Blockchain tokens: What you need to know
With bitcoins and other altcoins being featured in the trending news events more often both positively and negatively, there is a great hype surrounding blockchain technology. The tremendous potential that blockchain technology holds makes it much more than just a financial advantage. Intensive research has gone into researching the technology.
Many big brands such as IBM have started using it towards enhancing efficiency in the business world. The technology has paved the way for using the internet as a secure place for transactions just as it is used for information. While there are varying responses to blockchain technology and the stability of cryptocurrencies, majority agree on the fact that digital tokens are here to stay.
ICO and Tokens
Many token issuances in recent months have instantly sold out making many wonder if they are just another bubble waiting to burst. While the future of cryptocurrency is not yet clear, the rise in value of bitcoins and other cryptocurrencies have started a trend that focuses more on utility than easy financing.
ICO(Initial coin offering) was considered earlier as a democratic way for raising the capital that startups need. Businesses that were based on blockchain were able to access an innovative crowd funding model completely different from traditional venture capital and banking routes. It allowed participants to make use of the service or even partake in the profits made by the business in future. Thus the price of the token depended on how much value the service or its profitability had.
Easy startup capital
The success of some of the tokens spurred on speculators to consider betting on other such tokens. Soon the tokens started attracting institutional investors. But the disparity in the number of tokens issued and funds present to make use of the tokens led to spike in the token prices. This chain of events led to a state where startups found it pretty easy to gather capital even without any working product or revenuemodel. Thus the tokens and their profit potential became the main deciding factor.
Change of perspective
Fortunately, the scenario has suddenly undergone a shift now with more stress being laid on VC funding and working products, and less focus on the tokens as a strong financing method. Many companies like Kik,the messenger app and Blockstack have recently announced blockchain token sales, while raising capital through VC separately. The tokens are seen more as a way to encourage public participation than mere funding source.
This increase in awareness about the potential of block chain technology can help redesign the tokens issued in future. This could begin a more efficient regulation that leads to practical application and fair distribution of the benefits. Some of the changes that could be implemented include placing limits on coins investors issue rather than what users or investors buy. This will help the blockchain industry to return to its roots and focus on the benefits this can bring to enterprises, startups and regulators.
Tokens with block chain technology as the basis can blend buy in and practicality in a smart way. Once the speculative trading frenzy settles, tokens can help incentivize development, testing and growth in many sectors with minimal risk. And this can be accomplished without trespassing any security regulations.