Tokenomics, the token economy

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poker tokenomics

Tokenomics, a term that combines the words token and economy. Token, a unit of currency or token that is linked to blockchain technology; and economics, a branch of social science that studies the needs, generation and management of wealth.

Before explaining what this economy consists of, let's define what a token is and how it differs from cryptocurrencies.

To define what tokens are, we look for the closest similarity, poker. In this game, there are tokens or coins that have an economic value, only in that context, and that can be exchanged for real money. Therefore, a token is defined as tokens that have value within a private or proprietary project, which varies according to the value that the project generates for the company that created it. 

Following this definition, we can say that tokens are part of an ecosystem in which there are all kinds of real assets from works of art, financial assets or even your favourite artist's song. That is the great advantage of the token economy, we can develop those poker chips virtually, in any context and give them a value. 

Let's look at a simple example. A company can create its own token economy to motivate its employees. If they perform their jobs efficiently, or meet their sales targets, the company can reward them with tokens that they can exchange for particular benefits such as days off.

The aim of Tokenomics is to create a reliable system in the long term, through the loyalty of the community and that can represent anything (physical or digital). The difference with cryptocurrencies is that they use their own blockchain technology and tokens use the cryptocurrency blockchain, i.e. tokens are inside the cryptocurrency blockchain with a decentralised application. All this is not possible without the main element; the blockchain. Without blockchain there is no tokenomics.

HOW TO CREATE TOKENOMICS

  • To have the idea of the project we want to carry out.
  • Having blockchain technology
  • Create a community to support the project in order to boost it in its early stages. 
  • Initiate the project, distribute the tokens among the members of this community, so that they can speed up their visibility.

 ADVANTAGES AND DISADVANTAGES

ADVANTAGES

  • Unique projects, own ideas that are governed by its rules, within a secure economy with blockchain technology. The rules for their development are clear and transparent. 
  • Their usefulness in the real world, as these projects can be invested in as if they were shares in a company, adding value to the project and to the economy.
  • High elasticity, as it allows any value to be transferred from the real world to the virtual world and decentralised control, through blockchain technology (tokenisation).
  • It grants rights to its owner, such as governance, security or access to a service.
  • It can be used for enrichment, or to motivate users.
  • Secure and efficient payment method.

DISADVANTAGES

  • Price fluctuation, in the sense that prices are not stable and do not follow a predictable line for investors. 
  • Economy at an early stage and little known. They are in the process of development and undergoing continuous change.
  • They tend to be high-risk investments.

TYPES OF TOKENS

  1. Platform tokens: they create and support decentralised applications for different uses, from advertising for a company to a video game. They are powered by the blockchain on which they are built to protect the transactions that are carried out.
  2. Security tokens: also called digital keys, they were created out of concern for the use of these instruments. They are rights, shares, assets or participations obtained by an investor, but which are registered and stored in a blockchain.
  3. Transaction tokens are used for transactions or exchanges of goods and services, i.e. they are used as a traditional currency.
  4. Utility token: these are used to access and make use of specific services. The company sells the utility token and the utility token provides the utility to its buyer.
  5. Governance tokens: these tokens allow you to make decisions, collaborate and participate, and in some cases even vote in the projects in which you are involved. They serve to support this project and give it greater consistency.

Tokens have different functions, with specific uses and different characteristics. But within a single project, tokens can acquire one or more of these categories, as they are not mutually exclusive. In other words, within a project, the token can be both platform and security at the same time.

Today, this digital economy may seem very futuristic, but with today's circumstances, more and more transactions are done online and digitally, so we cannot ignore this issue that is increasingly present in our economy.

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Tokenomics, the token economy

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