Token Economy – The Future of Currencies?

Tokenomics (token economics or crypto-economics) study the economic institutions and policies of the distribution, production, and distribution of goods and services that have been tokenized. Blockchain technology has become the driving force of innovation on the internet.

In a market economy based on a division of labor, the role of money issued by governmental bodies is to facilitate the exchange of goods and services.

There is a widespread misconception that Bitcoin and tokens that have derived from similar technologies are currencies comparable to fiat currencies like EUR, USD, etc. This post will point out why Bitcoin and other crypto tokens are not currencies in the traditional sense, but rather:

A new asset class

Bitcoin and other native Blockchain tokens that have derived from Bitcoin have more resemblance with commodity currencies of the past, rather than the state of the art fiat currencies.

An operating system for a new type of economy

that transcend the geographical boundaries of nation-states. The protocol of the Bitcoin Blockchain coordinates people who do not know and trust each other across boundaries of nation-states without the need for classic centralized institutions and classic legal agreements.

While it might be counterproductive to call Bitcoin a currency, as it sparks a lot of controversies and is not entirely true, Bitcoin does have similarities with money as we know it. The biggest challenge that we face when we are trying to explain or discuss Bitcoin, Blockchain, and other crypto-economic technologies, is that we are trying to explain new phenomena with old terminology that sometimes don’t do justice to the full range of possibilities that these new technologies have to offer. To understand the full range, we need to deep dive into the following questions: What are the roles and functions of money? What are Bitcoin or so-called tokens anyway? Can a token economy eradicate the monopoly of nation-states to issue money?

Where is the token economy used?

Token economies are used as a method of strengthening a behavior, or increasing its frequency because the tokens are a way of “paying” children for completing tasks and the children can then use these tokens to buy desired activities or items.

We hope you have found this article informative and interesting. For more information or queries contact us to know more about this technology.