Chapter 8: Token Economies

Blockchain networks enable trustless data transactions to take place between an ecosystem of individuals, businesses, and stakeholders in an adversarial environment. Trustless systems do not require the transacting parties to know one another or to rely on a trusted third party (any of which could be arbitrarily malicious actors) to facilitate the transaction. The data transactions can represent any form of value – monetary currency, physical assets like precious metals or real estate, intangible assets like a unit of energy or a loyalty point, or they can represent access to a specific utility including the right to consume a resource or the right to vote. The possibilities are vast. Cryptographic tokens, more commonly called crypto tokens, which are native to the respective blockchains on which they reside, are fundamental to the value transfer mechanism. Crypto tokens are analogous to data packets traversing a network in that bits of value can be transmitted the same way bits of information move over the internet (Walden 2020a). However, a critical distinction exists. For example, data shared over the internet is sent to the recipient as a copy; on a blockchain network, transfer of a digital asset means the sender is no longer in possession of it. Blockchain-based digital assets are designed to be unique, liquid, secure, instantly transferrable, and digitally scarce (ConsenSys 2020).