The Power Of Tokenomics

in LeoFinance2 months ago

Cryptocurrency garnered a great deal of attention due to its ability to make people money. This is something that caught the eye of those looking for quick hits to make large sums of money.


What is overlooked in all of this is how powerful tokenomics really is. This has the potential to create advanced economic systems that far surpass what we are accustomed to dealing with. This will result in growth rates pretty much beyond human comprehension. Instead of a few percent, we could see the entire global economy growing at double digit rates for decades.

How is that possible? The answer is contained in the what tokenization does.

What Is A Token Economy

It is simply one that is based upon tokens. Well, that is easy.

However, do not let the simplicity fool you. It is here where the power resides. Tokens represent something else. Thus, any asset can be tokenized and turned into a digital representation. This allows for the financialization of these assets, providing a solid economic foundation to build from.

A tokenized economy is built upon assets that are constantly marked by the market, through the price discovery process. Through this process, more money is available to grow the entire system, something that we fail to see in our present system.

Assets no longer sit idle. Instead, they are part of the system of collaboration through their monetization. The tokens, which have value, are then utilized for further innovation and expansion.

What Can Be Tokenized?

The short answer to this is anything.

As we proceed forward, we will see that any asset will be eligible for tokenization. There will be little that will be exempt. Whether it is real estate, art, businesses, or classic cars, all will have a digital monetary layer associated with them.

That is not all. We also can see a lot of intangible stuff that receives the same treatment. Ideas can be tokenized based upon their potential. Individual's streams of income can have the same done. This could also be tied to many different forms of incentivizing people. Good health, for example, could have this monetary component associated with it through nutrition or exercise tokens.

Of course, we cannot for automation. Tokenization is ideally suited for the Internet of Things (Everything). As machines take over a great portion of the economy, we will see tokens offer a way for all to benefit and profit.

Mass Distribution

Tokenomics is one of the most powerful distribution systems ever created. This does not require government intervention or regulation. Instead, the market freely distributes to those who are participating.

Since anything can be tokenized and turned into an asset, that means we are all eligible for that system. Whatever we contribute has value. Tokenization allows for the capture and monetization of that value. As that occurs, more assets are generated and held by an individual, thus growing their financial influence.

Of course, when one has more resources, the ability to participate to a great degree is realized. This enables one to involve him or herself in projects that can help to increase the overall economic pie. Naturally, this will provide a positive feedback loop to the individuals wallet, furthering the process.

As they say, rinse and repeat.

Communities As Economies

Many are starting to discuss the idea of how powerful the tokenization of communities really are. On a blockchain like Hive, many are already living with the concept. We see how a group of people who are passionate can generate a strong economic platform through their drive and passion. This can be anything that people gather around: a game, an ideal, a sports team, a hobby, or even elimination of a particular disease.

These economies are tribal in nature yet, at the same time, global. Whereas in the past, we saw local tribes, the digital platform enables membership from anywhere in the world. This brings a much wider audience pulling together a variety of talents and viewpoints.

The richness of the community through diversification also is enhanced by the distribution. Since it is global, the resilience of the economy expands. It is not dependent upon any local phenomenon nor can it be affected by any geographic disaster. Regardless of what the community is, it will be enhanced by automation and having sectors of the economy generating value without human intervention.

Lack Of Gatekeepers

Our final point might be one of the most powerful.

Gatekeepers are akin to parasites in an economy. Basically, they take a percentage of what is occurring in return for a small contribution. This is the result of years of honing one's position, either through monopolistic tendencies or with the assistance of government/bureaucratic entities.

However they came about, the end game is always the same: these entities stifle economic activity since their "rewards" is not in proportion to the contribution.

A token economy removes these people from the equation. Resource can flow with must less friction, these generation more power throughout the ecosystem. In economic terms, this is called the Velocity of Money.

As the resources continually find themselves used for productive purposes, and not simply to reward entities that positioned themselves for easy profit, economic expansion occurs at a much greater pace.

In the end, the power of tokenomics leads abundance. Operating in a digital form, this is only limited by computational power and bandwidth. Since anyone can participate, the value of the entire system will grow rapidly. Trillions of dollars in wealth is going to be monetized and accessed over the next few years, potentially setting off a massive boom in productivity and ingenuity. Of course, this requires infrastructure to be built first.

Once that is in place, the industry can then start to look at solving real world problems through the tokenization process. In the meantime, more individuals are getting involved in the wealth generating process which will provide the foundation down the road.

Hang on tight. The power of tokenomics is about to be unleashed upon the world. This will create economic outcomes that few can envision at the moment. However, digitization is always an accelerant and we are going to see that with most everything.

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Absents of gate keeping is the really a huge aspect for me, it means people can incentivize what they bring to the table in the highest form unlike how it works in so many real-time cases. It's quite easy how tokenisation will change the game from the biggest of ventures to even the smallest of Idea, the value still remains immense.

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It does open up the doors and level the playing field. Removing gatekeepers is huge because they tend to trail in innovation since they are established. Innovators tend to be smaller in size and when you add in there could be millions of them around the world, the potential impact is enormous.

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It's not just that they trail in innovation. They actively hinder it. You may recall Apple temporarily banning BTC wallets from the App Store when they thought it would interfere with the rollout of Apple Pay.

I think one could consider the more recent Robinhood/GameStop situation a similar example. Although that wasn't an assault directly on the technology, it was still the establishment rallying to stifle change in the status quo. One could argue it's a better example.

All valid points. They do stifle innovation in whatever ways they can when it threatens them.

It is all about control.

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You're right, the potential impact is enormous and I'm imagining tokenisation at even the grassroot of almost every little venture.

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well said...
I haven't truly understood the concepts of tokenomics,
especially for someone like me who continually fills a lot of airdrops.
I cannot differentiate the fake from the original projects because I do not understand a lot about tokenomics and macro economy.
I'll have to read this over and over again to be able to pivot and discern more projects in the long run.

It takes time. On Hive, and the associated platforms, you are learning and experiencing what it is all about. Stay active, bring value through your posts and comments, and things will start to make sense as you enjoy the distribution that takes place.

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well noted.

Leofinance imo is the best example of tokenized community I know.

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Well you can look at it from many different levels. I agree with you although the same case could be made of Hive.

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POB model seriously reminds me of government an when a majority get to the top they stop doing stuff and just leach. Out of all the communities LEO seems to be the own where the majority of top stake holders seem to be contributing.

Tokenomics are super critical when you setup a project or community here on Hive or any cryptocurrency.

That is true but there is always the fork. If the whales are doing as you claim, then others can just fork out. If that behavior is not conducive to the community, they can just up and leave.

We saw that happen before; I cant remember where. I will have to look it up to give you the name of the new project.

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It may be a basic question but I would like to understand if the tribes on the hive, which are just front ends can also fork out ? I mean is that possible technically ?

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They could fork out but not sure why they would. That would entail developing a vast amount of architecture.

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It seriously took me a year of getting into crypto to really start to realize how important tokenomics are when you are looking at a project or a coin. I think I have a better handle on it now, but there are still some aspects that are beyond me. It's crazy how a few really smart decisions can eliminate a multitude of hassle.

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It takes a while before things become clear. There is no ideal solution, it is all experimentation.

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How far will we have to financialize?

What's your opinion on:

"Refusing nonhuman life the right to hold money is to deny what is possible in the regeneration of nature. It also wilfully ignores what will happen on the frontlines of the anthropocene over the next decade if there is no radical intervention that allows nonhuman life forms to announce to the world that they are worth more alive than dead."


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Thanks for the article. I had not seen that one so I will have to read it.

When I said tokenize anything, that is exactly what I meant. There is nothing that prevents what you describe from taking place. tokenization is an method for incentivization of behavior. Monetizing the biodiversity of the planet is a way to alter behavior in a desired direction.

An entire economy can be built by the community that is interested in making that the case. Their efforts can produce the same outcome as any economic activity. If enough people are involved, this economy can grow to be a lot bigger than many sectors we have now.

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I read the whole thing and found it utter nonsense. Many did the same with the bitcoin whitepaper though. Maybe I'm just old and lack imagination.

Why nonsense? There's some real value in financializing microactions and create protection through trade

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Man. I've been struggling with teaching this to a group of devs.

They claim they are making a DAO on their website. Then in discord, I propose a HIVE tribe because it fits what the project needs to do flawlessly. The "project lead" says "the devs" are taking the project a different direction. When I point out this is exactly what a DAO isn't, I'm told they are more DAO-like.

A DAO is decentralized autonomous organization. You are a centralized organization with a hierarchy structure/lead. This project im talking about is about as DAO-like as Mcdonalds.

Oh well. Hopefully still might see something come from it. I just wish more people viewed it like you do, the power of distributed organizations with token economics. Great article.


Bang, I did it again... I just rehived your post!
Week 60 of my contest just can now check the winners of the previous week!

I still didn't fully understand what tokenomics entailed, I would like to start a project to tokenize assets where I live such as vegetables, resources or other things, but I need to do more research on this information.

thank you very much for this.

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I struggle to see why people would want to own a piece of a classic car but I think stranger things have happened in crypto

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If it is a piece of a Gremlin, might not be that much call for it. However, for a classic corvette in mint condition, that is something different.

Besides, it isnt so much the fractionalization as the tokenization = digitization. Then it is much easier to collateralize that asset.

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oh I see, I didn't think about collateral

I totally agree

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Crypto is the future, and projects with a strong community will have a huge stake in the future.

Nice write up

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@taskmaster4450, you were given LUV from @amphlux. About:

The short answer to this is anything.
I'll say everything. 😎

I generally consider the economy as part of the community. Obviously at the current stage, the economy is basically run by the elites but in the future when things get set together, it will basically a part of the community.

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Your post has been really appreciated and was the most upvoted of the day

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To support your work, I also upvoted your post!

Check out the last post from @hivebuzz:

Feedback from the June 1st Hive Power Up Day

In a way, we are going back to the future. We have had it with big corporate trusts (why do we call monopolies "trusts" when "distrust" is what we should do to them?) and are getting back to decentralized communities of people with common interests making free trades with other groups for mutual benefit. Similar to the biblical picture of every man under his own vine and fig tree. Small is beautiful--especially when lots of small things have a big, decentralized network/blockchain.

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