In today’s world, crypto assets are changing the way businesses need to be built. Instead of getting the equity financing from founders and accredited investors, entrepreneurs are using ICO (Initial Coin Offering) financing route.
In the crypto token version of business, marketplace value is captured by all those who create value for the marketplace, including marketplace “users”, and that value is captured without any transaction fees. This model eliminates the middleman.
The oligopoly of platforms like Uber, Airbnb, Amazon, etc. will face a challenging time in coming days.
Demystifying Crypto Assets
Crypto assets are digital assets which utilize cryptography, peer to peer (P2P) networking and a public ledger to regulate the generation of new units, verify the transactions and secure the transactions without the intervention of any middleman.
Crypto assets work exclusively on the internet by using a network of computers that lend their processing power to verify and register all the transactions made. In return for their work, computers are rewarded with a payment in the form of tokens. The system that allows for this to happen is known as the blockchain, and it is the fundamental force behind any crypto asset. The blockchain is formed by blocks and each block is a segment of the chain that holds the Ledger of transactions made with crypto assets.
The decentralization of economy along with avoidance of taxes, inflation, and local incertitude, implies that anyone can save their money in tokens and withdraw it on a need basis. This is the reason why crypto assets are getting popular.
One of the most important aspects of crypto assets is their supply. The supply of a crypto asset is often the determinant of its utility and value. While some have a finite total supply, many are launched with infinite total supply. A crypto asset’s supply can be divided into three types:
Circulating Supply: It’s the amount of coin available at present time and circulating in the market.
Total Supply: The total supply is the amount of coin that is already in existence (whether in circulation or not)
Maximum Supply: It is the maximum amount of coin that will ever exist for a particular cryptoasset.
Types of Crypto assets
Crypto assets can be divided into 4 categories based on the characteristics they possess. Four type of crypto assets are Cryptocurrencies, Platform tokens, Utility tokens & Transactional/ Payment tokens:
Cryptocurrencies: Well-known native blockchain assets with only the basic characteristics as those of a fiat currency but are decentralized. The only purpose of these crypto assets is to act as money or digital currency which offer a more secure and decentralized experience to the users.
Popular cryptocurrencies are Bitcoin, Monero, Litecoin, etc.
Platform Tokens: Platform tokens are designed to act as a platform for other decentralized projects.
Popular platform tokens are Ethereum, EOS, NEO, etc.
Utility Tokens: Utility tokens (also called protocol tokens) denotes decentralized services or units of decentralized services that can be bought, sold, and earned. Just like any real-life service token, these tokens can be exchanged for specific services like distributed storage, video game currency, etc. These tokens are developed with a specific use case in mind and acts as an API key which is used to access a specific service. Some of the popular utility tokens are Golem, Augur, Gnosis, DigixDAO, etc.
Transactional Tokens/Payments Tokens
Financial institutions and banks are still very slow when it comes to cross-border payments. They depend on year’s old technology facilitated by SWIFT which involves multiple parties and KYC and AML requirements. Transactional tokens are crypto assets launched to solve this inter-border transactional problem.
One of the great examples of transactional crypto assets is Ripple. Ripple is a global real time settlement network which connects different banks and financial institutions around the world without requiring beneficiaries or other intermediaries. It enables cross border payments within banks within seconds while providing them an end to end visibility throughout the whole process.
Do you know crypto assets are already disrupting traditional business models?
AdEx – Advertisement exchange
AdEx is a decentralized ad exchange built on Ethereum blockchain and smart contracts. The AdEx platform is designed to disrupt and replace the traditional digital advertising models by providing a transparent, focused solution for advertisers to collaborate with ad publishers and reach the best potential clients.
Major ad serving networks and exchanges operate with huge amounts of centralized data that can easily be traced back to the consumers’ identities. With the help of blockchain, advertisers still get to receive and process data about their target audiences and consumers in the form of statistics only – without compromising the privacy of these consumers.
SingularDTV – Film/ television studio & distribution portal
SingularDT is a decentralized system in which artists and digital content creators can build, monetize, protect and manage their creations using the blockchain technology.
Musicoin – Music platform
Musicoin is designed to support the creation, distribution and consumption of music in a cycle. It enable musicians and consumers to exchange value in a frictionless environment. With a unique currency and a solid peer-2-peer (P2P) contract system.
Golem – Decentralized supercomputer
Golem connects computers in a peer-to-peer network, enabling both application owners and individual users (“requestors”) to rent resources of other users’ (“providers”) machines. Today, such resources are supplied by centralized cloud providers which, are constrained by closed networks, proprietary payment systems, and hard-coded provisioning operations. Also core to Golem’s built-in feature set is a dedicated Ethereum-based transaction system, which enables direct payments between requestors, providers, and software developers.
iExec – Cloud computing platform
iExec aims at providing decentralized applications running on the blockchain a scalable, secure and easy access to the services, data-sets and computing resources they need. This technology relies on Ethereum smart contracts and allows the building of a virtual cloud infrastructure that provides high-performance computing services on demand.
A2B Taxi – Taxi service platform
With A2B they want to make a decentralized taxi service and distribute wealth to community members. They are building trust-based social platform, which connects licensed taxi service providers and taxi service users into one community platform.
WeTrust – Savings & Insurance platform
WeTrust is a collaborative savings, lending and insurance platform that is autonomous, agnostic, frictionless, and decentralized. WeTrust creates a full-stack alternative financial system that leverages existing social capital and trust networks, eliminating the need for a “trusted third party”, allowing for lower fees, improved incentive structures, decentralized risks, allowing a greater amount of capital to reside among the participants, and ultimately improving financial inclusion on a global scale.
Going back to barter system…
To conclude transaction in its earliest form began with the barter system and now with crypto assets, we are going back to the same structure. Crypto assets are treated as a commodity today, just like gold. We have to wait and watch to see how it will develop. The pace of change is accelerated now more than ever. As an investor, you can only ensure you remain updated and part of the whole industry so that you are present when the next big evolution happens.
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Nitin is a part of the AIM Writers Programme. He is an experienced data and analytics consultant. For the last two decades, he has been extensively working with large organisations in implementing and managing data warehouses and creating analytic solutions for various domains, predominantly in the BFSI sector.