Blockchain Token Economics
Blockchain Token Economics
Token economics essentially refers to the study, design, and implementation of economic systems based on blockchain technology. Every blockchain platform and blockchain application has its own token economic model.
The subject of token economics focuses on the actual, new economic models that are created through cryptocurrencies. This excludes tokens that are solely used for fundraising and play no significant role in its underlying platform as they do not pose new models.
There is one assumption on which nearly all token economic models are based: people act upon incentives. This is based on incentive theory, a human behavioral theory that assumes behavior is motivated by a desire for reinforcement or incentives. In token economics, these incentives are the tokens themselves and they are used to motivate network members to behave to the benefit of the network.
Blockchain Token — A crypto economic operating system
While Bitcoin was originally designed with the purpose to create P2P money without traditional banks, the underlying blockchain technology that makes it happen has proven to be a gateway to a new type of economy (crypto economy), and a new type of distributed governance (crypto governance). Please note that the terms crypto economy and crypto governance are new, not fully defined yet, highly controversial and somewhat complementary or overlapping. In a follow-up blog post will go into the details of those terms. For now, I would like to stick to analyzing the functionalities of Bitcoin:
- Public & Permissionless Payment Network (P2P Network)
- Bookkeeping Tool(Asset Management)
- Crypto Economic Governance Tool (Governance Layer)
- Bitcoin is mined to keep the network safe(Security Function)
- Bitcoin needed to pay for transactions (Commodity/Utility)