Tokens

= virtual currencies used in companies based on blockchains

Description

"Tokens are the new “new” thing in the blockchain space. Just when everyone thought that blockchains were hot enough, everyone realized that tokens *are* the business model for Web 3.0.

A decentralized system spreads control among many parties. It may or may not be tokenized. The key benefit of tokens is to align incentives among participants of the ecosystem. It’s a positive-sum game among the tribe of token holders. (And let’s not forget the windfall of a token launch, if you choose that path.)

So far, only startups have launched tokens. But what about enterprises? Could we tokenize Facebook? What about Amazon or IBM? How? What would be the benefit? In short: tokens will eat the enterprise from within, because investors will make money and the community will gain. We’ll have crypto tribes that started as companies. Repeat across many enterprises and it means goodbye to the stock market." (https://blog.bigchaindb.com/tokenize-the-enterprise-23d51bafb536)

Typology 1

1. Coins or Cryptocurrencies

Micha Benoliel:

"These are digital currencies like Bitcoin in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds. They are operating independently of a central bank.

Soon every fiat currency may become a cryptocurrency, in that case operating with central banks. This is what Singapore has started with their Ubin project.

2. Utility tokens

The utility tokens are services or units of services that can be purchased. As describes in Balaji S. Srinivasan post, these tokens can be compared to API keys, used to access the service.

They are a way to fund projects of shared infrastructure that couldn’t be funded before. To enable such ecosystems to be built some tokens can be “pre-mined” in addition to be sold in “crowd-sales” during tokens launches.

3. Tokenised securities:

Tokens are representing shares of a business. In addition, considering the SEC announcement any token that can’t pass the Howey test should be considered as a security and fall under the 1934 Security Exchange Act. " (https://medium.com/startup-grind/understanding-the-difference-between-coins-utility-tokens-and-tokenized-securities-a6522655fb91)

Typology 2

Josiah Wilmot:

"Like cryptocurrencies, tokens are fungible and tradable, but they are also unique in that their value is derived from something they represent, such as company equity or access to a service — not their utility as a currency or store of value. Two common types of ICO coins are equity tokens and utility tokens.

Equity Tokens

Equity tokens are a subcategory of security tokens that represent ownership of an asset, such as debt or company stock. By employing blockchain technology and smart contracts, a startup could forgo a traditional initial public offering (IPO) and instead issue shares and voting rights over the blockchain. Additionally, a lender could create tokens that represent debt owned by the company, enabling loans to be bought and sold in a high-liquidity environment.

Many people believe that equity tokens will eventually become the predominant type of ICO token. However, the U.S. Securities and Exchange Commission (SEC) has indicated that equity tokens are subject to federal securities regulations, and as of the time of writing, few startups are equipped with the resources to issue equity tokens that comply with all applicable regulations. Consequently, investors should not contribute to an equity token ICO without obtaining guidance from a legal professional who specializes in federal securities law.

Utility Tokens

Utility tokens, often called app coins or user tokens, provide users with future access to a product or service. Through utility token ICOs, startups can raise capital to fund the development of their blockchain projects, and users can purchase future access to that service, sometimes at a discount off the finished product’s sticker price.

An example of a utility token is the Basic Attention Token (BAT). As Strategic Coin explains in its BAT token launch research report, the BAT token functions as a medium exchange between users, advertisers, and publishers who participate in the Brave browser ecosystem. Advertisers purchase ads using BAT tokens, which are then distributed among both publishers and browser users as compensation for hosting the ads and viewing them, respectively.

Utility tokens are not designed as investments; however, many people contribute to utility token ICOs with the hope that the value of the tokens will increase as demand for the company’s product or service increases. Utility token price fluctuations can be compared to those of sporting event tickets. The value of a ticket to a future sporting event may increase if one or both of the teams wins a significant number of games and becomes a contender for the championship. On the other hand, that same ticket may decrease in value if a star player suffers an injury or a team goes on a prolonged losing streak." (https://strategiccoin.com/difference-utility-tokens-equity-tokens/)

Discussion

Designing Tokens for the Commons Economy

Akseli Virtanen:

"In their money role, crypto-tokens can be an alternative unit of account, not just a means of exchange. They open a possibility to invoke a new measure of value, not just facilitate new processes of trade. As such, tokens can have a ‘backing’ in the value of output they facilitate, and not function simply as tools of speculative position-taking. Here is their radicalness, that they open a possibility of re-thinking and re-engineering what we understand by production. What are the new social units of production? How is such production measured as a social contribution? How is output distributed, accessed and owned? Re-defining and re-measuring production provides the material basis of the crypto economy — a basis that gives crypto-tokens a long-term future as the currency of an alternative economic logic. A different way of doing economy." (https://medium.com/econaut/cryptoeconomics-working-sessions-at-nyu-stern-24a60d99d243)

Tokens as Derivatives

"We don’t know yet what tokens can do. To approach tokens only as “money” or “assets” is to approach through an old paradigm. In their ownership role, crypto-tokens can be derivatives (purchases of risk exposure, not just asset ownership) designed so that people risk together, not individually. They are distributed economic-organizational systems. Organizing tools in the interactive logic of contingent claims and speculative positions. Just like derivatives, tokens can work as collective tools, as collective approaches to risk taking, as ways to share the upsides created by facing change (volatility) together. Can we think, design, and use these decentralized organizational-economic applications (these “tokens 2.0”, these “cryptographically enabled distributed economic and social systems”) as derivatives in precisely this sense? Can we think them as a new value form?" (https://medium.com/econaut/cryptoeconomics-working-sessions-at-nyu-stern-24a60d99d243)

The long-term value of tokens

Dick Bryan:

"Long-term token values will be determined by three factors:

The current valuation of a token business Projections of the future positions of that business The level of ‘speculation’ on crypto assets and financial assets generally We know that the third factor is impossible to explain. It depends on what Keynes called ‘animal spirits’. It is likely that speculation will remain high, for this is an immature market with rapid new entry in a sector of the capital market with widely-appreciated potential but low levels of technical comprehension. It makes valuation difficult, but it is unavoidable.

The second factor is also impossible to know with certainty. We know that the emerging landscape of cryptographically enabled distributed economic and social systems is changing exponentially, and that there will be some extraordinary success stories and some dismal failures. But we cannot yet know which is which. There is a proposition that, in this dimension, tokens be equated with call options: the right to participate in/own an as yet unknown future. It is an important insight, although our capacity to value the option is also limited. Critical to pricing options is quantifying the volatility of the underlying asset and the time to maturity. We cannot yet model volatility, and we cannot know the time horizons of success.

But the first factor can potentially be known for crypto tokens that exist to produce something: an accountable, measurable value of some kind. This is an area where many token launches are vague, if not entirely silent. But it is the one domain in which current tokens can and should be critically valued. We face the danger that too many coin issuances are pitching an idea, but without nominating means to measure/validate its success.

A thought experiment: the ECSA economy proposes to define and measure value as it has never before been measured. We want to measure value in terms of social contribution, not contribution only to profit. We want to measure produced social benefits, and most of them do not make conventionally-defined profits. Recognising the existence of these contributions is not new. Measuring them in terms of a new unit of account is new. But is it possible?

The measurement process is important if we would like to report to the public, each year, estimates of the value of output created within ECSA. Our thinking right now is that financial markets place a value on this production. In combination with available data like the quantum of tokens in circulation and the balance sheets of ECSA, we believe that the ‘market’ will be able to assess the fundamental current value of ECSA. This is critical for the market needs this information to make clear evaluation of the current value of ECSA tokens." (https://medium.com/econaut/valuation-crisis-and-crypto-economy-39c5b7e373af)