Really Simple Store’s Token Economics
Turning an ecommerce platform into an ecommerce network
This is meant to be working document. Any comments (public or private) are welcome and encouraged.
I want to describe the token economy that I’ve created for Really Simple Store, but I’ll start with some background on the project. Feel free to skip ahead to the details if you’re already familiar with the project.
Background
- Really Simple Store is a “no frills” ecommerce platform and network, designed to sell products without much set up or configuration
- Until now, it’s been a private platform that was custom-integrated into existing websites
- Really Simple Store is in the process of relaunching as a self-service SaaS platform with a token economy
- The token economy is used to enable “collaborative selling,” where stores sell each others’ products without commissions or wholesale rates
- The token economy is separate from the underlying SaaS business and is only used for the collaborative selling feature
- Shoppers buying things through the Really Simple Store platform do not interact with the token economy
Why add a token economy?
Really Simple Store’s mission is to help people generate more income without dedicating the time and resources it takes to run a full-fledged ecommerce business. Tokens create opportunities to help fulfill that mission.
Tokens that have meaningful uses within the Really Simple Store ecosystem create new opportunities to exchange value, without affecting the economics already in place as a traditional ecommerce platform.
Stores use tokens to list their products in a private marketplace so other stores can sell for them. The tokens will likely have little value outside of the ecosystem, but inside, they can be used to sell products, which is the most valuable thing an ecommerce store can do.
Importantly, stores can earn tokens, participate in the network, and financially benefit without spending money.
Details
Here’s how Really Simple Store’s collaborative selling economy works. While initial tests and experiments have been promising, it remains to be seen what this will look like at scale!
It’s easiest and most enjoyable to explain the mechanics by example. There are numerous tangents I’m skipping, so hopefully you’ll start to imagine what else is possible! Here’s how it works…
Store A is a store on the Really Simple Store network. They sell vintage movie posters.
Store B is another store. They sell trendy home decor… a side business run by an interior design studio.
Store A and Store B do not know each other.
Store A owns RSS tokens, so they put a few of their posters in Really Simple Store’s private marketplace by “offering” tokens for each poster sold.
They choose to offer 10 RSS tokens for each poster. Those tokens are taken from Store A immediately and “locked,” basically in escrow, and their posters get listed in the marketplace so other stores can discover and sell them.
Around this time, Store B (the interior design shop) is searching the marketplace for interesting items to supplement their own products. They find one of the vintage movie posters that Store A sells- an especially kitschy one- and add it to their design store.
One tangent: that movie poster is now listed in two different shops, but behind the scenes, it’s still one product, and both stores “share” the inventory. If one store sells it, it will show as “sold out” or be removed from the other automatically.
For this example, a shopper on Store B’s store buys the movie poster, along with some of Store B’s other products.
When that order is placed (a single checkout for the buyer), those 10 RSS tokens that were locked up for the poster are released to Store B (because they sold the poster). Both Store A and Store B get a separate order and payment for only the products they sell directly.
And that’s the economy.
Stores can earn tokens by helping other stores sell, and they use them to sell more of their own products. All of this happens “on top of” any traditional economics.
Seeding the economy
An economy like this only works when lots of store owners hold tokens, so we need a way to seed the economy before it can grow organically.
Seeding has two parts: the initial launch of the economy needs to be seeded, but then each new store needs to be introduced into the economy as they join the network.
Note: The RSS tokens used for the original framework and tests were built on an Ethereum testnet. RSS tokens on mainnet will be available Q1 2019, so everything from here out is future looking.
Since Really Simple Store was previously a private platform, the current number of total of stores isn’t “network scale.” So while an airdrop could make sense for existing stores, it’s not as important as introducing new stores to the token economy.
Here are four ways stores will be able to earn tokens and onboard into the economy.
Selling other stores’ products
The most powerful way to get tokens is to list and sell other stores’ products. There is already incentive to do this- stores can offer more selection without carrying inventory or worrying about fulfillment. Any store can do this, for free.
First sale bonus
The plan right now is that Really Simple Store will give an additional RSS token bonus the first time a store sells another store’s product.
Selling another store’s product is a frictionless way of opting in to participate in the economy. We want to encourage that, but we don’t want to complicate things for stores that don’t care about tokens.
Referral bonuses
Similar to Dropbox’s famous referral program where both the referrer and referred get an extra GB of storage space, tokens can be a valuable incentive to refer friends to create new stores.
If we give each store 10 RSS tokens (for example), both would get an opportunity to test out the collaborative selling. Once a store participates and sees the value of the tokens, there is a large incentive for them to keep convincing others to sign up (earning 10 tokens each time).
This would cost 20 tokens per new store for Really Simple Store. Minting those tokens costs money, but it’s likely cheaper than acquiring users through traditional channels.
Onboarding incentives
Onboarding people into new systems is a universal problem. People would rather get started than take time to learn about features.
Really Simple Store can reward store owners with tokens for learning about the benefits of the platform. If it’s optional, store owners can do it right away or wait until they’re ready to participate in the token economy.
Here we’re offering a reward that benefits stores directly while indirectly increasing engagement within the platform.
There’s also a potential to give token rewards for things like adding a new product or cover photo, which are actions that increase a store’s likelihood to succeed. However, it may not make sense to give tokens to stores that have no intention of using them, because those tokens will be fully owned by the store and not recoverable by anyone else… and they cost money to for us to create.
Economics
I’m using OST’s OST KIT to build the economy (more on OST below). For the proof of concept that’s currently in place, I chose a ratio (to OST) that made 1 RSS token worth about $.05 at the time of minting. The value of an RSS token will always change in the open market. 1 RSS today would be worth $.01.
That’s OK. I want the RSS economy to live on its own. We have the option to use a price oracle to help people understand RSS’s value compared to the US dollar, but if the price of RSS is thought of in dollars (or another fiat currency), people would treat them as dollars and be more likely to hold onto them. Using them would be no different than paying a commission. If the price is low compared to dollars, however, they’ll still be just as valuable inside the network, and incentive to use them as intended would rise.
By focusing on the value inside the ecosystem, we can say an RSS token is worth the amount it helps a store earn. If a store offers 1 RSS token and gets their $10 product sold, that RSS token was worth $10.
By adjusting the amount of RSS tokens offered, stores can control the incentive for other stores to sell their product. By offering more tokens, other stores are more likely to list the product. A really great product may only require a small RSS offering to get listed in several other stores.
My hope is that it will make sense to use low-ish amounts of RSS, regardless of the market price of the token… something like 5–20 tokens per product. For a $15 product, sold with 10 tokens, a $.01 RSS token would be “worth” $1 inside the ecosystem. 100x the value.
The only way this all works is if the person receiving the tokens plans to sell their own products within the network. If they plan to cash out their RSS tokens for fiat, there is little incentive. In the last example, they’d earn only ten cents.
Costs to Really Simple Store
The cost of giving tokens away needs to be lower than a store’s lifetime value. Since minting RSS tokens costs OST tokens (again, more on OST below), the cost of giving away tokens depends on the price of OST at the time the tokens are minted.
The initial minting on mainnet hasn’t happened yet, so the cost to Really Simple Store is unknown. However, by building the RSS test economy through OST’s hackathon challenges, I was able to earn enough OST tokens to initially mint the economy when the time comes. If OST prices are low, it may make sense to purchase more for RSS specifically, but if they’re high, it won’t prohibit us from minting.
After that, depending on the total supply of RSS tokens and the amount of stores and token usage, we can choose to mint more RSS tokens on an ongoing basis, always paid for in OST.
Value to token holders
As a token holder, the value should come from the ability to sell more products (as opposed to the token’s monetary value). However, the tokens will always have a monetary value, and they’ll be exchangeable for other currencies (including US dollars).
The Really Simple Store network is a part of the larger OST network and ultimately the entire Ethereum network. If a store owner is part of another economy that’s based on OST, they can earn there and spend at Really Simple Store. Or someone can earn RSS tokens and spend them in another ecosystem.
Making profit
Really Simple Store needs to make profit as a business, and none of it will come directly from the tokens. So how does the token economy make sense from a business perspective?
The token economy already contributes to revenue in two indirect ways:
- It help stores sell more, so they stay on the platform longer
- It incentivizes more stores to join the platform in the first place
Those are both great effects, but there’s more revenue opportunity.
Once there is a network and an economy, there will be numerous ways to create and capture value from it. We’re looking at revenue with that mindset and approaching it from a value-first perspective. Where can we add value for stores to create additional revenue streams for us?
Here’s one example.
“Value add” merch store
This idea takes direct advantage of the token economy. Anyone can build a business like this on the platform, but Really Simple Store has a competitive advantage.
A value-add store sells products that are “add ons” for other stores– from generic products that a store doesn’t stock to specialty products that a store doesn’t have the resources to produce.
One example is a branded merch store. Really Simple Store has figured out the logistics of on-demand t-shirt printing with drop shipping. We can work with stores on the platform who want to sell branded merchandise but don’t want to hold inventory or invest any money.
Really Simple Store would create a custom, branded shirt and use RSS tokens to put it in the marketplace. The store would sell the shirt directly, earning the RSS tokens, and Really Simple Store would get the revenue for all merchandise sold this way, across all stores.
In this example, we’re taking advantage of a unique opportunity the collaborative selling feature creates. There are more opportunities we haven’t realized yet.
OST
RSS tokens are built with OST, using the OpenST protocol and OST KIT. OST, the company, created a protocol and token that lets Really Simple Store create our branded RSS tokens using only an API (similar in setup to Stripe or AWS). Using OST’s protocol, RSS tokens have value on the Ethereum network, but Really Simple Store doesn’t need to employ blockchain developers or crypto lawyers.
Here’s an overview of what OST has done as a company so far:
Really Simple Store was an early participant in OST’s alpha proof of concept programs and one of several winners of their Alpha III program. We’ve been learning and growing alongside of OST, and we see significant potential in the company and their products.
OST, the company, is lesser known compared to some crypto-companies, but they have huge partners building token economies with them right now, and they’re getting attention recently for their contributions to the Ethereum community at large via OpenST Mosaic (another protocol that applies to Ethereum in general and enables the consumer-level scale needed to support OST’s partner economies).
Read more in the OpenST Mosaic white paper:
So far, everything Really Simple Store has done with tokens has been on testnet, but some of OST’s larger partners have launched branded token economies on mainnet already. OST’s roadmap puts mainnet in Q1 2019 for a company like Really Simple Store, which is exactly when we’re planning to launch our token economy!
This is very exciting for me and for Really Simple Store, and I thought the first step to evolving these ideas is to get them out there. I’d love any and all feedback! drew@reallysimplestore.com
For more information on Really Simple Store, sign up for the waiting list. By signing up, you’ll be automatically enrolled in the pre-launch referral program (coming soon), which lets you earn extra free months when stores open to the public. Head to the Really Simple Store website to sign up. Thanks for reading!
