How to Create Value in the Underlying Platform of a Token
You have just bought a new utility token from a pre-sale. You bought it because you believe in the project and its C-suite team. You’re excited. The thing is, you are not sure what to do next. You wonder: How can I assess my token‘s long-term value?
The answer partly depends on how the initial coin offering (ICO) or token issuer is able to demonstrate that it can increase users’ demand for its own platform. The premise is that an increased demand for a service or platform can improve a token’s value or usefulness in its network over time.
Token Network Effects
In simple terms, I would compare utility tokens to the arcade tokens that children insert in slots to start their rented bumper cars. Both arcade and digital utility tokens are bought and used to gain access to a particular platform or service/network.
Digital tokens, however, can do more than just provide access to their platforms. They can be used for discounts, rewards, and access to memberships. The goal is to make tokens more indispensable as more and more users participate in its platform or features of its network/service.
According to what Skillshare founder Michael Karnjanaprakorn calls the “Token Network Effect”, more activities in the network or platform can further increase the demand for the token to beyond its limited supply. As the company continues to succeed, new investors take notice, while the current ones would have more reasons to hold onto their tokens.
Aiming for a Well-oiled Ecosystem
The key to the Token Network Effect, thus, lies in how the token issuer is able to align incentives for the network’s participants to hold onto the token. In such case, I cannot overemphasize the need for interested buyers to read issuers’ white papers and to look at their roadmaps, milestones, token metrics, and revenue models for clues on how they plan to incentivize various stakeholders to participate in their network.
In this article, however, let me focus now on four features of a platform or service that can help create a self-sustaining ecosystem:
Solutions are based on real-world applications and use cases.
In the tech world, the advantage of being part of a community for open-source development is that most developer-members are in the group not because they have been commissioned to build something for someone else but because they have a pressing problem they are trying to address. Thus, their evolving projects are driven by people who have specific use cases in mind.
The open governance group of developers behind Hyperledger Fabric, for instance, comes from over 100 companies in varied industries such as finance, healthcare, the Internet of Things, banking, technology, manufacturing, and aeronautics. By choosing Hyperledger Fabric for its framework, TraXion can leverage on the Hyperledger Project’s inventory of use cases in Financial Services ranging from interbank payments to cross border payments and escrow.
Open source solutions are offered so that diverse businesses can freely connect to the network and accelerate adoption.
In a blockchain network, connected participants/peers transact and reached an agreement through a client software that is released and developed open source. When open source codes are available in public software repositories such as GitHub, co-developers can flag coding issues and offer solutions. More importantly, because source codes are visible for comments and modifications, a blockchain network’s participants (even if they are strangers to each other) can understand and trust the system they are joining, thus partly mitigating barriers to mass adoption.
TraXion, which aims to transition people, businesses, and governments to a crypto-ready society, is creating an open source, inter-blockchain ledger through Hyperledger Fabric. The open source framework and code base in Hyperledger Fabric allow users to build robust, industry-specific applications, platforms, and hardware systems.
White labeled solutions can be customized, while using TraXion tokens to move digital assets.
One of TraXion’s vision is to offer white label platforms to banks, operators, and agencies in key jurisdictions and transition them to a distributed ledger where accountability, transparency, and trust are more ensured.
Enterprise-grade solutions can also be customized to the needs of agencies and brokers — be these for cross-border transactions or for multiple payment options in different fiat currencies without the need for counterparties. For instance, TraXion’s first customer, a seafarers’ cooperative, will be giving its members access to a TraXion digital wallet at lower transaction costs and fast transaction time. Those who pay their insurance premiums with TraXion tokens are also incentivized with a discounted rate.
TraXion tokens also give users access to rewards and memberships, and may be used to pay for services in the ecosystem. (And if you’re interested, there is a good article that details the products of TraXion here).
Technology used allows for compliance with regulators and banks.
TraXion is committed to comply with regulations in key jurisdictions where it has a presence. It favors Hyperledger Fabric because of the benefits of a permissioned, consortium-type distributed ledger in Financial Services, including its promise of security, faster transaction time, and access control capabilities.
Because of certain nations’ privacy protection laws, for instance, some data elements in an individual’s personal records must be kept confidential. Hyperledger Fabric’s access control features guarantee that only those with assigned access rights to a record are the only ones who can view such information.
