Tokenized Motivations
Altcoins come and go. However, for the most part, many are born and marketed as a utility token. In other words, outside of their specific proposed utilities, they hold very little value. It is interesting, however, to note that many successful projects also fall into this category. There are very few projects that offer actual utility that is attractive and valuable to the holder.
Layer1 projects are unique in that, in the majority of cases, the token is required for gas fees, and while it does not place much demand, it is a constant demand. This results in users always having to have a small allocation in their wallet. Furthermore, there is staking. However, regarding true economics, many find fault with this dynamic. However, as an individual, it can be an attractive option.
Most projects can operate without a token. The irony is that many are born for the sole purpose of creating a token, which subsequently creates value, ultimately enriching the team. This value then trickles down to investors and holders of the token, with early adopters benefiting the most. The concept of tokenization will, of course, introduce even more tokens into an already existing tokenized market.
The difference is that, in the majority of cases, these will be already existing, functioning, and successful businesses and entities. The tokens associated with these entities will primarily be used for the sole purpose of enhancing functionality, improving liquidity, and serving as collateral. However, I expect that to change over time, also to include additional utility and perks.
An Undiscovered World Of Utility
I have addressed utility cases before and believe that the concept of utility within a tokenized world is still in its infancy. What do I mean by that? If you investigate multiple utility tokens, you will find that the scope of utility is limited and very similar across the board. Every project offers the same three or four utilities. There is a lack of creativity, primarily due to a limited perspective.
I am also not saying that I have the answers. However, with the expansion and maturation of tokenization and on-chain utility, more adventurous and creative ideas will eventually come. Something I have addressed before is interoperable utility. In other words, a legitimate project or business that offers tokenized reward structures and other incentives in the form of a utility token can be swapped for goods or services elsewhere.
Earning GRASS for sharing my unused bandwidth can, for example, be used to pay for airtime with Dent or some other service. The Grass project surged to a billion-dollar market cap and still trades in the hundreds of millions, despite altcoins still being suppressed in price. The TVL regarding the staking protocol is approximately 10% of the circulating supply.
I remember when Tezos surged in value many years ago; it was primarily due to a limited supply in the marketplace, as a result of more than 90% of the circulating supply being locked up in the staking protocol. Grass has managed to attract and maintain holders, a year after launching their token. Furthermore, the recent drop in the price of GRASS is likely linked to the upcoming second airdrop. I address this in a recent article.
Those who were previously unable to mine Grass points, as the application was only available on desktop, will be pleased to know that they are now available on mobile with a limited period of 3X rewards. The concept of utility interoperability remains a dream, however. Traditional blockchain interoperability is still evolving and finding its way. As mentioned, tokenization requires a high level of interoperability to achieve mass adoption.
Final Thoughts
Effective utility models will have to improve their game by becoming more creative and restrictive. Creating simple built-in structures on their applications and websites for purchasing their token is one way. If the process is as easy, or even easier than making a TradFi or stablecoin purchase and offers incentives, it’s a no-brainer. Essentially, projects are often lazy; they prioritize results over excellence and the overall user experience.
Get the basics right, and then refine them to create a slick and attractive application and user experience. Complicated processes can deter even the most devoted believers in some cases, let alone the uninformed masses. This is a topic that would most likely require many articles to address adequately. However, let’s begin thinking in the right direction. All the best! See you next time!
Disclaimer
First of all, I am not a financial advisor. All information provided on this website is strictly my own opinion and not financial advice. I do make use of affiliate links. Purchasing or interacting with any third-party company could result in my receiving a commission. In some instances, utilizing an affiliate link can also result in a bonus or discount.
This article was first published on Sapphire Crypto.