Unboxing the Token Economy – Beyond Bitcoin
In any field, when disturbances occur, the vocabulary becomes a little muddled. New words enter the lexicon. Sometimes the names are used interchangeably – a shorthand that somehow bypasses the nuances and distinctions that help us understand what’s really going on.
This is the case with technology, and with what one might call the “token economy” – which includes the “crypto” economy, distinct from bitcoin and blockchain. And don’t even get us started on Dogecoin.
We’ll unbox it all for you, starting right here, with the first installment in a series.
Tokens have been around for some time, but the stage is increasingly set for ecosystems – of commerce, but also for all kinds of exchange – to take advantage of the speed and security offered by tokens to enable the world to flourish. innovation in new (and upcoming seen) use cases.
To get a sense of how ubiquitous cryptos are, consider this week’s news that eBay is considering the introduction of non-fungible tokens (NFTs) and also examining whether to accept cryptocurrencies as payments. Most have a passing familiarity with NFTs, which are used to turn art, music, tweets, memes, and all kinds of collectibles into unique digital deals, which can sometimes fetch astronomically high prices. tens of millions of dollars. Altcoins, like Dogecoin, are digital tokens that have occasionally triggered a speculative frenzy (like Bloomberg reported, Robinhood’s crypto trading systems have been overwhelmed by demand).
And in another nod to tokenization, in another part of the business realm, Visa said on its earnings call that it had reached a milestone in the first quarter by crossing the threshold of two billion tokens, against 1.4 billion in September.
But: Blockchain is not bitcoin is not Dogecoin is not NFT is not token economy.
The token itself
Conceptually, a token is simply an object – a coin, if you will, a ship, really – that represents something else: a value, an information, a good, a service, a contract, which is exchange between parties. Security tokens, in another type of offering, can give recipients fractional ownership of real property, such as real estate. Utility tokens are tied to a specific purpose, such as the transaction.
Increasingly, in the digital age, tokens are created by digital means, cryptographically housing these units of meaning and data.
… and the blockchain
Do not confuse tokens or cryptos – the bitcoin token or the Ethereum token – with the blockchain. Blockchains are digital “ledgers” which, via a decentralized database, are used to track the exchanges that occur between the parties. Not all assets or holdings that cross blockchains are tokens, and not all tokens need blockchains to cross between parties. You could say that we are seeing tokens and blockchains converging.
This is because at least some components of the blockchain – the layer that underpins the general rise of the “token economy” – are universally appealing to those who wish to participate. Note: Transactions are peer-to-peer, eliminating intermediaries. Apparently, this allows transactions to be done quickly and securely – and they’re cheaper, because fewer parties involved “touch” the transaction. What is exchanged directly between the parties are rights, and sometimes economic values, immutably – to a bitcoin (and its value of $ 56,000), for example – which circulate between digital wallets.
Tokens can be fungible and can represent a claim on, for example, an unmarked asset. Every bitcoin is the same as every other bitcoin, and every token claim of money or fractional ownership would be the same as any other proportional amount. Non-fungible tokens are associated with a unique art or a tweet from Elon Musk. Tokens can also provide the right, for example, to enjoy a live broadcast event or provide proof of identity for travel.
Next Up: The Rise of Bitcoin – and Specially Designed Blockchains
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