16 Oct 2020 | News
It has been nearly a decade since the invention of bitcoin. In over a decade, the cryptocurrency and blockchain industry has reformed the traditional way of conducting ‘things’. The crypto-blockchain Space now continues its expansion with significant products for different applications and building an ecosystem of cryptocurrencies within its infrastructure.
Blockchain technology along with crypto tokens gave a new dimension to investing and fundraising mechanisms. It encapsulated the concept of tokenomics to exchange value in an ecosystem.
In this article, we are going to understand the relevance of tokenomics in the crypto blockchain industry and how do you evaluate any token before participating in an ICO.
Tokenomics With Crypto-Blockchain Space
In the traditional sense, a token is defined as a unit of value that enables an organization to govern its business model along with facilitating its users to interact with products within the corporate’s ecosystem. The token further represents shares, benefits, points, or equity for each individual user along with giving them access to rewards and benefits from the product/ platform.
Within the crypto-universe, tokenomics facilitate users to buy or use services of a platform through the use of a digital token. A token is essentially a native coin of the platform that can be used within the product’s ecosystem. The cryptocurrency token, essentially a programmable currency, is issued on a blockchain network with its own terms pertaining to its operations and functionality.
In the crypto-blockchain space, a token is an instrument that incentivizes its users to join, contribute, and take leverage from the product’s services. A user can use, hold, or choose to spend tokens in exchange for goods or services provided by the platform. Furthermore, tokenomics has helped in building a strong community of users that enable mass adoption for the product and in turn benefit users as well.
Within the crypto space, Initial Coin Offering (ICO) is an instrument through which a user can participate in the product by purchasing native tokens of the platform. However, with a number of ICO’s being released each year, how does a user evaluate the genuineness of the token?
Evaluating a Token Within The Crypto Universe
A ‘good’ token enables a company to expand and build its ecosystem along with distributing rewards to its users. It should also incentivize a user so as to build a strong community and drive mass adoption. There are some key fundamentals to evaluating a token that ensures its success in the longer run.
The first step is to glance at the functionality of the token within the product’s internal structure. Does the token provide any leverage to users who possess it? Can a user exchange the token and access the service provided by the platform? A good token should have a clear purpose and cater to a wide range of functionalities within the platform’s internal infrastructure. Tokens can represent voting rights, governance, product access, work rewards, contribution, or any other functionality such that it benefits all the stakeholders, including the user, of the platform.
The token should also drive value-based exchange in a market or product. The transaction of a value-based economy in a token enables a user to leverage the token and further spend it to buy services inherent to the product’s ecosystem. This also creates a transactional economy for the token within the buyers and sellers.
One of the key aspects of evaluating a token or product, especially for blockchain and crypto startups, lies in the team behind its creation. The members, advisors, and team have a huge impact on ensuring the long term success of the product and thereby the token as well. Moreover, the team is also a critical factor of the widespread adoption of the product in the longer term.
Another key aspect in evaluating the genuineness of the token is looking at the distribution model of the particular token. In order to build a sustainable ecosystem for the token, it is necessary that it is distributed among a wide range of groups. The total supply of the tokens and its allocation should be distributed to users, developers, team, investors, and not be restricted to team members or crypto investors only. A global and wider allocation prevents centralization within the token’s ecosystem.
The structure of ICO and crypto tokens is yet a grey area in various parts across the globe. An investor should check if the product and platform are legally compliant within the governing structure. This helps prevent fraud along with ensuring maximum security to a user’s crypto tokens.
ICO and Tokens
While dozens of ICO’s have failed, it also cannot be ignored that ICO’s are an effective tool for fundraising mechanisms- for startups and users as well. It gives a startup/ organization to build a loyal community and use the funds to drive development within the organization. At the same time, it gives users an opportunity to invest in a product early-on and either gain returns or access a product’s inherent services. Moreover, ICO’s promote inclusiveness to investments at a global level.
Finxflo, a global crypto brokerage firm, is set to release its native token FXF through its public ICO, commencing on the 15th of July, 2020. Finxflo, a platform based in Singapore and developed by an experienced team of Fintech experts, essentially aggregates and retrieves optimum prices of cryptocurrency at any given point in time. By partnering with 50+ prominent cryptocurrency exchanges, it facilitates a user to access optimum cryptocurrency prices using one wallet-one platform functionality.
FXF tokens are its native tokens that will be available through its public ICO crowd sale commencing from 15th July. This will last for a duration of 6 months and will end on 31st December 2020. The ICO enables Finxflo to build a growing community of dedicated users and further develop services based on the feedback from its users. The FXF token utility is centered around the Finxflo trading platform. The token is one of the instruments along with the option of traditional coins to pay fees for cryptocurrency transactions conducted on Finxflo. However, the hybrid model will run until 2021 with the FXF token being the only way to pay fees on Finxflo starting from the year 2022. FXF tokens have added incentive of reduced fees while transacting cryptocurrencies. Trading fees will further be reduced depending upon the amount of tokens held in a user’s wallet.
Moreover, the token allocation is uniformly distributed among founders, users, developers, and the crypto community so as to ensure wider and sustainable adoption of FXF. The total supply of saleable FXF tokens is at 600,000,000. In order to provide maximum protection and security, FXF has also taken measures of providing insurance services to a user’s cryptocurrency funds. Additionally, it also ensures that all its services and products fall under a completely legal structure.
The FXF token allocation and its subsequent methodology is as follows:
50% of FXF tokens are allocated for public sale through its ICO. This enables Finxflo to gain wider community input and further incorporate the feedback into building a stronger user-centric product. Additionally, this would further ensure a larger trading volume and subsequently, enable Finxflo to negotiate with larger pools of liquidity.
5% of FXF tokens are allocated for private sale that is set to begin on the 1st of July and will last till the 15th of July. The private sale facilitates individuals to access the FXF tokens at a discounted rate along with reduced transaction fees.
5% of FXF tokens are allocated for partnerships with strategic crypto traders, influencers, and companies. The partnership ensures access to the influential pool of the cryptocurrency community. This would further enable Finxflo to access the market of cryptocurrency at a global network.
2% of FXF tokens are allocated for competitions and gain a wider input on the product of Finxflo. This also enables Finxflo to remove any bugs or loopholes existing within the infrastructure. The allocation allows the platform to be more reliable and be viewed at a global level.
11% of FXF tokens are allocated to the founders’ team at Finxflo. In order to ensure long term stability and participation of founders, the 11% will be disbursed in quarterly gaps for a duration of 3 years. Hence each founder will be able to access their full share of FXF tokens at the end of 3 years. This also ensures that all founders are completely involved in the development of the product and are committed to their large term goal.
27% of FXF tokens are allocated purely for operational purposes in order to enable long term price stability of the token. This includes tokens given for the overall development of the Finxflo product to optimize it for its users. The operations may include listing it on exchanges, marketing, and business bonuses handed to employees. Bonuses for employees, including hold bonus and available bonus, will be paid through FXF tokens in order to ensure that each employee is working towards the long term appreciation and price stability of FXF token.
ICO’s have proved to be an innovative strategy for blockchain and crypto startups. Moreover, as of now, there are a number of applications that are being developed for blockchain use-cases. The potential of this space is predicted to have exponential growth in the next few years. With this, ICO’s provide users, including retail investors, a chance to be a part of the next big Google or Apple of this century.