Crypto Tokens Don't Thrive Without Ecosystems
Crypto Tokens Don't Thrive Without Ecosystems

By Daniel Goldman | The B.C.U. Times | 27 Mar 2020


Because of the great success that many had with ICOs during the cryptoasset bubble, a lot of people saw a token as a way to generate capital to start up their project, or as a marketing tool to promote that project. But that's not what a cryptoasset is, or at least that's not what it should be.

I'm very interested in economics, including tokenomics, and I think I'm getting closer to understanding them, at least as much as anyone does right now. I've become quite concerned about the number of tokens that are being produced for every single crypto related project, just for the sake of having a token and funding the project. I've been focused on BELA for a while, because I think it is a token that has, or at least had, a lot of potential, but which was mismanaged.

Monetization of Real World Value

A cryptocurrency should be created when we're monetizing something. Non-fungible tokens should be created when there is an asset of real value that needs to be controlled in a distributed and decentralized way. Creating virtual assets on a blockchain, just for the sake of making something a "dapp" just isn't healthy for the ecosystem.

I'm a huge fan of the idea of monetizing our daily activities. When an activity or asset has a lot of apparent social value, but is difficult to monetize in traditional ways, cryptoassets may be the perfect solution. A lot of what we do, especially online, generates useful content and information that people use. A good example is Q&A platforms. I like the idea of platforms like Quora, Stack Exchange, and others, but right now the only platform that rewards people in any way is Quora, and Quora only rewards a few select people in the QPP and only for questions. 

Building an Ecosystem

Even if one or more of the platforms I mentioned create a token, it still likely won't be successful. That's because tokens need an ecosystem in which to thrive. I've touched on this idea before, with my discussion on TERN and BELA's lack of community support. But part of the problem I think comes from their creators. Neither see the need for a broader ecosystem. Moreover, since both are focused on their own projects, they cannot focus their attention on building that ecosystem.

Take BELA. What is BELA? It's just one of many ERC-20 tokens, that expands its supply at a certain rate, and could be used for anything, but is only used to tip posts on Belacam. Tipping is all well and good, but what can you do with that tip? Nothing, except perhaps trade it on an exchange. There are two issues there. First, BELA isn't listed on many exchanges. That's certainly a problem. But it's not the biggest issue.

Most people don't use exchanges and most people don't want to use exchanges to convert to a usable form of currency. This issue leaves Belacam the only place to use BELA. And even for people who can access exchanges, it's not much better. That's where the ecosystem comes in.

If BELA is the monetization of visual art, then BELA should have a visual art ecosystem. What other activities are related to visual art? Buying and selling of artwork is one example. Access to art supplies is another example. I'm sure there are plenty more. The point is that BELA needs an ecosystem in which it makes sense. 

Consortiums

If one were to look at the most successful tokens, they are not attached to a single project. They are managed by non-profit, often fairly community oriented consortiums. These non-profit entities can focus on building the ecosystem for the token, while individual companies can focus on building their own products. I'm not opposed to consortiums having a heavy hand in many of those projects, but the core focus of the consortium should be the development of the ecosystem.

Moving Forward

In general, anyone who wants to create a new crytoasset should think about what I've said. They should ask themselves whether the token represents something of material value, whether it is traditionally easy or difficult to monetize. They should then ask themselves if they are prepared to build an ecosystem rather than a single project. If they're not, then creating a new cryptoasset is not for them. If a person or group of people really believe that there is the need for a new token, then they should focus on building a consortium. 

Further Reading

Token Health Starts at the Community Level

Part of the responsibility for token health rests on the developer community to create an ecosystem for their token. But those who wish to see a token thrive, or complain that it is not, have a certain amount of responsibility as well. If a token isn't doing as well as a community would like, the community has to step in and help out.


Daniel Goldman
Daniel Goldman

I’m a polymath and a rōnin scholar. That is to say that I enjoy studying many different topics. Find more at http://danielgoldman.us


The B.C.U. Times
The B.C.U. Times

The B.C.U. Times - blog about promoting the blockchain and cryptoasset user experience and ecosystem.

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