This document discusses tokenomics and how blockchain, tokens, and ICOs could impact the future of business. It provides an overview of key concepts like cryptography, cryptocurrency, blockchain, tokens, decentralization, identity, and capital raising. While still early, the document argues that tokenomics and blockchain will fundamentally reshape society by shifting power to individuals and enabling new business models through decentralized networks and applications. Risks and regulatory challenges are also noted.

1. Tokenomics
What Blockchain, Tokens and ICOs Mean For The Future of Business
Photo by Ramiro Checchi on Unsplash

2. Stephen Peters
ICO and Fintech Advisor
Background in banking, payments, artificial intelligence
stephen@psc.net.au
https://www.linkedin.com/in/stephenjpeters
@siriuscove
Photo by Max Ostrozhinskiy on Unsplash

3. Talking Points
• Tokenomics
• Cryptography
• Cryptocurrency
• Blockchain
• Tokens
Photo by Taduuda on Unsplash
• Fat Protocols
• Decentralization
• Identity
• Capital Raising
• Business Models

4. Tokenomics
A token is a privately issued currency used to buy and sell
operations within a network application, creates a mini economy
with forces known as tokenomics
Made possible with a combination of technologies, some old, some
new
• Cryptography
• Blockchain
• Solves the double spend problem
• Enables pseudonymous and anonymous transactions
Like all disruptive technologies this tech will create new business
models, new industries, new societies, but still very early stage,
about where the internet was in 1990

5. Four Years of ICOs
ICO Space

6. Why is Cryptography Important?
Some of you will know this Enigma
machine, which was a German
crypto device used in WW2 to
encrypt radio transmissions.
A group at Bletchley Park led by
Alan Turing decrypted the enigma
code, and was then able to monitor
all German orders and reports.
Basically, this break-through
contributed significantly to the
Allied victory.

7. Cryptography
Crypto concepts are now
reaching mainstream:
• Hashing & Signing
• Private and Public Keys
• Passphrases
• Cold storage
• Privacy
• Anonymity

8. • Data cannot be faked
• Records can be certified as authentic
• (Practically) immutable records
• Signing makes impersonation impossible
• Replaces security models based on access and
centralized control
• New thinking about networks and market models
Impact of Cryptography

9. Cryptocurrency • Digital money
• Cryptography regulates the
creation of units of currency
and verifies transfers
• Original vision of Bitcoin was
decentralized currency (not
issued by a central bank)
• Governments now starting to
see value in a centralized
crypto currency
• Cheaper than cash
• Increase tax revenues
• Controlled supply: inflationary
vs deflationary

10. • Bitcoin was not the first digital
currency, builds on earlier work
from hashcash, digicash, and
others
• Bitcoin is the largest cccy, about
33% of total market cap
• 1500+ cryptocurrencies listed
today on CoinMarketCap
• Total crypto market cap is
currently 500B
Crypto Markets

11. What is a Blockchain?
• A shared database, aka “distributed ledger technology” or DLT
• Stores data in a cryptographically secure “block”
• “Chains” these blocks together so that any tampering to the data is
immediately obvious
• All the computers in the network agree on the truth of the data
written to the blocks, no central party required (consensus)
• Various consensus models, Bitcoin uses proof-of-work which involves
solving a difficult mathematical problem that requires a lot of
computing power
• Everyone has a copy, hence the name “distributed ledger”

12. Inside the Blockchain
Photo by Raphael Koh on Unsplash

13. Characteristics of
a Blockchain
Photo by Raphael Koh on Unsplash
• Permissionless / Permissioned
Access
• Public / Private Networks
• Decentralized / Centralized
Governance
• Coin / No Coin
• Immutable (Data Integrity)
• Distributed Applications
• Smart Contracts
• Scalability
• Security

14. Limitations of
Blockchain
Photo by Raphael Koh on Unsplash
• Immature technology
• Energy requirements for
certain consensus models
• Throughput for the Bitcoin
and Ethereum networks is
poor, approx. 7 & 15 TPS
respectively, faster options
exist
• Limited storage on chain
• Limited suitability for the
enterprise
• Security at the access points
(wallets, exchanges)

15. A token is a cryptographically secure unit of value
that an organization creates to self-govern its
business model and resources, and empower its
users to interact with its products, while
facilitating the distribution and sharing of rewards
and benefits to all of its stakeholders.
What is a Token?

16. Tokens
• Tokens provide a way not only to define a protocol, but
to fund the operating expenses required to operate the
network as a service.
• Tokens provide a model for creating shared computing
resources while keeping the control of those resources
decentralized (and without necessarily requiring a
centralized organization to maintain them).
• It’s all about the network incentives

17. Network Effect
Tokens provide incentives to reduce the bootstrapping problem

19. 3 main kinds
• Utility token
• Work token
• Asset token
Kinds of
Tokens

20. Fat Protocols
• The protocols on which the
internet is built are stateless:
TCP/IP, SMTP, HTTP, etc.
• They simply process and
route data according to their
function.
• Fast and efficient, but not
smart
• Creates problems in
application layers

21. Fat Protocols
• Blockchain is ushering in
an age of “fat” or stateful
protocols
• Protocols which retain
state, like identity which is
a huge missing component
of the internet
• New applications like
decentralized social media
where the user is paid for
their data
APPLICATION LAYER
IDENTITY LAYER
BLOCKCHAIN LAYER
DATA LAYER
NETWORK LAYER

22. Photo by Dennis Kummer on Unsplash
Centralization vs Decentralization

23. Centralization
Centralized authorities are in place to ensure trust between parties
is carried out according to a set of rules
Centralized authorities dominate most aspects of modern life
• Political, Banking, Asset Management, Property Titles
The apps you use everyday:
• Facebook, Google, Twitter
Central control has not always worked out well
• Leads to dictatorships, huge financial losses, data and privacy
hacks

24. Decentralization
• For the first time, blockchain gives people the technology to
transact with each other in a trustworthy way without a trusted
intermediary or central authority
• Rules are embedded in software, smart contracts on the
blockchain, executed by machine with no reliance on human
intervention
• The network provides incentives to govern behaviour
• Upends the traditional centralized models of business and the
institutions we have created to maintain order
• It is a fundamental change, requires careful thinking and will
challenge all your preconceived notions of society

25. Examples
There are examples of decentralized systems used every day, and
more are coming
Email (1962)
• Common protocol, many clients to access
• No single company in control
• Data can be moved but not easily
Bit Torrent (2001)
• Common protocol, many clients to access
• No single company
• Data is shared between computers, may not reside in one location
Bitcoin (2009)

26. IdentityPhoto by Nicolas Ladino Silva on Unsplash

27. Digital Identity
• The lack of digital identity standards and platforms is a major
hindrance to the development of the next stage of growth
• Personal data sovereignty is the other side of that coin
• Today, your data is spread across dozens or hundreds of
institutions, organizations, government departments and
agencies
• Centralized honey pots that attract hackers
• 1B Yahoo accounts hacked, Equifax 165M and so on…

28. Control and Sovereignty
A digital identity solution could store
• Financial assets
• Medical records
• Personal data, profiles, and preferences
• Important documents and data
You could control access to external applications like Facebook
and receive token rewards in exchange
Share as little or as much as you like, with automated controls
governed by software. Blockchain gives us the capability.

29. Capital Raising
Tokenomics has created a new capital
raising channel:
ICO (Initial Coin Offering)
• Extends crowd funding models like
Kickstarter to projects and ventures
• Work around IPO and traditional
equity channels like venture capitalists
• Some ICOs are good and some not
• Lots of regulatory issues surrounding
ICOs, are they really securities

30. Business
Models
• Made on the internet
remains, witness the
growth of Google,
Amazon, Facebook,
Apple, Alibaba, Tencent,
Baidu
• But these are all
centralized businesses
• Facebook is already
facing a backlash after
trolling scandals

31. Cryptokitties

32. How to Make Tokenomics Work
• Critical thing is to equip your private token economy with the
right incentives to create value
• Prioritize decentralized solutions where possible
• In some segments especially enterprise this will be a long
transition and you may need to develop bridging solutions and
gradually introduce decentralized functionality
• Create a strong identity core to your solution

33. Examples

34. Caveat Emptor

35. What Could Possibly Go Wrong?
Regulation
• Governments will have a difficult time with cryptocurrency,
so expect more regulation
• But there are valid libertarian use cases
Scams
• There are many, many scams in the ICO and cryptoexchange
space
Delivery
• Blockchain has been around for a few years
• Few production examples, interest could wane

36. Who Wants To Be A Billionaire?
• Decentralized Identity – a platform where your personal data
is under your control
• Voting – a secure and anonymous system immune to
tampering, and falsification (and also faster)
• Social Media – a decentralized social media network that
respects your privacy and does not access your data without
your permission
• Decentralized Bank – a bank that just provides services but
wealth is held by the individual, easy to move
• Games that incentivize certain behaviours with coins

37. Takeaways
• Tokenomics and Blockchain technology will fundamentally
reshape society in the decades to come
• Decentralization promises to shift the balance of power to
individuals
• Identity and personal data sovereignty will remain major issues
• It is still very early in the space, so lots of opportunity
• Go out and build something great!

38. Photo by Ray Hennessy on Unsplash
Thank You
stephen@psc.net.au
https://www.linkedin.com/in/stephenjpeters
@siriuscove