“The truth is we are all caught in a great economic system which is heartless.”– Woodrow Wilson
We have all heard the chant “Tokenise the World”, seen the hashtags, watch twitter talk about everything being tokenised and decentralised. However what does that really mean? I want to break it down to a micro economic level to show the beauty of incorporating tokenisation on a utility level within an enterprise and building it outward to operate with the larger crypto economy. Taking it from a buzz word to an understandable application that we all can envision.
Let’s start by looking at a traditional micro ecosystem. A Company (Axel’s Gym) would largely have 4 prime stakeholders: Shareholders, Employees, Customers and Suppliers. At every point of interaction with Axel’s Gym each has an opposing force driving their interest. Shareholders seek to earn more dividends and by that reduce costs in the business. Customers want to pay less for monthly access to the gym, however, want all the bells and whistles of a first class gym. Axel’s Gym would like to get the best gym equipment at the absolutely lowest possible price and pay its employees market related salaries at best, while its employees would like to earn higher than average salaries to stay loyal, as it is the only vested interest they have in the gym. All of these cost balancing exercises are what Economics 101 describes as the principles of running a profitable business. The main goal is profit and shareholder’s value.
In reality the only people who care about shareholder’s value are the shareholders themselves and the managers, as their bonuses are structured around it. So where ever there is an interaction with money there is some sort of friction.
Now imagine Axel’s Gym decides to change to a tokenised ecosystem. By that, Axel’s Gyms will have to create the Axe-token, with which they will pay their suppliers, pay their employees, distribute dividends to shareholders and with which their customers will pay their memberships. The Axe-token will live autonomously from the business by free market forces determining its value.
By allowing a micro economy to operate with its own token, something spectacular will happened. All the prime stakeholders have to have one common goal, which will align all of their interests, that being to increase the value of the token. This will create harmony across the ecosystem as, with an increased token value, customers will be able to buy premium memberships, employees will earn more, shareholders will receive more dividends and suppliers will earn more for their supplies. The friction will be removed from the ecosystem.
For the Axe-token to achieve this, the token has to follow the simple principles of Crypto economics. It has to have a fixed supply, it has to have a market to independently determine its value and it has to have a specific purpose in the ecosystem that has created it…. Simple right?
Johnny, a very dedicated bodybuilder spends a hell of an amount of time between the weights, staying in shape. For this loyalty Axel’s Gym will reward him in the Axe-token, which he can use to subsidise his gym fees every month.
Tim, a personal trainer at Axel’s Gym, will earn his salary in Axe-tokens, when he spends in inordinate amount of time with Johnny, making sure his form is correct, he finishes his sets, he eats correctly and whatever else goes into looking like Arnold Schwarzenegger himself.
When Johnny goes home to rest, Tim will head over to the deli in Axe’s Gym for his quick lunch before his next client. He will buy his lunch in Axe-tokens and by virtue of that the Deli can pay their rent back to Axel’s Gym in Axe-tokens. This is all an enhancement of the circulation of the Axe-token, in and out of the gym’s ecosystem.
Axel’s Gym will then redistribute the axe-tokens it has received through the month back to its customers, relative to the base value of loyalty the gym spends every month.
If too few tokens are circulated back to the Axel’s Gym to distribute its rewards, they will go to the market and purchase the amount they need, applying buying pressure and pushing up the price, while the company still spends the same amount and not increasing its reward spend. Customers and employees will see the increase in value and be incentivised to realise their value created and apply selling pressure to the market, stabilising the price.
And by such utility & circulation an open market is created and value determined.
However let’s take it a step further and assume that Bob’s Grocer has done the exact same thing and created the Bob-token. These tokens are built on the same crypto principles as the Axe-token. It has a fixed supply, it has a market in which to create an independent value and it has a specific purpose in Bob’s Grocer.
So instead of Johnny having to sell his Axe-tokens for cash, and either spending his cash at Bob’s Grocer or buying Bob-tokens to spend at Bob’s, he will be able to simply exchange his Axe-tokens for someone else’s Bob-tokens at a value that normal market forces will determine, aiding in the reduction of friction between these two ecosystems.
Now lets take it even a step further. Johnny will plan a family holiday to the Maldives and when he arrives he will take his wife and two children to the local restaurant on the beachfront. As he walks in he sees the beautiful Bitcoin B on the window indicating that they accept Bitcoin for their meals. Johnny will by that time have a healthy balance of both Axe-tokens and Bob-tokens in his “wallet” and because both of them are built with a free market in mind and will have a value through their utility, he will be able to seamlessly go to the market and exchange his Axe and Bob-tokens for Bitcoin to spend in Maldives, miles away from his gym or Green grocer.
In a simple application of cutting edge technology, any company can effortlessly change the way they communicate value to their ecosystems.
Loyalty will be rewarded in value that can grow with the company as everyone in the ecosystem has a vested interest in the company’s wellbeing;
Customer acquisition will become easier through adding value that is represented in the value of the token;
Stakeholder retention will be more secure for value adding companies;
Value of the company instantly becomes global, expanding the market reach into areas a company might never have thought of;
Customers who do not have access to traditional financial services are reachable; and
True value is viewable near real-time in the market.
This is the beauty of tokenisation. We will never see commerce and economics in the same way again, text books will be re-written, business will be conducted differently and the future is brighter than ever before.
The more time you spend understanding the beauty of Tokenisation, the less you can see a future where it does not exist. The journey might still be long, however we believe that everyone will be better off by Tokenising the World, one ecosystem at a time.