Tokenomics As New Branch Of Modern Economy
A token is an electronic unit of measurement that represents the value of products or services token holders are to receive. Ancestors of digital tokens are subway tokens, shopping vouchers, coupons, gift certificates, etc.
All issued digital tokens also have a certain economic function. Any company can release its own tokens, and their functions will depend on the company's goals and business model.
There are several principal differences between tokens and cryptocurrencies:
- Tokens are centralized and usually issued by an organization.
- Tokens do not have their own blockchain, they are based on ready-made solutions. The exception is the ether token based on Ethereum.
- The token price forms in accordance with supply and demand and also depends on the token functions.
Eventually, the functions of the tokens determine their types. There is no common classification of tokens, but since tokenomics, a new (unofficial) branch of the modern economy that researches economic models of tokens, appeared, all coins can be divided into several groups depending on their functions.
Types of tokens by economic functions
Appcoins, also known as application tokens, or utility tokens, are used inside the network to pay for various services. In fact, appcoin is the internal currency of a platform. Application tokens can be used as a reward for some actions. For example, for moderating the forum on the platform, or other work for the project's benefit.
- Ether, an appcoin used for any operation on the Ethereum platform.
- Storjcoin, which is necessary for purchasing the volume storage on Storj, a decentralized cloud storage.
Equity tokens are similar to digital stocks of a company. However, unlike a real stock, it does not give the right to own a part of the company or the right to vote (these options are rather exceptions). As a rule, investors buy equity tokens to get dividends, which are formed as an interest from the company's profits or from commissions for operations within the network.
- DAO, a platform that distributes money for projects and works on the Ethereum smart contracts. The owners of DAO tokens receive rights to vote and select funded projects.
- Sia, a decentralized data storage with token SC — Siacoin. Their owners received 3.9% of the data storage profit.
Credit tokens, also known as storage tokens, are quite rare. As a rule, a company releases them as additional tokens. Investors invest money and receive interest payments if one condition is met — they should not withdraw their funds for a certain time.
Example: Steemit. Owners of a token SD (Steem Dollar) receive payments with an interest rate of 10% or 100% per annum, depending on the tariff and the deposit term. It is noteworthy that the investment income is also made in SD, which is another way to support the project's economy.
Asset-backed tokens are the only tokens that are secured by real assets or their ownership. In fact, it is a digital asset that confirms the right to own things which are inconvenient or irrational to store or move in physical form, such as real estates, transport assets, oil, precious metals, diamonds and gemstones, artworks, etc.
Asset-backed tokens also give right for fractional ownership, which makes this kind of token a bit like an equity token. Holders of asset-backed tokens are like stockholders with one difference: they do not own company's shares, but own a part of an asset.
An asset can be both tangible or intangible (for example, carbon contracts). The buyers of CTO (Carbon Token), CTC (Carbon Token Classic), or SCC (Super Carbon Coin) get the right for emission of a certain amount of greenhouse gases into the atmosphere. Likewise, an investor can buy other intangible assets — trademarks, patents, insurance packages and other contracts, that exist only on paper and in the digital form, but at the same time give the right for some actions.
Asset-backed tokens lead to tokenization — converting of assets from a physical form to the digital one. The concept of tokenization existed as the technology that ensures the electronic payments security. Since blockchain technology appeared, the term of tokenization has broadened and given the maximum protection to asset owners by granting the reliability of data transfer and decentralization.