peaked and then dump their reserve coins in an effort to extract maximum value out of whatever market there is for qtc.
If they have 50 and the pool has 50 qtc and 50 eth, there is 100 in circulation
If eth was $2000 that would be mean they have $100,000 worth in their wallet and $100,000 worth in the pool (they have 50% of the entire circulation)
now since liquidity pools have to be 50/50 if someone wants to buy 1 qtc, it costs 1 eth or $2000 dollars
the pool now has 49 qtc and 51 eth. qtc is now $2040, eth is $1960
If the developers wanted to sell 25 coins for eth, the pool would have 74 qtc and 26 eth. Qtc is now $1300. It has lost 30.5% value which could trigger a sell off from the remaining users.
It’s a very ELI5 explanation as there is a bit more to it but essentially sums it up (if this wrong feel free to correct me)
It literally is just money they printed themselves, but only worth as much as people are wiling to buy it for. It is also why so many coins and tokens are scams. They promise the world, get people invested and because the developers hold so much of the circulation, they can sell it and leave everyone else holding the bags
The more they print, the further it dilutes so it’s worth less. This is the the problem with inflation, however having less coins in circulation doesn’t automatically make it better
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