More and more companies analyse the business opportunities that can be created by using blockchain solutions in their current activities. Now not only start-ups but also mature organisations look at its potential and invest in R&D departments whose task is to verify the possibility of using smart contracts, commonly known as tokens.

Sygnisoft SA, as an IT and consulting company with extensive experience in implementing projects based on blockchain solutions, is often invited to workshops, during which, together with Clients, it analyses the potential of blockchain use in their business. One of the first questions that arise during the discussions is the legitimacy of using tokens in the company. The question seems very obvious, but we know from experience that it is not. We always try to make our Clients aware that blockchain is just a modern technology, and for its use to make sense or build a competitive advantage, it must have good business foundations and realise an interesting idea.

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The very creation of a smart contract is not a technological challenge nowadays since it comes down to a few lines of IT code, but the purpose of its use and consistency with the company’s operation strategy should be carefully thought out and planned. Blockchain is something new and mysterious for many people outside the industry. These people are often unaware of the benefits of using it. Everything unknown often causes anxiety and prompts us to be cautious. Therefore, the implementation of modern solutions should be introduced slowly and planned for a longer period of time. In my experience, in mature businesses, even a three-year perspective makes sense, where we have enough time to educate and change our clients’ habits.

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After defining the business goals, we should take care of developing processes and mechanisms that will create a real need for possessing tokens by potential Clients. It is the creation of demand for tokens that will prove the project’s success. The very choice of the type of tokens determines the mechanisms that we will be able to present to Clients. Most often, we divide tokens into three main types:

  • Security – equivalent to the company’s shares,
  • Utility useful tokens, e.g. loyalty points,
  • NFT – ideal for artists, non-fungible.

Depending on the type of token we plan to emit, we should prepare an appropriate strategy for its use, often called tokenomics in the industry.

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For the most basic “Security” tokens, the demand generation possibilities are quite limited. The most common is a promise of redemption by the issuer at a specific, higher price. This solution is used less and less and is not considered very attractive. A much more interesting and effective idea for increasing the demand is “burning tokens.” For example, the issuer undertakes that every year 10 per cent of the profits will be transferred to buy tokens from the market and then “burning” them – that is, destroying them. Such deliberate limiting of supply causes a natural increase in the token price. This solution is very often used with Security tokens and is considered attractive for their holders, as it contributes to the increase in the value of the acquired tokens.

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Another frequently used strategy is to allow token holders to purchase (the tokens) more directly from the issuer but at a lower price. This solution is used for large projects, where the development period is spread over the years, and the value of tokens increases with the project’s progress. In this case, buyers who decide to buy tokens at an early stage are guaranteed that if they wish to re-purchase the tokens, the price will be kept at a predetermined level regardless of the market price.

In the case of the second type of token – “Utility” – we have many tools thanks to which we can viably influence the increase in demand; however, it requires more creativity and commitment of the team. One of the most commonly used strategies is using a token as the internal currency in a given project. Let’s say we sell the issued tokens at $0.5 while specifying that their nominal price in the final project will be $1 – in this case, we can say that the purchasers of the tokens receive 100 per cent more. This is very attractive because Clients know in advance how much they can gain by investing in a project and are therefore more willing to do so.

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Another interesting strategy is creating mechanisms that would motivate customers to buy and hold tokens for a longer period of time. Such a solution is called staking from the English word ‘stake’), and in Polish ‘freezing’. A good example might be a financial service, in which by purchasing a certain number of tokens and then freezing them for some time, e.g. 1 year, a purchaser will receive a much better credit card with a package of privileges (higher cashback, reimbursement of Spotify and Netflix fees, etc.). The aforementioned mechanism strongly increases the demand and- what is important- influences the expected period.

Of course, the question arises: what happens after this period? Most frequently, tokens are unblocked and returned to the Client, who can sell them freely. However, instruments that would encourage the Client to reuse must be created to ensure that the tokens are not resold. Especially as he has paid for them a long time ago and does not really feel it as a cost. It is worth considering that in most cases, the satisfied Clients will want to prolong the package of privileges and will purchase again.

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Another commonly used instrument is a presentation of a unique offer for Clients whose tokens’ freezing period ends, e.g. exchange of tokens for a product or service available only to holders of such unfrozen tokens at a very good price. Any idea that will motivate customers to keep their tokens or use them is a good one since this keeps tokens from returning to the market, generating supply and dropping the token price. 

The presented model can be successfully used in many businesses. A company selling tickets for mass events, concerts, sports clubs, and business organizations can be another example. Clients that will purchase tokens and freeze them for a certain period of time will be the first to choose seats or receive invitations for pre-sale. Also, the tickets price for such Clients might be lower, etc. Such a mechanism provides a wide range of possibilities and, most importantly, ideally builds long-term demand for tokens.

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An interesting solution can be found in the tourism industry as well. To receive additional privileges in a given hotel network (e.g. upgraded hotel rooms, free minibar or different check-in hours), Clients must purchase tokens and freeze them for a specific, predetermined period of time.

To get investors interested in tokens, companies more and more often implement very creative solutions. The idea of fusing Security and Utility tokens is an interesting example. One of the exclusive spirits manufacturers is giving token holders the opportunity to buy limited edition bottles in closed auctions. Besides direct benefits from owning tokens and their increase in value- long-term approach, token holders benefit from participating in a closed club where only they can buy limited editions of various series. Such mechanisms successfully build a sustained demand for tokens and help to distinguish the project from many others.

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The use of tokens in business is growing in popularity. Undoubtedly, with the growing understanding of blockchain capabilities and Clients’ awareness, we will increasingly use tokens in our everyday operations.

Looking at currently performed projects by Sygnisoft and discussions on future solutions, it is clear that we are at the beginning of the blockchain revolution, and the companies that will start to experiment and build real, long-term demand today will benefit the most.