What is Token Economy?

What is Token Economy?

It is to create an economic system suitable for services and participants using tokens ( coins ) . In other words , it refers to a method of providing services and generating profits by using the reward of coins, and a mechanism to smoothly activate the service by providing rewards to service participants . In other words, it is to ‘ design the rules between coins and the real economic system.

Effect of token economy

The issuance of existing currency (asset) was the sovereign right of the state. Therefore, it was necessary to use the existing won , dollar , and yen , and various problems such as fees and complexity were prevalent. However, in the token economy, the issuer of money ( asset ) can be anyone . In a way, it can be seen that it constitutes a mechanism that can form a small society and maintain the society between service providers and users within it. Did you know the real estate tokenization case study?

Classification of token economy

1. Token economy linked to the real economy (Facebook<Libra> & IBM , etc. )

Issuance of stable coins linked to fiat currency (linked to fiat currency <real money> )

2. Token economy according to ecosystem contribution (Steem, etc.)

Provide reasonable compensation to content providers . For example, in ‘ Steam ‘ , you write a post and reward (token/coin) is paid according to likes/comments in the post.

In order to construct a good token economy ?

1. In addition to tokens ( coins , monetary rewards), other incentives must exist . For example , power , prestige , etc. For example , in a game, a player can sell game items and receive tokens ( coins ) to obtain a monetary gain . However, if this is the only reward, it is difficult to act as a sufficient motivator .

In fact, there is a ranking system in the game, and by using it, you can enjoy additional honor and power, and this serves as a motivation beyond the simple monetary rewards received above.

2. It should be accompanied by price stabilization of tokens . Continuing the above, let’s say I have 10 coins obtained by selling game items . At that time, the price was 100\ each , so it had a total value of 1000\.

one coin changes

However, let’s say that the price of one coin changes from 100 \ to 10\ when selling it after a week has passed . If so, will the ecosystem participants be motivated enough to continue to trust and participate in it ?

3. It is essential to secure sufficient liquidity . Sufficient liquidity is required to trade tokens ( coins ) received by service providers and service users . ( This is going to be covered a little more in the later exchange concept, so if you don’t understand, let’s move on to this point )

4. Consistency of reward and target behavior is required . Not only should a reasonable compensation be given when an action to obtain a token is performed, but if this action can be obtained in another way without rolling according to the existing designed mechanism, this may act as a hindrance to efficient operation.


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