Developing Token Economies (Pt ☝️)

An Absolute Beginners Guide To Token Markets & Tokenization

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The Fourth Industrial Revolution & The New Token Economies

Welcome to the Internet of Value (I.O.V.) … I’m your host Chris Berno and in this Executive Summary we’re looking at Tokens, Tokenization and Token Economies, why you should have a working knowledge of them and ways they’re already being deployed today as well as future implications of them for your business and your own personal wealth.

Chris Berno Internet of Value

Introduction

For centuries we (humans) have been tokenizing objects as a means of exchanging value. From cowry shells and wampums in the ancient trade networks of Africa and Asia to the Chuck E. Cheese tokens you may have coveted as a kid or the rewards points you may have redeemed for an upgrade on a recent business trip. Generally, tokens have no or very little intrinsic value in and of themselves but represent the holder’s ability to exchange his or her tokens for something of massive value to the holder - well perceived massive value at least - extended play at the arcade or some extra legroom and free drinks on your last flight. Some examples of value could be cash money / fiat currency, access to products or services, or certain privileges (i.e. upgrade fo first-class or VIP early access to a Hollywood blockbuster) that otherwise would not be available.

What Is A Token And Tokenization

A token is an object or symbol that can be exchanged for something material or for services or privileges between two or more parties. Generally, tokens are created by issuers or businesses to improve customer experience, reduce workflow friction and/or increase customer loyalty. Outside of the two parties, the tokens are usually worthless. One example from the 20th century that (depending on your age) you may be able to relate to is the Chuck E. Cheese play tokens which first surfaced in the 1980s allowed players to convert fiat money into these tokens that could be used to play arcade games and purchase toys from the gift shop. Chuck E. Cheese has since retired to a token system and replaced it with a stored value player card but the token model was and remains a great example of token economics.

Fast forward into the 21st century and tokens are evolving with times and available technology. In the book, The Real Business of Blockchain, authors David Furlonger and Christophe Uzureau suggest that there are 4 categories of Tokens …

Four Token Types

1- Fiat Tokens - represent government-issued currencies such as the UD Dollar or the Euro and are traded in physical form aka money as we know it today - so, in this case good old fashion cash money is considered a token. Fiat currencies work well in the physical world as we use it to procure goods and services (i.e. 1 Big Mack Value Meal costs $8.95), but dosn’t work so well in digital or online transactions.

2- Process Tokens - facilitate the use of fiat tokens in digital environments. Facebook authentication tokens for example are a very simple and basic example of how using process tokens can help you gain access to and facilitate transactions in digital environments. For example logging into your Netflix account using your Facebook or twitter credentials. This is a an example of a process token and you’re probably starting to get more comfortable using it.

3- Complementary Tokens - enable exchange in closed environments. A good example here are the loyalty programs that have become so common in the travel industry (frequent flyer miles, hotel rewards, etc). These tokens maximize value for the issuer by encouraging specific behaviors in the token holders and/or customers.

4- Cryptocurrencies - are digitally native currencies that can replace fiat and process tokens and can be used to create new kinds of assets. They are further divided into Utility, Security and Stability categories which we will examine in another section of the Internet of Value series. While cryptocurrencies haven’t transformed money in the real-world the way some cryptocurrency enthusiasts predicted they might, there are nonetheless some indications that some cryptocurrencies are gaining at least some awareness and recognition in the business world.

Token Business Models

Chris Berno deploying token economies

Tokenization, the creation, and representation of value or assets is not a new idea. Fiat Tokens (aka money) have been used by governments and issued by central banks for thousands of years. In addition to Fiat tokens, we saw the emergence of complementary tokens with things like American Express Traveler’s checks, business loyalty programs (i.e. Southwest Airlines Rapid Rewards Program), and many other member-only type tokens that represented value to specific groups (i.e. American Express Customers or Chuck E. Cheese guests for example). More recently we’ve seen the growth of Process tokens which help us control access to information and programs on our phones via applications and starting in 2009 with the introduction of bitcoin the very fist cryptocurrency tokens developed to work like traditional fiat tokens but wholly developed for the digital world. So what’s the rub here? Why am I writing this executive summary and where’s the opportunity you ask? … Blockchain technology amplifies the useability and adaptability of tokens turning them into flexible and dynamic tools for creating and exchanging value in peer to peer networks. On blockchains, different tokens can be used for different purposes and well designed, implemented and managed token systems can provide massive benefits and ROI to both the issuer of the tokens as well as the token holders in the system and drive exciting new forms of business development.

For example, Cryptocurrency tokens will be used to replace fiat currencies migrating us (humans) away from legacy cash money and ushering in a new world of decentralized finance featuring digital dollars and eventually eliminating the need for central banks (but that’s going to die-hard so don’t hold your breath). Utility and Security tokens will facilitate new models crowdfunding, financing, and Investing. Expanding far beyond just finance-related business models and use cases, tokenization will help us (humans) take back ownership of our personal data and control how and when money is made from it. Digital tokens will also create new markets and opportunities to grow wealth across social-economic sectors including some historically “frowned upon” businesses in the adult entertainment industry.

And we’re just in the very beginning stages of business blockchain application development. What token strategies does your business currently deploy and how can they be enhanced by blockchain technology and begging the digital transformation process positioning you and your business for improved efficiency, customer experiences, and growth opportunities using new distributed technology and models. Maybe you can build tokens that let customers control how their data is used by your company and be able to prove compliance on-demand with little effort - if so perhaps in exchange for full control, your customers would be more willing to participate in important surveys or other data-related activities that give your business a leg up on the competition. Or maybe your current rewards program could be expanded and extended to vetted members of another company elite customer level which would create new revenue for both firms and create new opportunities, products, experiences, and rewards for your most valued customers. For example Singapore Airlines KrissFlyer. Standard Operating procedures like hiring, and recruitment …

Conclusion

Chris Berno on business development with tokens

If you’re goal is to gain wealth with digital assest (namely crypto currencies) … you’re timing is pretty excellent… In much the same way the internet changed how we obtain and consume everything from clothes and travel to food and entertainment, Blockchain and the corresponding token economies it fosters will change things all over again, only this time much faster with less warning and opportunity to drag your feet. For Entrepreneurs and both business and civic leaders, the time to be considering, experimenting, developing, and prototyping token applications on the blockchain is now. If you’d like to book some time with me one on one to learn more brainstorm ideas and start putting plans in place I’m available for 1-hour blocks here on a sliding fee scale with no obligation what so ever. I’d look forward to discussing your digital transformation ideas and requirements. Chris Berno // New York, USA

Chris Berno
Chris Berno
Tech Co-Founder, Independant Blockchain Researcher & Consultant

My research interests include establishing proof of impact of applied distributed technology, immersive & interactive media experiences and advancing UI/UX for better accessibility for users with vision, hearing & dexterity challenges.