Blockchain tokens and how they work - The basics

1. Tokenomics
Gayan Samarakoon
https://www.linkedin.com/in/g-samarakoon/

2. BlockChain VS Internet

3. History of CryptoCurrencies
2008: Satoshi Nakamoto, Bitcoin
1982: David Chaum, e-Cash and DigiCash
1997: Adam Back, HashCash
1998: Wei Dai, B-Money
1998: Nick Szabo, Bit Gold
2004: Hal Finey, RPOW

4. VC Investment in BlockChain Health
• BIS research estimates
– Current (2018)
• $176.8M
– By the end of 2025
• $5.61B
Blockchain
Capital
Andreessen
Horowitz
Draper
Associates Boost VC
Polychain
CapitalSequoia

5. BlockChain Eco-System & Tokens
Creating a token strategy.
- What is the application
- Is it a dApp?
- Is it a third party application communicating to
the networking layer or nodes via API calls?
- Has there been changes to the way the private
key issue and storage through the design?
- Is there enough talent to develop tokens?
- ERC20 is really easy.
- NEP-5 from NEO?
Public or Private protocol?

6. Four types of Tokens
• Currency — A payment method between participants.
• Asset backed — A claim to an asset that is fungible and
tradable – SECURITY TOKEN
– E.g. – Tokenised building in Brooklyn – the
Brooklyn project by consensys
• Grease the Wheels — The token is needed to power
the blockchain – Incentivise NODES to keep consensus
going.
• Equity — A “stake” or ownership in the company.
– E.g. ICO replacing the IPO.
– SECURITY TOKEN

7. Sample ERC-20 token code

8. Example Token strategy
Strategy #1 – Single Utility Token
• dApp
• Simple ERC-20 tokens (ETH)
• Issue as many for use within the dApp – i.e.
Utility function
• Do an ICO
• Make a tonne of cash and hide in the
Bahamas
Strategy #2 – Two Tokens – Utility and Security
• dApp
• Security Token offer for company shares
– Must comply with securities acts within each
jurisdiction. E.g. ASIC
– Security Token offer for company shares
• Utility Token offer to use within the dApp
– Tokenomics become important.
• E.g. a loyalty program structure with rewards,
redemptions and purchases within the dApp

9. Token Classification Framework: Untitled-Inc

10. Token Classification Framework: Example
You could call
Augur’s REP a
Non-native-
protocol-
Network-
Network-value-
Work token
likely classify as a
Utility Token.

11. Things to consider when tokenising your dApp
• Does the dApp need a token to function?
• Does the Blockchain require tokens? – i.e Public vs Private
• What is your token strategy?
• Have you created a tokenomics document? (example to follow)
• Consider legal ramifications based on jurisdictions e.g. Token classification
& Compliance
• Hire the best developer you can possibly buy
• Lots of nightmare stories with coding errors in Tokens. Critical for the success of your dApp
Next step: The ICO
• PR, Marketing, Pre-ICO raising via private pools, Exchange listing negotiations, Market
making from liquidity providers, in-house trading desk, on going compliance
etc…………………

12. Tokenomics Doc example: E-Nome
• E-Nome Tokenomics summary
• E-Nome system Token flow and
Data Transfer
Tokenomics = Economics+Your Token

13. • E-Nome Token structure – Dual token: A Tokens (Nomes -
CryptoCurrency) and B Tokens (Health Points – data
collection)
• Conversion of B Tokens to A Tokens via smart contract in the
incentivization process
• Nome Escrow for creating in-house loyalty programs and
converting A tokens back to B tokens
• Token allocation and availability breakdown
Tokenomics Doc example: E-Nome

14. ICO Analysis framework: Untitled-Inc

15. Amazon – Healthcare and Blockchain as a service platform
Google Health – Largest Investor in to Blockchain projects overall
Apple Healthcare – Filed for patents in December 2017 for Blockchain timestamp verification system
IBM – Watson and Involvement in Hyperledger
Tencent – Blockchain as a Service (BaaS)
AliBaba – Heavy involvement in Blockchain application development and protocol development
Microsoft – Azure Blockchain Workbench (BaaS)
What are the Tech Giants upto?
Will they become competitors or complementors?

16. Please get in touch
linkedin.com/in/g-samarakoon/