Are "Personal Tokens" Stupid?

By Market Militia | Market Militia | 14 Apr 2020


 

The Ethereum community is brilliant, but occasionally they think up some weird stuff like spending ridiculous sums on digital kittens. So, are personal tokens something we should add to that list of Ethereans' spontaneous insanity or is there really something there? Well let's consider their use cases and assess what merits, if any, they have. 

 

The Rise of Dude Coins

 

What exactly are personal tokens and why do people create them? For the most part, these tokens are usually created for the purpose of purchasing in advance someone's services at some form of hourly rate. The price of tokens could be set at a fixed rate or they might use the decentralized exchange Uniswap, which is used as the means of purchasing these tokens. They can also be created and sold by specialized dApps such as PersonalTokens.me, where you can even have your shiny new personal token packaged with legal stipulations thanks to OpenLaw. 

Alright, so why create one? Frequent use cases for personal tokens are for crowdfunding such as supporting a student's education, providing an author an advance on an upcoming book in exchange for a token that could later be redeemed for the book, or for reserving service hours from a consultant. These are three legitimate uses for personal tokens and many other offerings are possible. 

 

Okay, so why not just use ETH though?

 

Personal tokens are not going to be anywhere near as liquid as ETH, BTC or another well known cryptocurrency, so there is a risk that you bought something and will get no future value. For example, let's say you obtained some tokens from a really good doctor, he is so great you just had to reserve his time by getting his personal tokens, but then he tragically dies on an airplane. Sure, the most important thing is the sad loss, but on top of that terrible situation you're now stuck with worthless tokens.

Another example would be a great marketer that knows her stuff, but due to personal life issues she must shut down her business. Many utility tokens lose all their value if the use case is not autonomous and independent of a single person or entity. So before you buy a personal token you might want to consider the inherent fragility of these types of cryptoassets. 

 

The Case For Personal Tokens

 

Okay, so we hashed out the issues, let's end on a positive note. Personal tokens shouldn't be seen as money, because even Buffet tokens backed by Warren himself would potentially become useless if he suddenly kicked the bucket for some reason, but that doesn't make them stupid. There are good reasons for buying this kind of token. 

Jeff Booth, the entrepreneur and author of the book The Price of Tomorrow, uses an interesting method of explaining fundamental economic principles to his audience. He asks what the most valuable thing to you right now is, then he provides the answer: air. We need it constantly, it is very valuable, yet its free. If we're going under water though, we will gladly pay quite a bit for a tank full of the stuff. This is because economics is not about pricing value, but about pricing scarcity. When the best things in life are free we don't put a price on them despite their high value.

When it comes to bitcoins, ethers and other forms of decentralized currencies what we cannot control is the supply. With a personal token you can set a supply limit on how many tokens (possibly equal to an hour of services) you allow to circulate. If you are a book author you can control the amount of redeemable book tokens that exist, possibly creating a secondary market that drives people to purchase your book at large prices, building your reputation for quality. 

A final point is on stability. Let's say you are a freelancer in the gig economy and so far it has been frustrating because some months are very busy and other months are too slow. Personal tokens don't provide stability on the price of your services exactly, but they can work to provide you the compensation in advance. In a way, personal tokens are a revolutionary new method of having professionals on retainer, such as lawyers, developers and others. 

However, since you often cannot vet the buyer of your tokens, it is very important that you carefully reflect on the terms you wish to set in advance. 

 

 

Did you like this article? Check out another below:

 

What Makes Good Tokenomics?

 

tBTC, A Game Changer For Bitcoin Or Ethereum?

 

Can A Cryptocurrency Truly Replace Gold?

 

 

 

 

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Market Militia
Market Militia

The Market Militia blog discusses decentralized and open finance being built on blockchains such as Ethereum as well as the benefits to human liberty that can be achieved through concepts such as "digital constitutions" through distributed systems.

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