Token(ed) meetup jan 31st
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Building a strong token economy in your dApp is the key to create a sustainable growth of your user base and drive your company's mission forward.
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Token(ed) meetup jan 31st
- 1. Token-Based Economy What - Why - How Stephanie Tramicheck Founding Partner, Propulsive.io @stramich January 2019
- 2. About Propulsive STRATEGY ADVISORY POSITIONING TECHNICAL DEVELOPMENT MARKETING COMMUNITY CONTENT PR 17 blockchain projects and counting in 3 areas
- 4. A business that happens to have a token vs A token-based ecosystem that deliver on its mission
- 5. Benefits of a good token economy ● A dynamic system that can evolve over time ● Survive ups and downs of the market ● The tokens are the engines that create and bare the value creation ● Fewer issues with regulators ● Enable scalable and sustainable growth
- 6. What is a Token-based Economy? Financial perspective - Economics Creation of a private economy where there is a buying and a selling, value creation, production & consumption. Psychology perspective - Behavioral Modification A system of behavior modification based on the systematic reinforcement of target behavior. The reinforcers are symbols or “tokens” that can be exchanged for other reinforcers.
- 7. 101 concepts
- 8. Crypto-currency (coin) versus Token Token and coin/crypto are two differents concepts: ● Coin is a blockchain native cryptocurrency, it represents a store of value, a medium of exchange, and a unit of account ○ You can use it to pay the transaction fee ○ Or trade it with someone ● A Token is an “I owe you” contract (IOU) with rights and obligations: ○ Tokens can be identical (tickets to a party) or unique (airplane tickets), can be transferable or not ○ Token represent things or do things. They are not things themselves.
- 9. Cryptoeconomics vs Tokenomics Cryptonomics ● Initial Coin Offering - Token Sale economics: discounts, bonus... ● Supply distribution and its evolution ● Impact on token value ● Protocol layer rewards Tokenomics ● Application layer of a token ● How the token is used in the ecosystem by the different stakeholders and what is the behavior it elicits.
- 10. Incentivization
- 11. “Show me the incentive and I will show you the outcome.” — Charlie Munger
- 12. What do you want stakeholders in your network to do? Stakeholder Stakeholder Stakeholder • • Drivers & Motivations Drivers & Motivations Drivers & Motivations • ••
- 13. In the world of gaming Game loops A game economy is the configuration of the game loops within the game (currencies, time loops, XP, levels, pricing, etc.). Its goal is to structure players' behaviors and incentives.* *https://hackernoon.com/how-to-build-a-robust-game-economy-lessons-from-one-of-the-worlds-longest-running-mmos-426f8fd94f6d
- 14. What is the ultimate goal?
- 15. Drive your Mission Forward Most serious blockchain-based project are driven by a mission The token-based economy is a powerful tool to deliver on that mission. ● What is the key objective or piece of data / metric that needs to be optimized to deliver your mission? ● Consider vanity metrics vs pragmatic metric
- 16. In the startup world Flywheel - Network effect
- 17. Uber’s flywheel
- 19. Use the token to incentivize and reward stakeholders to do more of what you need them to drive your mission forward.
- 20. How-to
- 21. How to Design your Token Economy Define your main objective (actionable metric) Identify the stakeholders For each stakeholder, identify what are their motivations and drivers. For each stakeholder, what actions do they need to take to contribute to the actionable metric growth. Choose / design incentives to motivate each stakeholder to perform the identified actions Test, learn and iterate 1 2 3 4 5
- 22. Seven Elements of a Token Economy* *Miltenberger, 2008
Editor's Notes
- Last November in San Francisco, EOSIO, this third generation blockchain organized a hackathon. The prompt was “Build an EOSIO application that fosters a fundamental competitive advantage by implementing a business model that aligns interests amongst stakeholders and/or drives more value back to users.” To me, it shows that we are completely moving out to those projects with a token to justify a ICO, and raise money.
- The big difference is around the notion of Token Economy. To me, when I read a whitepaper about a new dApp, if they don’t talk about their Token Economy and describe how the token is beneficial to each main stakeholders and how it is circulating, it means this business happens to have a token. They have not embraced the full power of the token economy, where each stakeholders drives value to the token based on their own driver./motivation. “The killer app for the blockchain is not tokens, but it is the creation of private economies or ecosystems. Tokens are just enablers to that.” - William Mougayar
- There are many benefits to design a token economy, an ecosystem within your app.
- The economic perspective: The behavior modification system: A token economy is a system of behavior modification based on the systematic reinforcement of target behavior. The reinforcers are symbols or “tokens” that can be exchanged for other reinforcers.
- Coin models intend on replacing fiat for certain financial transaction. Those models are offering benefits regarding e.g. speed, cost, privacy, and / or ease of transacting. The price in fiat essentially reflects its expected likelihood to someday become a popular, liquid form of money. Token models on the other hand are built around specific markets or businesses with the intent to create a better way of circulating value between its participants. The tokens themselves are the medium through which people participate in the market’s services. The price in fiat reflects the value that the service or the token ownership provides to the holder.
- The blockchain community understands that blockchains can help align incentives among a tribe of token holders. Each token holder has skin in the game. But the benefit is actually more general than simply aligning incentives: you can design the incentives of your choosing, by giving them block rewards. Put another way: you can get people to do stuff, by rewarding them with tokens. Blockchains are incentive machines.
- For a token model to work, it needs to craft a strong value proposition for all participants, it particularly needs to incentivize people to buy, hold, and use the tokens. The incentive might be different for each stakeholder Incentives to enter a platform (Enter) - Acquisition Incentives to use the platform (Stay and Play) - Engagement Incentives to stay long-term (Captivate) - Retention
- what do you want people in your network to do? It has a crucial corollary: how well can you communicate that intent to the machines? This is a devilish detail. Do we really know how to design incentives?
- A game economy is the configuration of the game loops within the game (currencies, time loops, XP, levels, pricing, etc.). Its goal is to structure players' behaviors and incentives. PubG and Fortnite PubG - It is easy to find loot, guns and ammunitions. You don’t need to kill other players to get loot. The map also is very large and fills empty at time. Yet PubG is a Battle royale, and there should be only one winner at the end. The availability of loot and size of the map is promoting to develop strategies. Camping is one. In Fortnite, on the opposite, you need to loot fast and need more loot by killing players. Then the game is about to learn to defend yourself and kill players. You need to build skills.
- A well designed token economy is a flywheel on steroid. Startups that are gaining traction knows what they are doing. And have harvest the fruits of a network effect or a flywheel they have understood.
- Back in 2014, David Sacks (ex-Paypal, Yammer, Zenefits) tweeted the above diagram to explain why Uber’s geographic density is the new network effect. Let me start by sharing a concrete example of a flywheel. Achieving liquidity between peers. Where the sum of network value is higher than the sum of cost of acquiring each side. This meant enabling ~5 minute pickups for riders and ~$25 hourly earnings for drivers. First, it guaranteed drivers hourly rates and spent money to acquire drivers. With drivers on the road, Uber focused on filling their cars through paid channels and incentivizing referrals. In a nutshell, the company subsidized fares and gave away free rides until there was enough demand and drivers could earn enough on their own. City by city, Uber implemented this playbook — buying drivers, buying passengers, subsidizing rides — to shave minutes off the pickup SLA and increase driver earnings, propelling Uber to liquidity.
- building a content loop - https://firstround.com/review/pinterest-and-grubhubs-former-growth-lead-on-building-content-loops/ Grubhub A startup with 30,000 users and 15 employees in two markets. By the time he left, his strategy around content and SEO helped turn the online food ordering site into a $10 billion public company with three million users and 1,000 employees. The company had 200 people and 40 million active users, but growth was tapering off. The content loop and scaled SEO strategy that Winters and his team introduced helped usher in a second wave of growth, leading to over 200 million users and and a $12 billion valuation The big difference is that the content is created by the users. You can’t acquire that through paid activities as uber did.