Token Economy Where Consumers Become Contributors
What is Token Economy?
If you are interested in cryptocurrency, you would have probably heard of the term token economy. From the term itself, you may speculate that it is a word related to the economic conditions that make up the token. Token economy is basically designing the rules between a token and the economic system in which it is used. In other words, tokens are paid as rewards to induce specific actions from participants in the economic system. It is a term derived from behavioral psychology because it is rewarded when specific actions are performed.
In the token economy, the main goal is to use rewards to expand the network and make more people to perform specific action. This is because the wider the network, the more the token is used and the ecosystem can be formed. In other words, the token economy is becoming an important means of cryptocurrency marketing and the token economy consultant is playing a pivotal role in publicizing. The reason why the token economy is becoming an issue is because a series of systems from service implementation to compensation can be established through program-based economic design on the online network. If the token economy is ideally implemented in the blockchain, the activities each participant conducts to pursue their own interests will be balanced so that the entire service can be sustained and implemented. Participants will be able to receive rewards as much as they contribute. Consumers can now become service contributors and benefit from developing the function of the service.
Examples of token economy
When you think of cryptocurrency, the first thing that comes to mind is Bitcoin. Everyone has heard of Bitcoin, but few people know about Bitcoin’s token economy. The objective behind Bitcoin’s launch was to form a reliable P2P payment network without the control of a central authority. For this reason, the token economy is designed to reward those who mine new blocks with Bitcoin, record the transaction in the block, and receive a fee. Therefore, the reward for mining is the motivation, which is not easily felt in real life, but only those who mine can feel the token economy. So there are not many people who can feel the token economy of Bitcoin.
As an example that can be accessed by numerous people, there is a token related to TOEIC, an English test for international communication. It is the Santa TOEIC Coin (STOEIC), a token issued by Riiid. Riiid analyzes the problems that TOEIC learners find difficult through AI and provides customized problems so that their grades can rise. Here, tokens were introduced to stimulate individual learners’ desire for achievement and to achieve target scores. It constitutes a token economy in which reward tokens are paid when learners perform actions such as solving problems, listening to lectures, and raising their scores. In fact, an official said that the number of problem-solving questions and scores increased each by 32.2% and 22.4%, compared to before the introduction of the reward-type cryptocurrency.
The token economy induces specific actions and participation through rewards. However, not all tokens are designing such an ecosystem, and not all of them have been successful. Therefore, we need to think about what kind of effort we need to make to achieve a token economy.
How to Activate Token Economy
In order to form the token economy, there are things that must be equipped in advance. First, you need to consider what value the token will have and where it can be used. How to collect users and how to distribute tokens are also important points. The process of forming the token economy is to obtain a token reward when contributing to the ecosystem, use it again to use the service or to obtain a profit through the exchange, and to contribute to the ecosystem again.
It is important to establish a community by securing users, designing the use of tokens, and setting standards for distributing tokens, but one more important thing needs to be added here. Getting tokens should be easy. Regardless of the size of the value, if it is not easy to obtain tokens, it will start with difficulties in acquiring users. There are other things that need to be considered, but if at least the above four are met, a token ecosystem will be built with the voluntary participation of users.
Attitude towards the token economy
The combination of blockchain and token economy creates an ideal system in which everyone involved becomes a contributor and distributes profits. However, the value of the ecosystem can vary greatly depending on how it is made and used. Therefore, if you want to create tokens, you should strive to secure users and create liquid tokens with a clear purpose, not simply a token that can earn a profit. In addition, if you want to invest in tokens, you must fully consider what the token is used for and where it will be used before investing. Even if it is just an investment for the purpose of capital gains, it is necessary to consider the purpose and liquidity of the token.
A condition for the success of the token economy is voluntary participation in the blockchain network. It is necessary to think of tokens as an important factor that constitutes an ecosystem called token economy rather than simply an investment target. If you pay attention to the token economy, your skills to analyze the token ecosystem will become more sophisticated.
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