How To — Tokenize Your business?
In 2017, the crypto ecosystem saw the boom of ICOs and tokenization of the world became a common term used by those in the industry. A report suggests the global tokenisation market is slated to grow to $2.25 billion by 2020. This revolution is also led by the privacy concerns of user data and the need for decentralisation.
What are tokens?
Tokens usually represent value, whether it is game credits or money in a wallet or inventory in the warehouse. These tokens can be used in a system to exchange value. For example, Sia Project utilises Siacoin to buy and sell storage. Just like we pay Dollars for a Dropbox storage space, users pay in Siacoin for storage on the Sia Network. Similarly, if one has extra space on their storage device and they offer to host that space on Sia Network, they will get paid in Siacoin. This is one way of using tokens.
Second way is where tokens become a way of representing an asset. They can also be used like internal currency. Exchange of tokens will mean exchange of ownership. For example, paintings in a gallery could be converted to tokens and when a person buys a painting, they are actually given this token’s private keys which will determine that they own this painting. So asset transfer becomes relatively easier and cheaper. This could be applied for real estate, bonds, cars or any asset on the market.
While tokens are usually associated with ICOs, it is not necessarily so. ICO is a means of raising capital whereas tokens can be made to represent whatever asset you want to assign to it. That asset can be equity or any other asset from your business that you want your customers to trade.
How do you go about tokenizing your business?
Map current business model
Map your current business model to identify sensitive information and value generation. You may want to tokenize your payments or sensitive customer information or replace the value chain and intermediaries with tokens. This information will be clearer once the current business model is mapped.
Once the current business model is mapped, identify areas that you want to tokenize. For example, you want to tokenize the payments. You need to answer questions like how can I incentivise customers to hold and use my token, what efficiencies does the token bring in and map out the primary and secondary functions of the token. This stage is to make sure there are enough efficiencies to lower the cost in the long run.
Every token is meant for a different purpose and you need to identify and commit to a Blockchain. Though the most popular platform is Ethereum, each one has their advantages and disadvantages. And with newer platforms being released every year, it is better to get help for an expert partner for a decision like this. Apart from Ethereum, there are other blockchains like Stratis, Neo, Cardano and EOS.
Identify the level of decentralisation
Whether you want a private blockchain or a public one, how much control do you want to give to your users? All of these decisions come into play when thinking of the extent of decentralisation that you want to achieve. Again, there are not one size fits all answers here. Once you know the function of your token, you will be able to decide whether you want a private blockchain or a public one.
Finally, you launch the token and a testnet. This is to make sure the blockchain is stable and all the bugs are ironed out before the mainnet is launched. This may involve a full fledged ICO or an airdrop.
Listing on exchanges
Once the token has been launched, it can be listed on various exchanges and traded freely by the community. This is where community gains the benefits of partnering with you and / or buying your token. This stage will also determine how good your business model is and whether it will incentivise users to hold your tokens or just dump them when the market opens.
On going Community involvement
Next step is to get the community involved, make them your champions. In this era of decentralisation, token holders’ are incentivised to work alongside the founders to spread the word, help with bugs and testing and work towards achieving a stable and functional system.
Tokenisation is not for everyone and it can be an expensive exercise. But if you are aware of the efficiencies it can drive in your business, go ahead and use it for greater transparency, security and opening up the marketplace.
Learn more about topics like this in our Cryptocurrency Community.