China-based crypto mining-pool services provider Poolin, which halted all withdrawals from its PoolinWallet on the back of liquidity problems, will be issuing IOU tokens corresponding to that value.
Poolin reducing the impact of suspension with IOU tokens
In a statement, the provider noted, “The team has come up with the IOU-tokens scheme to minimize the impact of withdrawal suspension. The tokenomics of IOU-tokens will bring intuitive & various options and easy-to-use operations.”
PoolinWallet will release IOU tokens against users’ initial holdings at a 1:1 ratio. With the option of unlimited withdrawal, the pool added, “Users could withdraw their IOU tokens at any time. The withdrawal request will be approved quickly and automatically.”
IOU tokens are standard ERC-20 tokens issued on the Ethereum blockchain that can be used to repay loans or buy brand-new mining equipment.
Poolin announced on Sept. 5 that it will pause all withdrawals, flash trades, and internal transfers within Poolin systems for “preserving assets, stabilizing liquidity, and operations amid a dull crypto market.” Since it stopped accepting withdrawals, Pollin’s pool’s overall computing power has decreased by around 60%, as per reports.
This leaves Poolin’s ETH owners on the sidelines at a time when Ethereum switches to a proof of stake consensus mechanism in ‘The Merge.’ Because of the magnitude of this event, a good deal of volatility is expected for ETH.
Solving the liquidity crisis
Notably, according to information from mempool.space cited by Bloomberg, Poolin’s digital wallet has Bitcoin valued at almost $59 million. It’s interesting to note that Poolin previously partnered with BlockFi and Three Arrows Capital, both of which are now bankrupt and were utterly destroyed by the market crisis.
Meanwhile, an unlimited withdrawal limit on IOU tokens and the ultimate goal to burn the tokens in batches while maintaining the issuance at a 1:1 ratio may not solve the liquidity crisis of the pool. In addition, since anyone could add liquidity to any IOU-token or token pairs on the chain, maintaining the liquidity of these IOU tokens will also not be guaranteed.
With the Ethereum Merge going live, Chainalysis noted in its recent report that the event might have significant effects on the value and allure of Ether as an asset, which affects mining, staking, and institutional adoption of cryptocurrencies. The analytics firms also see an impact on GPU owners receiving ERC-20 token rewards if a rival Ethereum chain that follows proof-of-work continues to exist.
With more information expected from the platform in the coming days, Poolin stated, “Our priority, for the time being, is to resume withdrawals of as many coins/tokens as possible. Meanwhile, [the] Trade and Earn feature will remain ‘Out of Service’ till the withdrawal issue has been alleviated significantly.”
BeInCrypto has reached out to company or individual involved in the story to get an official statement about the recent developments, but it has yet to hear back.