The “token economy” is a phrase you may have heard far and wide in the blockchain ecosystem, but it’s rarely defined.
It’s heavily intertwined with the decentralized nature of blockchain in that the community’s revenue is used as a reward for participants who create value on the network that either produce content or service users. The steps involved in designing a token economy, however, showcase exactly how complicated these can get.
To start off, you want to identify the different stakeholders, design incentives and consider the game theoretic properties for each stakeholder. And if this doesn’t sound that bad, remember that the question everyone will be asking is: “Does this really need a token?”
It’s been a tumultuous March in the States, but one of the more exciting bits of news is that one of the Democratic drafts that passed through Congress proposed a digital currency. It definitely begs the question -- why are people thinking more seriously about tokens? What does everyone stand to gain from participating in a token economy?
As a token economy grows, a good one will incentivize all the stakeholders to create more value, and additionally return that value to the stakeholders. In order to keep the growing complexity of such an economy manageable, potential participants should look for those economies that prioritise decentralization and automation.
However, one glance at the cryptocurrency charts is a reminder that token economies aren’t perfect.
In the last decade, most economies have fallen prey to disuse because of one most common reason -- that is high volatility.
When the value of the cryptocurrency fluctuates wildly, even the orthodox participants in the community around that cryptocurrency might think twice about transacting using this crypto. That’s why realizing the value of a stable coin is all the more important.
At Sperax, we understand that decentralization starts with finding the right participants to hold the tokens.
The Sperax token economy includes a stable coin in the top layer public blockchain. We are the first decentralised system with a native stablecoin. This design choice ensures that the token holders in the financial layer are incentivized to create an ecosystem that also connects to the real economy. We believe that there could be many more opportunities for developers with the stablecoin element -- that they could build apps that lower the barrier for non-crypto users to participate and create seamless experience of payment like an Internet solution.
Furthermore, Sperax prioritizes having token holders’ interests aligned with the value of the network so that their contributions to the design and upgrade of the ecosystem directly translates to added value for everyone involved.
Similar to other public blockchains, SPA token accrues value as there is more usage of the underlying blockchain. Moreover, validators who choose to participate as a node in the financial layer could also earn the stabilization fee as stable coins are minted and transacted in the system.
Finally, one of your first concerns with automation should be privacy and security -- as you may know if you’ve read a bit about Ethereum’s DAO hacks. Having smart contracts that execute deterministic functionality can backfire, and it’s important for all participants to do their due diligence on a proposed token economy.
Trusting the right people and the right blockchain can be difficult, which is why Sperax has gone to the trouble of building off of the generations of work in privacy and cryptography that academia provides us with. Our papers in IEEE analysing blockchain security have served as the basis for our design of the token economy, and we hope that you’ll see the importance of prioritizing security too.
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