The tremendous growth in popularity of cryptocurrencies and blockchain technology attracts more and more projects and entrepreneurs from real business, despite the falling market in the last time. Some try to integrate the blockchain into their workflow, but the others, on the contrary, are skeptical about the relatively new technological trends at thematic conferences.
In any case, this topic is debated hotly now, and it indicates the development of such a global phenomenon as business tokenization.
Alexander Ivanov, Chief R&D Officer at 482.solutions, explains in this article what the tokenization process means. We will also discuss problems and, most importantly, the prospects for implementing this solution against the background of the crypto industry hectic behavior.
Everything Will be, But not Immediately
IDC analysts are confident that companies around the world will spend $11.7 billion to implement the blockchain products into their processes by 2022. These figures are not surprising, because, in early 2018, this amount has already reached $ 2.1 billion.
It is worth noting that representatives of the financial sector are looking in the direction of the blockchain at the moment. For example, the Bank of England announced a partnership with the blockchain-company Chain in April of this year. The largest financial institution of England presented the concept of transactions, which differ in guaranteed security because users can access their data in a completely secure network operating on the blockchain.
The opinion of the CEO of the Swiss UBS Group AG can serve as an additional confirmation of the favor of the financial giants for the blockchain. Sergio Ermotti assured that blockchain is a necessity for modern business now.
But it should be understood that it is not soon that every store worldwide will start accepting Bitcoins, and the agreements with any insurance company will be carried out using smart contracts. Everything takes time and, according to the experts from Gartner, we will be able to observe the massive use of distributed registry technology only in 10 years.
Tokenization and Token Classification
You have come across the term “token”, of course, but many still cannot explain what it is and why they exist in the cryptocurrency industry. If you are thinking about the tokenization of your business, then you need to clearly understand what a token is, what types of tokens are on the market and only after that to wonder about their implementation.
A token is considered to be an accounting unit, that is used in digital asset expression. In simple terms, the token is a cryptocurrency too, however, this digital asset is used for other purposes. To put it even easier, the token is a surrogate of fiat.
There are various types of tokens in the industry that are used for the specific goals of the issuer.
Tokens for ICO
These tokens are received by an investor who entrusted his funds to a startup at the stage of attracting investments. The goal of the investor is to make money on a token that will rise in value if the company successfully enters the market. Tokens for ICO are usually used by projects to access services since they can be easily purchased or obtained by creating custom values in projects.
A good example of these tokens use is Sia’s distributed file storage network. Thanks to Siacoin tokens users have the opportunity to enter their data into the network.
Tokens for Share
They are not much different from the above tokens: they are also received by investors as a result of ICO, but in this case, a startup must pay to its` investors percent from profit or from commissions.
An example is Digix, the token’s holders of the service for transferring the gold to digital assets receive a percentage of the fees charged in the Digix Network Gold network during transactions.
This is a kind of token that is used by companies as a means of borrowing in exchange for fiat investments. This means that owners of credit tokens receive interest payments from their earlier investments. It is worth noting that credit tokens often use highly liquid projects because the profit of investors depends on their own invested amounts, but not on the activities of the project or the general market situation. Thus, the investor has the opportunity to sell quickly their credit tokens and return their funds back in the conditions of panic in the market.
The social network Steemit offers its members the tokens of this type – Steem Dollar (SD). SD holders receive a fixed income – 10% per annum. Moreover, Steem Dollar can be sold on the exchange, and its buyer will continue to receive 10% income.
Tokens for Buying and Selling
The name of this token denotes the purpose of using this asset class. An interesting way to use tokens for intra-service calculations represents the IBM-Natixis-Trafigura. Project developers are proposing to digitize deals with oil.
Tokens for the Law
Tokens for the establishment of legal relations were created with the aim of eliminating all paper documentation from circulation. These tokens are already used by SingularDTV’s asset owners. This system is created for licensing music and ensures that copyright of performers and composers is respected.
Problems and Prospects of Business Tokenization
The blockchain is not a panacea
The first problem faced by many successful projects is the continuous decline in investor confidence in technology. Companies with statements about the introduction of this technology in those products where the blockchain, in fact, is not needed, were launched with the aim of “hyip” on the popularity of the blockchain. As a result, they failed, and investors lost their money. We hope that you realize that blockchain is not a panacea for all diseases, but it is even contraindicated for someone. Businesses on the way to tokenization, first of all, need to analyze and take into account all the risks, as well as prepare a strategy based on industry-known errors and defeats.
Successful ICO is not a guarantee of successful tokenization
It is also important to realize that attracting investments through ICO is an important tool, but not the last in the process of successful tokenization of business.
When conducting an ICO, there is no need for the project to launch a token on its own platform, but it should be borne in mind that when using, for example, the Ethereum platform, companies must pay a commission. And the higher the cost of the token, the more you have to pay commissions, the cost of transactions in the network also increases, which causes a negative reaction from its users. Many projects face the problem of integrating the blockchain into a business for this reason. An only solution is a competent approach to your product, which will be in demand among users, but without prejudice to the cost of commissions for transactions. Therefore, it’s time to think about developing your own blockchain platform.
Based on these facts, it can be concluded that successful integration of the blockchain into the business depends not only on raising funds during the ICO but also on ensuring the attractiveness of token.
Will There Be a Profit?
In the first quarter of 2018, ICO projects attracted more than $ 4.5 billion, but in April this figure reached only $ 500 million, which was the worst result in the last 8 months. The next blow was a lightning fall in the total capitalization of cryptocurrencies, which inevitably led to a decline in investment interest.
Well, come on, it wasn’t all bad: the ICO industry has presented a completely new look to real business. Entrepreneurs were convinced that it is possible to raise funds quickly, without many years of discussions and multi-page business plans. Moreover, projects began to enter the market, which raised money for the construction of new enterprises and even the purchase of new equipment in order to develop an existing business. Unfortunately, their collected amounts always turned out to be much less than those of projects with the prefixes “super-technological ecosystem on the blockchain with a globally modernized consensus algorithm”. Despite this, it became clear that the investor is ready to believe in the project that is public, its idea is clearly formed, and its founders are open to their potential users.
In conclusion, I would like to write that there is a profit after the hyip, but only for the projects where business tokenization is absolutely transparent, it is well thought out and really solves many problems of both product users and the workflow in general.