I love CZ. I think he has built something really reputable in the Blockchain space. More still, I admire his openness and honesty, you don’t see that often in Founders.
CZ built an empire in 180 days and is still building. If you follow his tweets closely, he says it all the time.
Admittedly, if you do not love CZ for his brilliant and candid opinions, you’ll love him for his sense of humor, lol.
However, the purpose of this story is to share CZ’s opinion (which I agree with, btw) on why crypto tokens/coins will continue to be issued for the foreseeable future.
Benefits of Issuing Crypto Tokens/Coins
There are many benefits of issuing a coin. Some are obvious, some are not. Many people know that you can issue a new coin and get some money from the initial sale if you have some credibility.
It can be an ICO, IEO, IDO, etc. I’d say this is probably less than 0.1% of the total value you get from issuing a coin.
If you look at BNB, it raised $15m USD equivalent in bitcoin at the ICO, while that is a fantastic raise for a project at such an early stage, today, the total market cap of BNB is $90 billion USD, about 3000x (Note: This was in 2021).
The second small benefit is the coins the project team retains. In the case of BNB, the team allocation was about 40% of the coins, which is now worth $45 billion USD. While this sounds like a real sum, I’d dare say it is still just a small portion of the value you get from issuing a coin.
Note: The team allocation of BNB was and will never be distributed to any members of the team. The team has committed to burning them all, which makes BNB a fair launch coin, i.e. the team did not keep any tokens for themselves. All the BNB our team gets will be earned through providing our services.
The real benefit of issuing a coin is it creates a whole new ecosystem, from user interactions to user retention, and development of the ecosystem.
This is something that cannot be done using company equity (securities) or fiat currencies, or even using bitcoin. You have to create your own coin for it to work.
First, let’s look at how companies work. You have your users, who pay, then you have the company who builds the products and pays its colleagues, then gives the profits to their shareholders. In this model, money flows one way only. From users to the company to shareholders.
It’s different with a token. You do an initial sale (ICO or IEO), and assuming the token offers some utility or benefits in your platform or ecosystem, the people buying and holding your token are typically your users.
When the price goes up, the token holders, your users, benefit. Thus, they are incentivized to use your platform more and get more friends onto your platform. They become your best salespeople. (Your users typically have more friends in your typical demographic.) And they get rewarded through token economics.
It creates a positive virtuous cycle, a very sticky ecosystem. You can’t do the above with fiat currencies. It just doesn’t work. You can’t do this even with bitcoin. You have to create a new token for your platform or ecosystem, otherwise, you can’t create a symbiotic growth environment with your users.
What about equities? You could grow with your shareholders- True, but they are typically small in number (especially for early-stage companies), and they may not be your users. More importantly, you can’t use equity to pay for your services. You can’t do airdrops or other user incentives with equities.
For the above reasons, I believe people will continue to create new tokens for their projects. And there will be millions of tokens. Like start-ups, most will fail. But the ones that succeed will succeed tremendously and create a lot of value for the world.
When Should You Issue Crypto Tokens?
CZ- On Creating Tokens
I advise you to not create a token until you have a product-market fit. Tokens should be an acceleration mechanism, AFTER you have built a product that people want.
Once you issue a token, it becomes harder to pivot your business. You have to get consent from your community. So, it is not ideal for trials, MVPs (minimum viable product), or the experimental stages.
Conclusion
Dear reader, I’m sure you understand now why projects will keep issuing tokens/coins. However, watch the process, projects should Build a product people use and then Launch a token. It worked for Binance, it could work for your blockchain startup/company too. If you’d like to learn how Binance has enjoyed 1.8 million more awareness than any other blockchain company, here’s how.
LinkedIn: Onyeka Ekwemozor
Twitter: OnyekaEkwemozor
