Why are tokens useful?
In 2017, so many people bought, sold, and held tokens, even if the project hadn’t launched yet. Some of these tokens were breaking the law, others were scamming people, but some were legitimately trying to create a powerful, valuable platform for the good of the larger community.
For example, 0x, a protocol that powers decentralized exchanges, ICO’d in 2017. An ICO is an Initial Coin Offering, very similar to an IPO but on the Ethereum blockchain. The original token sale raised $24 million dollars worth of Ether and then used this money to design, build, test, and secure their platform. Many people chose to buy and hold this token as a way of investing in the future of 0x, just like how you may buy a stock. Stocks are FORCED to comply with a certain agreement, while tokens can follow their own path. Tokens have many ways of returning value to their investors. 0x’s main model is to allow customers to “stake” their tokens. When users do this, they can make a tiny bit of money in return for the money they have staked, similar to gaining interest. The increase of staked tokens makes the protocol’s markets bigger and more competitive. Their model also allows you to participate in governance, allowing users to vote on what they want the platform to work on next. This is similar to being a shareholder of a public company, except it’s much more likely your voice would be heard by the team. There are numerous other token models that will be explored in future articles: buybacks, time, burns, and more.
Another example of a usable token is the idea of “personal tokens.” People are selling their time or freelance services to others, just like they normally do, except they use a token instead of cash or a check! One fun personal token is the “Memes by Tom” token. You can buy Tom’s token on Uniswap, and then exchange it for a meme, created just for you, by Tom!
The recent inception of personal tokens and other assets beyond the traditional ERC20 tokens will continue to bring people to the Ethereum blockchain and will simplify all of our current traditional financial instruments from fundraising to privacy concerns.
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