Designing a token model is somehow similar to create a business model with the important difference that it is not easy to modify a token model, after creating it. For the first time in history, humans have created a form of digital information that is unique. One that cannot be duplicated, erased or manipulated. This sequence of bits can express not only money but also the ownership of a house, a car, or a company. It is more of a service than a currency. Some of these unique pieces of digital information can be defined as “tokens”.
The value of a token is determined at the intersection of supply and demand for that token. This intersection indicates the price. For this reason, when it comes to the creation of new tokens, Token Economics is one of the most relevant parts of your Blockchain project. This is extremely important because the value captured by a token is essentially its utility or intrinsic value. Moreover, it also ensures that the token’s price grows alongside adoption/success of the underlying project. A token lacking utility will see its price supported only by speculation and is very likely to fail in the long-run.
Every token created with our Token model Management Framework on Tokenraise project follows quality assurance guidelines, written and reviewed in order to conduct successful and sustainable Token Sales.
Not only currencies
It has become clear with the latest industry trends, that cryptocurrencies can do so much more than taking over existing currencies. They can be used to tokenize assets, give access to technology platforms, represent ownership, make holders become active participants of decentralized networks, among many other uses. Due to this, digital tokens are creating entirely new economic models which we refer to as token economics.
Models for token economies are shaped and implemented before a new token is launched. As in all economic models, one of the first steps is to identify specific behaviors that create a strong community with a common goal. A powerful token model studies human action and acknowledges the strength created by incentives and game theory. Considering a token only as technology would mean ignoring all the new strategies to generate value introduced by Blockchain technology, as we explained in one of our previous articles.
While most features in a Public Blockchain are measurable and quantifiable, designing a token model is far from being an exact science. However, there is one constant feature on which every model is generally based: Game theory since people act upon incentives. In a token economy, these incentives are the tokens themselves and they are used to encourage network members to behave to the benefit of the network. In fact, by doing what’s best for them, they do what’s best for the network.
This system of decentralized trust has applications that we still don’t completely understand. Its characteristics give a whole new potential to the economic sphere.
Demand, Supply, Token Model Frameworks
Initially, the token may be offered to a small audience of investors, which we can call “Family, Friends & Innovators”. Usually, this offer (private sale) is not made public and takes place long before the actual Public Sale. These first subscribers are those who risk the most and wait for the longest, but in exchange, they receive the token under preferential conditions: greater discount and special bonuses.