Developments in Token-Economies and Decentralized Applications

A comprehensive analysis of token definitions, their main uses and developments of decentralized applications and the token-economy, in an evolutionary path that exceeds paradigm 3.0, crosses that of Industry 4.0, to arrive at a scheme for Company 5.0.

These summarize the contents of the article that, starting from the examination of a term, the token, very often confused in its meanings, wants to offer the reader a vision of the scenario, supported by an analysis of the fundamental principles.

Tokenization

Offering a universally valid definition of a token is a daunting and, in all likelihood, worthless undertaking. Before we even engage in a taxonomic exercise, it is perhaps useful to ask what is the main reason why what, not always consciously, we call, tokens and what are the reasons that support its use.

Generically we can assume that when you have the need to manage an asset in its value or in its existence, without having to report to it on time and in any circumstances of use, the creation of a token becomes essential, where it is able to represent a surrogate.

Why would we need to report to an asset considering only its representation? In order to answer this question, look at the good that, in a trading economy, it must be able to allocate, transfer and extinguish. If we thought we could use the asset in every transaction (and not its representation), we would have a lot of difficulties in most use cases. This very simple concept allows us to reflect on a couple of considerations that lead not so much to the concept of tokenity, but to that of "tokenization".

The use of a tokenized asset allows to improve a large number of processes, but it is necessary that someone guarantees the legitimacy, that is the goodness of that "good-token" pairing at the origin, both from the point of view of enhancement and attribution. Where such a guarantee is met, the benefit of using tokens in exchange transactions is certainly undeniable.

We Already Use Tokens ... But We Just Don't Notice It

Let's take some examples of "tokens" taken from the common world. 

The meal voucher expresses a value related to the canteen replacement service that companies can offer to their employees. When we use vouchers we are sure of their face value, guaranteed by the emitter and we know that we can spend them at the restaurateurs who accept them, in the face of an agreement with the emitter himself.

Casino chips represent an accumulated and expendable monetary value for the enjoyment of games within the gaming house; the player knows that he can buy and exchange them at the central cashier and is certain that the dealer will accept his bets, paying with the same possible winnings.

The car wash token allows us to take advantage of the service offered by the washing machines pumps that, automatically, activate and dispense everything you need to clean our car. The value of the token is commensurate with the duration of the service and each of us knows that this value corresponds to a certain number of minutes during which we can vacuum the mats, or a quantity of perfume sprays and so on.

The points that are used within a promotional mechanic, allow us to be repaid for our loyalty to a brand; the value of each point is determined by the brand holder who can define the rules of assignment and exchange.

Why We Should Use Cryptocurrencies and Tokenize the Blockchain

So far we have discussed what could be considered, from a functional point of view, the simplest definition of tokens, but we have not yet talked about how a token could be exchanged on DLT platforms, such as a blockchain. In order to prepare ourselves for a better understanding, it is appropriate to share some reflections that, without a doubt, we might consider "essential".

In each of the examples shown, we must point out that, although not always consciously, there is a requirement assumed as implicit, but necessary for the good functioning of the use case described: trust. The company, the employee and the restaurateur, trust the meal voucher emitter, otherwise they would not employ the voucher as a canteen replacement.

The dealer and the player trust that the casino will ensure the liquidity needed to pay the chips. Whoever washes his car at a car wash trusts the program that controls the pumps. The consumer believes in the brand and knows that he will be able to redeem the points accumulated at any time, obtaining in return a reward for the trust he has decided to put in it.

However, the exercise of that trust, that is, the way in which that trust is guaranteed, in each of the exchanges that we have described in use cases, is not always operated in efficiency and, in some unfortunate circumstances, could be undermined by the episodic manifestation of corruption. Controls that in the different processes in which the transactional kinematics analyzed in the examples develop, could be efficient where there was a distributed application logic that operate in accordance with a decentralized governance. And that's where blockchain comes in.

Referring to further insights on coinidol.com, world blockchain news outlet, a description of what this technology is, in the economy of this contribution we now want to proceed with a more detailed review of tokenization and tokenization in the Distributed Ledger context.