Token Economy. The change is here
George Karamanolis, Co-Founder & CTO/CIO, Crowdpolicy https://www.linkedin.com/in/karamanolis
Technology has radically changed many traditional sectors
Examples: the platform tripadvisor for holiday and tourism, Alibaba, ebay and amazon for trade, itunes for music, netflix for entertainment, Facebook for all the previous and the content production model, #fintech and #insurtech for financial and insurance services respectively, and crowdfunding as a process and methodology of fundraising.
We are also witnessing another transformation. The democratization of goods and participation are more dominant, stakeholders are engaged most of the times with fewer or no intermediaries at all in service transactions.
“Internet of Value” and traditional goods
The natural (and digital) world is characterized by transactions in goods and services. The goods are either tangible or intangible.
Let’s look at some examples of goods: light, water, services, shares, real estate, works of art, music, etc. Many of these transactions are based on contracts, money transfer through conventional channels, and complex agreements.
Most of these goods cannot be divided into smaller segments, be liquidated, provide profits and benefits to their owners and they are difficult to transfer. There are simpler goods (e.g. music, supermarket reward points, vouchers) that lose their value or do not give potential to the relationship of consumers with the organizations that produce those goods.
What led to the new change
Blockchain technology became widely known through the use of bitcoin. It can be described as a “book” to which anyone or a specific group of users has access in order to “read and write”. It can also be described as an accounting record (general ledger) in which every transaction is recorded, e.g. purchase, sale or transfer. For example, all the records related to the transactions are presented in the transactions of crypto-currencies. Depending on the use scenario, there are several types of blockchain and decentralized ‘Ledgers’ (DLTs) technologies: a) Open blockchain which allows everyone, according to their contribution, to read and write in this book, b) Enterprise blockchain or DLTs (Distribuled Ledger Technologies). These technologies can be used by organizations to simplify and support processes such as monitoring the supply chain from the beginning of the manufacture of a product and raw materials, and c) Hybrid: some of their parts are available, some are not.
The new asset management model is affected by blockchain / DLT technologies in market segments that do not necessarily relate to banking environments.
We have two main cases:
1. Crypto / alternative currencies based on blockchain technologies
2. The use of blockchain technology in a number of cases in sectors of the Economy as infrastructure
A key component of blockchain technology is tokens.
The token as the structural component of a trillion euro digital economy market
The token can be described as a digital asset. It is a key that uniquely certifies that the person who owns it is also the owner of a value. Tokens can be supported / assigned to tangible assets that can be used by their owners or consumed against a service product or platform. They can be used as internal units for the purchase of goods / services within a system. A token can be represented in all of the above blockchain types and can be used / available through a suitable market place.
Participation in such a process involves the purchase of tokens using a fiat currency (e.g. euro) or a compatible cryptocurrency (e.g. bitcoin, ethereum). It may be a unit of value that corresponds to a tangible asset. Tokens are available on a distributed blockchain base in order to enable transparency, transaction authentication and monitoring by the community of users or any interested party. To achieve all this, standards are followed, where applicable, to provide exchangeability or interoperability characteristics. The most common technical standard is ERC 20 of the platform ethereum.
For example, a token may represent a digital currency, square meters of a property, 1% of an expensive painting, etc. The application of tokens to economy sectors expands the ability of financing and supporting assets that are not marketable and their owners. It also provides flexibility to acquiring them, since an investor or supporter can buy a small fraction of the asset and then exchange it.
You can also read:
An asset that turns into…token(s)
The conversion of a digital asset into a token is said to resemble the classic process and the rationale of issuing securities with a technological differentiation of the process.
However, the differences are significant (Technological escalation due to the nature of the technology, massive participation and transactions, etc.).
The following examples of tangible or intangible assets could be represented as tokens:
- Using tokens can run a decentralized p2p crowdfunding ICO (Initial coin offering) process. Read more on investopedia and wikipedia
- Use as an alternative — digital currency for domestic — extended transaction networks (e.g., suppliers, customers etc.)
- Points — loyalty — vouchers — tickets
- Every transaction — service contract
- Shares (a share or a fraction of a share)
- Square meters of a property
- Property share in a photovoltaic park
- Patents, Intellectual Property
- Transfer of ownership or rights
- 10% of an expensive collection of works of art
- Daily or hourly use of a car
- Software — discount vouchers
- API keys for access to platforms by developers and development of value-added services.
Value for organizations
There are plenty of reasons why the use of tokens can transform traditional sectors of economy:
- Powerful brands have the potential to REALLY get consumers involved and enhance business processes by receiving funding
- Start ups or established companies can fund the implementation of a business plan related to its performance
- Conversion of traditional assets into liquid, exchangeable and tradable assets.
- Transparency in transactions — accountability
- Minimising bureaucracy
We are gradually moving from mediation platforms and centralized marketplaces to decentralized value exchange networks based on digital representations of real-world assets and the use of digital representations in the form of tokens and blockchain technology.
All of this is interesting in many ways..
- Big vendors are engaged in technology and provide enterprise solutions and platforms for the development of services based on blockchain (e.g. IMB — Microsoft).
- There are a few examples in public sector, e.g. Ukraine and the auctions https://cointelegraph.com/news/ukraine-to-auction-seized-assets-through-blockchain-showing-it-fights-corruption and http://www.smartdubai.ae/dubai_blockchain.php
- Well-known platforms utilize blockchain technology https://www.forbes.com/sites/jwebb/2017/08/31/alibaba-ey-ibm-and-microsoft-use-the-blockchain-to-create-a-transparent-supply-chain/#381d1b3e4b37
- Cryptocurrencies (see Coinmarket Cap)
- Quorum, JP Morgan open source blockchain based on ethereum https://www.jpmorgan.com/global/Quorum
All of the above, as well as the transition to the “economy of tokens”, result in institutional, legal, operational and technological challenges as well as questions regarding the correct use of tokens and their owners’ awareness.
It requires the use of appropriate infrastructure and combined know-how (legal, economic and certainly technological..).
We are open to such cooperation and we implement related platforms and initiatives:
- We believe in the dissemination of blockchain / DLTs technology and the added value it will have for public and private sector bodies and organizations. It is the subject of all innovation actions crowdhackathon.com. Briefly, through the process of crowdhackathon we have encouraged the development of applications based on blockchain technologies, e.g. insurance and contracts, smart cities and charge for water consumption.
- We have provided mentoring support to startups wishing to enter this field by providing value-added services.
- We implement block chain based services as part of the digital transformation strategy for large organizations.
.. There is more to be announced shortly!