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In 2019, Shermin Veshgir gave a talk about web3, blockchain and cryptocurrency where she highlighted the advantages of a tokenized world. The world would function better if things were incentivized and tokenized.
But what really does the token economy mean?
What would a tokenized world look like? In this article we will be exploring the economics of the world as it is today and a tokenized futuristic world.
Economic systems is the way services, goods and human resources are created and exchanged within a society.
Currently these systems are built and regulated by central authorities in every country. These central ssystems govern the creation, auditing and distribution of value.
It may not look like we live in a tokenized society but we do.
A common example is the money in your wallet right now,
In our previous articlewe described tokens as tradeable assets used to represent value.
Money is a legal tender that acts as a token (reward) to incentivize people to work and advance the society. This is an example of a token that runs based on econonmic systems is controlled by central banks
In a futuristic tokenized world this will be different as "the state (country) will not be the only one regulating the financial and economic sovereignty of value"
Now we understand that;
- tokens represent value
- they operate based on economic systems
- they are currently been regulated by state authorities
Let's head over to understand the token economy and how it is currently being operated right now.
What is a Token Economy?
A Token economy is a management style that uses systemic reinforcements to get a target behavior. The primary goal of with a token economy is using positive reinforcement to increase good behavior and decrease bad behavior
Example of a Token Economy.
You want a dream Home, so you go to school, get a job, work and earn a salary (a token), which is increased or decreased based on your behaviour, money only acts as a secondary reinforcer to your primary goal of getting a dream home.
Tokens are a way to incentivize people to collaborate and work together to making the world a better place
Token economy has been used in child training where children are given points for good behaviour. These points are accumulated and gifted to them in the form of physical tokens
They may need 5 tokens to go to a party or watch cartoons. Therefore, for them to get their desired interests, they need to behave rightly to earn tokens.
Token Economy in the Digital World
The Token Economy is a form of decentralized economy operated on the blockchain, that changed how assets are managed & traded in the world
The tokenization of things means turning anything of value into assets that are used for interaction in the digital world.
The Token economy allows us decentralize the governorship by;
- transforming value into assets
- decentralizing the ownership of such assets
- capturing value that remains in the system
Framework of the Token Economy
The core components of a token economy are; Tokens, Backup reinforcers & Target Behaviour
Tokens: As stated in our previous article, a token is anything that represents a value or asset. which, when needed can be exchanged to gain that value back.
Backup reinforcers : just like the example earlier stated, we can have primary reinforcer or a secondary reinforcer. secondary reinforcers for crypto tokens can be access to DAO community, governance tokens, voting rights and access to resources on the platform
Target Bahaviour: : Target behaviours are what is expected from the community, to get this, good actors are rewarded when they carry put this behaviour and bad actors are penalized.
This is used to reinforce the targeted behaviour so that it can be done again & again. some of the target behvaiour for token communities include; voting, contributing, staking tokens, value exchange within the platform.
The Token economy has the power to build new economic organizations, no longer will there be one central economy in a state or country, a group of people will be able to come together, decide what value is to them and earn from it.
There will be several forms of tokens for different networks, from membership cards, to clubs to intangible arts these willcapture, deliver anything people chose to value.
A distributed economy will be more inclusive of everyone. for example, I can have assets in a tokenized economy in Finland, earning and reaping its benefits even if I'm in Nigeria.
The Token economy is at its early stage, to actualize it, we need builders, testers, lawyers, policy makers and technologists to ensure that we are not just building better economic systems but more inclusive and ethical ones
How do you think you will function in this economy? Can you think of a valuable asset that can be tokenized?
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