How tokenization can contribute to the further development of your business

Distributed LabBlogHow tokenization can contribute to the further development of your business

Businesses with real clients and turnover, bring this to your notice:)

ICO startups with nothing more than a white paper and their name receive plaudits and hundreds of millions of dollars. Many people, perhaps a little tardily, today decide to make an ICO out of their business and achieve similar results. However, it doesn’t go well for the majority of cases.

The whole situation with the presence of this hype around ICO in the rapidly emerging industry is actually similar to the fifth wheel of a cart that’s been pointlessly bolted on it. What I am getting at is that this hype won’t remain for long, more than that, it is passing already. What remains however is the tokenization. It offers businesses real benefits. And this is specifically what I would like to describe in this post.

Introduction to tokenization

  1. What tokenization actually is. It’s a way of representing a particular asset (in fact it could even be any service or product) in the form of a digital token.
  2. Tokenization vs ICO. What is what? Tokenization means the digitization of all business operations and assets. ICO is a means of raising capital by issuing tokens and later putting them into circulation on the stock exchanges.
  3. Initially, it makes sense to pay attention to the processes which are already digitized.
  4. Tokenization makes sense for assets which can be traded — known as fungible assets.
  5. Your token if backed up with certain assets can become a security token.
  6. If you plan to sell tokens in advance, then the business should already be running (rather like selling subscriptions for three years).

The business case and how it works with tokenization

Let’s take the mailing list service. It is all about selling mail packages on a commercial scale. Commonly, it’s the case of a freemium business model, where you have around 90% of ‘free’ clients (those who don’t make you money but just give the awareness of your service) and the least 10% produce you a profit.

Here’s what you can do:

  1. Create your own tokenization platform, which now becomes your primary accounting system.
  2. One token in your system is equal to one email letter. To be precise, it allows its owner to send 1 letter via your service.
  3. Each newly registered user is given, say, 1000 tokens on their wallet, which means that, from the very start, you give your customers a free opportunity to send 1000 emails. It’s the freemium business model, remember?
  4. You also distribute your tokens on some exterior exchanges. Why? See the next step:)
  5. Once a customer is out of his/her free 1000 tokens, he/she would have to buy up some more of them on any of the exchanges, where your tokens are distributed. That’s where you get your 10% of customers who give you profit.
  6. From here, you can start devising some of your business tricks that would motivate your customers to buy tokens. For example, you can let users exchange their tokens with each other, but only those that were bought on the exterior exchanges. While the free ones cannot be exchanged but may offer some kind of a discount on the buying of the additional ones. Of course, you can think up more of your own business ideas. Tokenization platform allows being creative.
  7. Your blockchain (aka accounting system) will, of course, display you all the transactions between users, but what’s noteworthy is that you are not limited with your accounting system and can easily trace transactions on the exterior exchanges. To be precise, the blockchain technology allows for building the gateways between accountings, easily.
  8. As a result, you have an adaptable accounting system that can easily communicate with other databases.

So, if we take a hard look at the benefits:

  1. Increased transparency of business operations. It is very valuable if you need to improve your analytics or demonstrate your turnover to investors.
  2. Your free users are more prone to the pay-per-use idea.
  3. You set up a secondary market for your services (similar to how Amazon sells second-hand items alongside with the new ones).
  4. Your business is now ready for an instant switch to a flexible pricing (auctions).
  5. You can establish an ecosystem (if you become a leader in the chosen industry).

Finally, let’s look at the takeaways:

  1. Tokenization isn’t sorcery.
  2. The system belongs to you.
  3. Actual assets and services are tokenized.
  4. The system is not likely to be built on the public blockchain

Conceptually, it is similar to the shift from paper era to the internet. Those who’ve made the transformation first will win-out in the end because their costs would be much lower than that of competitors.

Pavel Kravchenko
About the author

Founder & cryptographer