Initial Coin Offering ( ICO ) Token Economics
Although cryptocurrency tokenizes assets and is a modern marvel that is gaining popularity, there is now another form of this alternative currency, referred to as Token Economics. This new branch of the economy describes the study, design, and implementation of economic systems that are built on blockchain technology. There are also two different types of tokens: a Utility token, and a Security token.
A utility token provides access to products and services that are only on a particular platform, similar to when you travel and the county you are in will only accept their form of currency.
A Security token is basically used to confirm rights that you may have to specific products or services, such as a share of profits, or equity in a large asset.
Supply and Demand
Because Tokens are a new product that are entering the cryptocurrency market, the availability will focus on supply and demand. Companies will need to be careful that they are not designing too many products, if the token currency turns out to be fad that fades within a couple of months. Not only does this run the risk of lost revenue, but the overall value will decrease as well. Best practice is to estimate how tokens should be launched, and then estimate what the demand may be, and how it will either decrease or increase.
Distribution of Tokens
In addition to a profitable addition to your project, tokens should also have a global purpose. You will need to understand what the value of your token is in order to utilize it to benefit your needs to the highest.
A lot of ICO's make the mistake of thinking that the ICO will be the only source of funding from start to finish, and this should not be the case. For long-term business with higher monthly revenue, relying solely on your hands should not be implemented; rather, you should rely on block chain technology. Crowdfunding is probably your best source of fundraising, and has been shown to be effective in the crypto community. From statistics, more than 90 percent of ICO's have shown to fail; additionally, experts in crypto currency seem to believe that this is normal, and probably will not improve.
When you are trying to improve your token economics, it is important to consider all the angles and perspectives; your business and technical perspectives are important, but don't forget about your future investors as well. Keeping all perspectives in mind will help to increase your token economy, and help to grow your business; which will increase revenue.
You won't want to set your max token supply too low, and should prepare for the Bitcoin problem of working in fractional transaction amounts. Your team should be build with professionals that understand the risks involved, and know how to handle the windfalls. You will want to make sure that you have the necessary amount of tokens in circulation as well. Best practice is to have 50% of your tokens in circulation. For instance, if you have 500 million total tokens, you will want to have 250 million in circulation at any given time.
Token currency and economics may seem a little hard to grasp at first, but the more you familiarize yourself with it and use it to the advantage the more you will see your business grow; which means more revenue and profit for all those involved. It is important to keep in mind the basic structure of your crypto business, and also how much tokens you should have in circulation at any given time. Know these two factors will help you to be successful in this business venture.