Is there a token for that? Tokens demystified

Is there a token for that?

Tokens demystified.

Jan Brejcha, Ph.D.

Business designer, Co-founder at Adahoy.io

jan@brejcha.name

@jbrejcha

Contents

• Summary

• Initial coin offerings

• Tokens

• Regulation

• Conclusion

• Resources

• About

Summary

• This presentation aims at providing a brief introduction to crypto

tokens, how they can be beneficial for the users, and why they can

disrupt current industries. Various examples will be discussed.

• Crypto tokens are a special kind of signs representing objects and/or

functions living in the underlying blockchain, and can be generated

by smart contracts.

• Tokens enable the viability of open source protocols, and dApps

(decentralized applications), which was previously unattainable.

• Current regulatory frameworks try to mitigate frauds in ICOs, while

helping establish tokens as a new asset class.

@ParisHilton

http://coinschedule.com

Total amount raised in ICOs ~$2,2B

The DAO $168M

http://coinschedule.com

Total amount raised in ICOs ~$2,2B

http://coinmarketcap.com

Total token capitalization

• $146,6B: 146.636.364.157,00 on market

http://coinmarketcap.com

Total token capitalization ~$150B

• $146,6 b, 146.636.364.157,00 on market

@ParisHilton @StephanTual

@ParisHilton

http://www.marketwatch.com/story/this-is-how-much-money-exists-in-

the-entire-world-in-one-chart-2015-12-18

Money in the world ~$1,2 quadrillion

Bitcoin

Tokens

• Crypto tokens are a special kind of signs representing objects

and/or functions living in the underlying database (a distributed

ledger, or the blockchain in our case), and can be generated by

smart contracts.

• In this fashion, virtually anything can be tokenized, bringing the

benefit of easy trading, low costs, and high availability of any asset.

• Tokens virtualize already virtual objects (create simulacra), which

can be tracked on the blockchain

• Crypto tokens are currently niche and controversial. If present trends

continue, they will soon be seen as a breakthrough in the design

and development of open networks, combining the societal

benefits of open protocols with the financial and architectural

benefits of proprietary networks. (Dixon)

Token creation

• Tokens are issued through Initial coin offerings (ICOs – mainly for

financial tokens), or Initial token offerings (ITOs – mainly for non-

financial tokens) following specific rules.

Token issuance rules govern the:

• Number of tokens issued

• Time period of the issuance

• Token price (discount v. premium)

• When the issuance ends (time v. goal)

• Type of issuance (one-off v. continuous)

Token functions

Tokens are used as a media in decentralized applications (or dApps)

to perform various jobs. The purpose, or pragmatics, of the tokens is to

represent an entity/feature:

• Right, value exchange, toll, function, currency, and

earnings. (Moughayar)

• Intrinsic tokens, asset-backed, rights-related, currency (Neufund)

Most importantly, tokens align network participants to work together

toward a common goal— the growth of the network and the

appreciation of the token. (Dixon)

@ParisHilton

Token looming regulation

Regulation:

• US: Securities and Exchange Commission (SEC) – token as a

security, when acquired for money and with expectation of profit,

voting rights

• China: Total ban of tokens, ICOs, crypto currency trading

• EU/CH: Drafting a policy of tokens as a new asset class

Strategy: Circumvent v. comply:

• Use an ITO instead of ICO

• Exclude US participants/investors

• Limit to accredited investors (KYC)

• Register the token as a security (asset-backed token)

• Use only non-regulated features of the token (access token)

Token disruption potential

Tokens bring the opportunity to revisit and extend the early ideas

behind the World Wide Web (as pioneered by sir Tim Berners-Lee),

such as:

• decentralization (and the removal of third parties),

• non-discrimination (or network neutrality),

• bottom-up design (or permissionless, unrestricted innovation),

• universality

• consensus (here, about the rules and standards).

• Tokens enable the viability of open source protocols, and

dApps, which was previously unattainable.

http://apple.com

Instead of having ”an app

for thattm” in a closed

ecosystem…

http://status.im

…one can engage with open ecosystems

with “a token for that”.

@VladZamfir

…while paying, of course, great attention

to the user experience!

Conclusion

• Crypto tokens enable a potential “breakthrough in the design and

development of open networks, combining the societal benefits of

open protocols with the financial and architectural benefits of

proprietary networks”

• The current ICO frenzy risks of creating negative PR because of

many scams, unrealized projects

• Tokens have a potential of disrupting current business models,

and enable novel viable models

Resources: Online

• BREJCHA, J. https://medium.com/@jbrejcha/is-there-a-token-for-that-

c0002cfecb11

• COMPETITIVE COMPLIANCE.

https://medium.com/@Competitive.Compliance/9-token-functionalities-and-their-

compliance-implications-990b0c0cd164

• DIXON, C. https://medium.com/@cdixon/crypto-tokens-a-breakthrough-in-open-

network-design-e600975be2ef

• MOUGHAYAR, W. http://startupmanagement.org/2017/06/10/tokenomics-a-

business-guide-to-token-usage-utility-and-value

• NEUFUND. Blockchain Policy Initiative Report.

https://docs.google.com/document/d/1reHjcxSYk4coJDH4DzoV13iefE84hX19Og

fDXkNPQ4c/edit

• SEC. https://www.sec.gov/litigation/investreport/34-81207.pdf

Resources: Books

• ANTONOPOULOS, Andreas M. Mastering Bitcoin: unlocking digital

cryptocurrencies. O'Reilly Media, Inc., 2014. ISBN 978-1449374044. Available

commercially from Amazon. Czech translation:

https://www.bitcoinbook.info/translations/cs/book.pdf

• CHAMPAGNE, Phil. The Book of Satoshi–the Collected Writings of Bitcoin

Creator Satoshi Nakamoto. 2014. ISBN 978-0996061315. Available

commercially from Amazon.

• MOUGAYAR, William. The Business Blockchain: Promise, Practice, and

Application of the Next Internet Technology. 2016. ISBN 978-1119300311.

Available commercially from Amazon.

• TAPSCOTT, Don; TAPSCOTT, Alex. Blockchain Revolution: How the

Technology Behind Bitcoin is Changing Money, Business, and the World.

Penguin, 2016. ISBN 978-1101980132. Available commercially from Amazon.

• WATTENHOFER, Roger. The Science of the Blockchain. CreateSpace

Independent Publishing Platform, 2016. ISBN 978-1522751830. Available

commercially from Amazon.

Please, contact me for more information:

Jan Brejcha, Ph.D.

Business designer, Co-founder at Adahoy.io

jan@brejcha.name

http://jan.brejcha.name

https://www.linkedin.com/in/janbrejcha

https://twitter.com/jbrejcha