Although there has been a growing amount media attention given to cryptocurrency, there is still a lack of understanding over how to best define it in the mainstream. Technically speaking, in terms of blockchain, cryptocurrency is a unit which can be programmed and attached to a blockchain as part of a smart contract.
Beyond that, a token (cryptocurrency unit) is just another form of privately issued currency. While governments issue currency and therefore set the terms of use, blockchain allows for new organizations to issue their own forms of cryptocurrency and set unique rules around its use. This then creates self-sustaining min-economies, also known as ‘token economies.’
One weakness of token-based models is the way through which they interact with the business models laid beneath them.
With greater focus put on designing ICO’s to be optimal for token economies, the usage of such currencies and the relationships formed by these transactions will be of greater importance than the way that underlying economics structures are designed. In other words, although an ICO can launch successfully, the long term health of its particular economy depends on how well its business model functions.
All token-based economies depend on each party interacting with one another in a manner which is in accordance with the rules of that community. Owning tokens gives one rights, such as having a say in its value, access to the marketplace and any associated products. Some tokens will allow participants to have part ownership in a company and others may be purchased and exchanged for proprietary goods.
In some instances, a company may encourage a pay-per-use model in order for users to use the product or jump onto the blockchain. This may entail using smart contracts to purchase products, transaction fees or paying for such things as a security deposit on tokens or a wallet.
Generally speaking, a token enables transactions to be secure and easily verified within a closed environment. Companies can set up their own methods of payment processing and completely avoid the costs of using traditional financial institutions.
Taken as a whole, while tokens may be a relatively new form of currency, but their use is changing the way people do business and interact with one another making understanding them a critical component of success for businesses of all sides and in every industry.
BLMP ©2018, Singapore
BLMP (Blockchain Licensing Marketplace) is a blockchain technology company working to remove obstacles and facilitate trust in the complex issues surrounding Supply Chain Management transactions in the virtual goods industry.
BLMP Network uses blockchain technology to connect digital platforms around the world with global brands to monetize officially licensed virtual goods across any digital platform; from games to streaming services & social media, allowing millions of users access to a whole new world of branded virtual products.
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