The New Token Economy: An Introduction (Video & Transcript)
Adam B. Levine
(https://docs.google.com/presentation/d/1Kj4cCla3Li9P77GtLWEsNAu3PUemSc1QXfuWAokdQKI/pub?start=false&loop=false&delayms=10000) and Transcript
The New Token Economy
Whatever you do for a living, Whether you charge by the hour, the item, by project, or per line of code, you can within a few minutes and for less than a dollar create a customized digital token, on the bitcoin blockchain which you control, issue at will and which allows you to know with 100% certainty that anyone who has your token must have gotten it from you or someone you first gave it to because otherwise it provably could not exist.
This token you’ve created has rules you set defining what value you will provide when presented with it and under what conditions it may be presented to you. It can then be priced as you see fit and loaded into an automated digital vending machine allowing anyone in the world with bitcoin or other valuable tokens to buy pre-paid units of your work, which may be given to a friend, swapped or saved as the purchaser sees fit and eventually redeemed on your website in place of other payment and in compliance with the rules of the token.
My name is Adam B. Levine, I founded the long running Let's Talk bitcoin podcast as my vehicle to explore the ideas, people and projects powering cryptocurrency back in April of 2013 along with Andreas Antonopoulos and Stephanie Murphy. In January of 2014 we turned our little website into a podcasting network and in June of that year we launched the first ever rewards program that gave out real cryptographic tokens called LTBCOIN which was how I fell down the rabbit hole and wound up founding a company called Tokenly.
Tokens and Cryptocurrencys are like Apples and Oranges, they’re both fruit but of differing characteristics. Both Tokens and Cryptocurrencies use blockchains but a Cryptocurrency maintains its own blockchain and at least part of the use of its token is to pay miners to do that work. In contrast, an unlimited number of tokens, issued by different people, can use a blockchain like bitcoin but as passengers on the network rather than as the network itself. They pay a standard fee using bitcoin whenever they make a transaction on the blockchain but that’s it.
While something like Bitcoin is valuable because it literally is how you pay the postage to send things on the Bitcoin network, what we generically call tokens can’t be used to pay that fee and so for a token to be valuable, there must be something about it that makes it desirable or useful.
So tokens just to summarize are a neutral, brandable, secure, intercompatible cryptographic vehicle which can be created as needed and which can be held by users in a single wallet along with bitcoin and other tokens, Enjoying all the advantages of a blockchain but basically none of the cost.
Now that we have this neutral vehicle, what do you do with it?
While the technology is there to do anything you want with a token, those possibilities are restricted by legal systems around the world.
Just to get our terms straight, a currency token is something that has no value except that which the market gives it and an equity type token is anything that looks, walks or quacks like a token sold to those making an investment that is supposed to generate return.
Currency and equity whether in token form or not have all sorts of special government rules about how things can or can't be treated, so it's really less about the technology and what it can do, and more about who gets to decide and whether those being disrupted will give permission to those doing the disrupting.
By contrast, non-currency uses of tokens are not trying to do anything that government or regulatory systems care about too much, they get the advantages of cryptocurrencys robust infrastructure and cashlike characteristics but without much of the drama that seems unavoidable when presenting a revolutionary alternative to the global financial system.
If Bitcoin is digital cash, redeemable tokens are digital gift certificates. Once purchased, the merchant doesn’t need to worry about who they owe the product to, they only need to to make sure that they fulfill their obligation to whoever turns up with their token. This means that a token can trade hands dozens or even hundreds of times without the merchant knowing and yet they can trust that if a user has their token, they were paid for it at some point in the past.
So a simple example is, User buys a product in token form, theres a big gap here where a bunch of stuff can happen, and then someone redeems the token for the product it represents.
Let’s look at a more interesting example, one of the most compelling near-term uses for tokens comes from rewards based crowdfunding on platforms like Kickstarter. If Bob helps Alice fund her campaign then Alice will promise Bob a remote when it’s ready to ship. This doesn’t really work well for Bob or Alice because if Bob changes his mind or needs his money back, the only person he can ask is Alice and chances are good Alice has already spent Bobs money actually making the project. This means either Alice Refunds Bob out of money meant to produce the project or Bob is unhappily stuck with no options.
Once she’s successfully raised her money Alice could instead create a unique token to represent each type of reward she’s sold to her campaign backers. Instead of getting a promise, they have a cash-like representation of their support that they can do whatever they want with. If Bob wants his money back, instead of asking Alice for a refund he can find somebody interested to buy it from him or even set up his own online vending machine offering extra tokens he has for sale and buying ones he’d like more of.
When Alice is ready to ship her rewards she simply sets up her ecommerce system to accept Credit Cards and cryptocurrency at prices set in dollars along with her rewards tokens at fixed values.
The last and probably my favorite kind of use would be access tokens. You can think of them like tradable passwords that grant you specific kinds of access not for spending them but just for possessing them.
If we know that a single bitcoin address can contain any number of tokens, each in a unique amount then a website, service or app can ask a user to prove they own a bitcoin address and then treat its contents as that users property giving them specific powers and privileges within the platform depending on the rules they’ve set up.
So looking at our crowdfunding example again, everything is the same as before except in this example Alice has also decided to make Bob’s redeemable token into an access token to allow her to keep in touch with all her supporters.
Now Alice can share private, early or behind the scenes information with all the current supporters or her campaign not based on who supported her originally but who has each of the various rewards now. Alice can let all backers access the same early information or can give different specific permissions and even communicate differently based on the tokens each supporter has.
While I like to talk about Tokens generically, there are a number of different technologies and protocols you can use to create them. Since the beginning we’ve used Counterparty and while every protocol has its specific mix of advantages and disadvantages, they all provide the same broad opportunities to create cheap, cash-like tokens. The question really is, once you’ve got the token how do you make it useful for you?
Another commonality between the various technologies is the token by itself can do nothing. Tokens need to be sold and held and, redeemed and stored and all of that comes from server based solutions that abstract the cryptowonk, handle and integrate the token into user friendly, useful situations.
This was exactly the situation we found ourselves in after launching the LTBCOIN rewards program. We’d created the token, defined what kind of users would earn it through our rewards program and even built a simple tool that sent out unique amounts to hundreds and eventually thousands of participating community members for a penny or two per week. A gentlemen by the name of Jeremy Lam had started a company called Vennd that was building online vending machines for bitcoin and tokens. From first sight I was hooked, this was the solution we needed and further it could be the basis for a whole variety of tools that would enable everything from threshold based crowdfunding to auctions to charity drives. Only problem was, Jeremy’s company was new and overwhelmed. To make a long story short, I’m still waiting for the solution for Vennd. Over the last year i’ve put my money where my mouth is and built out the concept along with quite a few other necessary tools.
Tokenly is an open source infrastructure company. We’ve built tools that make it easy and fast to do everything from rent a single digital vending machine, offer your users a simple, secure wallet which can have individual tokens branded within it or custom brand the entire wallet to fit your needs. To running a customer branded software as a service platform renting token enabled, shopify-like stores to your customers for a low, flat, monthly rate.
Our products are designed to work together modularly, so when you create a vending machine or an auction you can stick it right into your store and perform normal sales, token sales and token redemptions in one easy, embeddable place. In the next two weeks we’ll be launching our first open alpha and making these simple, inexpensive, powerful tools available broadly for the first time.
So that’s the background, how I went from being a mild mannered cryptocurrency enthusiast to a would be catalyst for a new type of online economy. Here are a few of the opportunities that emerge from all of this.
I live in the Napa Valley, every year there’s a big fundraiser and auction where attendees spend about 15 million dollars in a night. You can donate any time of the year but if you want to participate in the party and auction, you’ve got to do your charitable giving on that particular night. The wine auction could, using a 7 dollar per month vending machine sell a customized charity token year round that represents 1 dollar of charitable giving to the foundation. When the night of the auction arrives, donors from all over the world bid in real time with the tokens received from their donations over the course of the year, and if they find themselves short they can always quickly donate some more to get that winning edge.
Auctions really haven’t changed during my lifetime, whether you’re talking about EBay or that wine auction one of the biggest problems is phantom bidders who either wind up winning multiple items and then don’t have the funds to pay or are just bidding up the price because they can - Running an auction using tokens obsoletes this problem, auctions are cash-on-the-barrel and to increase ones bid when you’ve been surpassed you merely send more of the token to the auction. If you don’t win or have been outbid and don’t intend to keep bidding, you quickly and easily get all your tokens back plus a little bonus from whomever outbid you for your trouble.
And why stop there? Each item being auctioned should itself be represented by a unique, token, redeemable for the prize which would allow people to bid and win items even if they cannot or don’t want to use it themselves. In token form, that prize can be given, traded or even sold without any impact or additional work on the part of whomever is providing the prize.
And this is a commonality in all of the things I’m excited about - They present new, empowering opportunities for users without putting additional burden on the merchant or platform.
Another more layered example is Netflix - Netflix’s streaming service has totally changed the way I along with quite a few others consume content, and for all the advantages it has once you’ve reached the end of Netflix you’ll notice that there are quite a few titles they don’t have and won’t likely get in the near future. This is because the streaming service, unlike their discs-in-the-mail service can only showcase titles which Netflix can get bulk, all-you-can-eat licensing terms, for all their users at a price they’re willing to pay.. It doesn’t matter if I’d personally pay a dollar or $2.50 or $5 to watch a new release because the studios don’t trust netflix and lacking trust, the deal can’t happen.
Imagine for a second that those publishers Netflix has to negotiate with created redeemable and access tokens that represent and allow the streaming of those premium films. Now instead of only having the all-you-can-eat option, Netflix can choose to buy for sale copies (as access tokens) or single use tickets (in the form of redeemables), potentially in bulk and then rent and sell them to their users at a profit.
A user who just to watch the film once would buy the cheaper redeemable ticket and spend it to start the movie or give them access for 24hrs. If you like the movie, buy the access token version and add the title to your premium library. When you’re done with it, you can lend, give or sell it to someone else.
Actually, netflix doesn’t even have to sell these tokens directly - The filmmakers or publishers can set up their own vending machines, market directly to their audience and pay Netflix to associate their token and stream the video as a content delivery network.
If you’re going to do that with Netflix, why not Amazon too? And every other Streaming service for that matter. Tokens upend the current reality where the platform does the picking to one where the content creator,the filmmaker or writer or whatever kind of creative work can Use these closed-gardens as merely an infrastructure provider, rather than having the option to partner, license or go away. If I want to sell my audiobook on Audible, why does the platform set the price and take 50% of every sale? Because they have a monopoly, the content lives and breathes and dies on their platform and at their discretion.
And that, is the big point. Tokens takes the productive output of normal people, which, for all my life, has been trapped on closed, proprietary platforms that eventually turn into abusive monopolies, and puts the power to choose into the hands of anyone who wants to create. In an environment where only bad options exist, the least bad will suffice and that’s the story of ownership on the internet to today. Tokens aren’t for every situation and won’t change the way we’ll do everything but they do give us better options and the power to build your own audience rather than the platform you wound up on.
There is a lot more to this, even after 18 months of thinking about little besides these possibilities, I’m still having new revelations and writing down new use cases all the time.
This isn’t going to happen all at once, Tokens are new and have the potential to disrupt the way things are done in nearly any industry you can think of. I’m looking for partners, companies and collaborators who can see what’s possible here, to join our open source effort and help me drag this vision into reality. Feel free to email me at email@example.com or chat with me