【Sharing Trilogy】Part 3: The New Economy of Dual Token mechanism
2017’s crypto economy boom has caused global attention from the financial sector, the regulators and many other fields. One of the first classifications was set by Switzerland, who divided Tokens into 3 categories: payment, security and utility. In mid 2018, Security Token Offering (aka STO) became popular as the US SEC seemed to be moving into this direction and many key crypto players started to shift their investment and product development to fit into these new criteria. For most people, STO acts as a bridge helping traditional financial institution senter into Crypto.
But instead of only focusing on just one STO or only ICO projects, there may be a third pathway for all projects. The new Dual Token design would not be 2 different layers of token application/ utility token within the project like in Steem, Vechain and many others, but rather, refers to the “co-existence”of both the STO and utility token.
STOs will be needed, as governments require an entity to be responsible for its actions, so as to protect investors and implement tax processes. STOs merely represent the share return value as in the traditional financial world, and its value ought to be studied as always with PE, PS, acid ratio and many other analytical methods. Just like the traditional stock market, the firm has a certain base value and the difference between the market price and its base financial value is the market premium, or the effect of PR on investors displaying the future growth benefit (growth stocks); in the recent Crypto burst the differences would be considered the PR hype as most projects don’t have a use case yet.
Unlike STOs, where its financial value can be easily understood by the traditional world, utility tokens will need to design a new understanding to be evaluated as its “basicValue”. Token growth velocity, internal circulation, traction are all new indexes that may replace PE, PS, acid ratio and etc…
Due to the development of the new crypto economy, traditional balance sheets will also need to evolve further, including new criteria for its token value. The financial result would include both the (STO) + utility token into the firm’s final value.
For a traditional firm, adapting token economics into its application will usually have stronger STO value versus the utility token part, as it is used to have fiat income that will display in traditional balance sheet, unless the firm is ready to decentralize itself and evolve into crypto only for all expenses and profits. (It would be bold and much respect for them! )
For an existing Crypto project its foundation ought to reform further into an STO entity, giving an example of a public chain that charges gas for its transaction and instead of sharing all transaction fee towards miners, part of it would be transferred to the foundation under the STO structure, while also being taxable.Usually in this case the token economy value would be greater than STO.
The new dual token model will have 2 graphs which added together will show the true value of the project.
Marketgraph of STO & Market graph of Utility token
Unlike the pyramid scheme described in the first article, the investment forms and step sought to evolve as well. In the near future there will be 3-investment vehicles to participate in.
Equity rounds that will share both STO token and its Utility token pool, it will usually be adopted for angels or later strategic partners.
STO rounds that will share utility token pool as extra bonus rounds
Utility token rounds that is aimed mainly for the users or retail investors
Of course there can be various rounds at each stage.
It is interesting how the Crypto market has evolved within the last couple of years and many more funds have clearer approaches to enter; projects are begging to pay more attention to its core value add. However, since the market is still cold, I would like to end the trilogy with a statement from Thomas Edison to all projects and funds.
If you wish to succeed, you should use persistence as your good friend , experience as your reference , prudence as your brother and hope as your sentry.