Skepticism of Utility Tokens

in blockchain •  3 months ago 

ABSTRACT: Blockchain startups typical pitch is that their utility token is needed to fill an industry-specific need, and perform functions on their platform. However, many of these utility tokens show a lack of real-world use and overrepresents a niche with a business model dependent on hope.

We assess what started this trend and scrutinize industry-specific based utility tokens.

The STARTup▼

The issue with industry-specific utility tokens started with their ability to raise millions of dollars through the hype that surrounded the blockchain space. It was accessible to clout your project as being the industry standard that companies will migrate to; after all, startups were showcasing the latest blockchain technology.

In hindsight, the idea that mass adoption and usage by consumers will make it the industry standard that leaves corporations with no choice but to use these platforms is ludicrous. It is a business model based on what the cryptocurrency community would refer to as "hopium."

The Idiocracy

Utility tokens offer future access to a function on a blockchain. However, to use these tokens take a tedious amount of work.
For example, let's say there is a utility token that creates a market for unused solar energy. To get access to the solar energy trading platform, you'll need the utility token. You probably won't find it in the most trusted exchanges, so you run the risk of dealing with shady cryptocurrency exchanges. You will also likely have to buy bitcoin first and exchange it for the utility token.

Congratulations! You now own the utility token, and you transfer your coins to the platform. Unfortunately, there isn't a market because no one wants to use this utility token as a means of exchange. The startup behind it has no industry ties. However, they did raise millions to compensate the individuals working on this project very well.

Typical Failure Token:

Marijuana industry-specific coins that could be accepted in dispensaries worldwide is a common failure token. These projects have been around for years. They may get a couple of dispensaries to accept payment in their cryptocurrencies, but rarely does anyone pay in crypto.

Merchant onboarding for Bitcoin is already hard enough, and it has the most extensive ownership base. All of these utility tokens and industry-specific coins will be obsolete as a medium of exchange. If they want their platform used, they must accept popular cryptocurrency.

Conclusion

Many of these Industry-specific utility tokens have failed utterly. Either their founders knew they would fail, or they were just as delusional as the investors. Hopefully crypto-enthusiast learn from this trend, and not fall for future ones that are sure to come!

Disclaimer: Not advice

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Industry-specific could perhaps work, if they are treated similar to the way STEEM gets treated - as stake (and influence) within the ecosystem. You're right though about the cryptocurrency tokens. There is really only a few tokens that will ever be even remotely accepted as being remotely like a currency - BTC, LTC, DASH, and then the list starts getting sketchy.

Better to design utility tokens so that they have some other utility besides payment.

I think there is a lot of potential in niche-specific utility tokens. However, the market at large is still too new to fully adopt these. It's like a trend that is ahead of the trend too far, So this trend is not accepted and is rejected. Sort of like pets.com. It was a great idea but launched a bit too soon.... A few years later Amazon came out and it took over.

I think a lot of these utility tokens have huge merit and could do really well, just the general public and mass adoption of cryptocurrency has to happen first.

I am not actually too well-versed in crypto, I only know anything about it because of blogging on STEEM. In your example of weed related coins failing - if that hot market cannot succeed with tokens, who can???

Tokens kind of remind me of fake money we had in a town I lived in. You bought it at the Chamber of Commerce and then spent it only with their merchants and supposedly got a discount. Who has time for that?

But as to tokens, I now have 34 (!) of them in my STEEM wallet. 34!!! I had ZERO a couple of months ago. So what are any of them worth? At the moment, steempeak tells me the value of all of them is $11.18. Then I go to steem-engine and the value shows less than $5. Is it worth it for me to find out why? No.

I need to claim tokens, stake them (maybe), or sell them, or ignore them. I use the tags for a few of them and those I will try to figure out soon. The rest I do not have time for, unless they show a lot of value on steem-engine. Then I will look into it maybe if I have the time and even notice.

I completely agree with your point that the top coins are the ones with the best chance to succeed. I use ltc to move money in and out of steem and like it a lot for low fees and speed.

Isn’t crypto just “digital pieces of fluff” anyway? Then was does that make tokens? 😅 For me, at least Steem has real-world applications that I’m interested in.

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@btcmillennial, For sure many Tokens will going to come up which will promise what not but here one point is, we should understand the real use case behind that token. We need more Tokens which focuses towards the practical use case more than just based upon hype.

Unfortunately a lot of these tokens are a pond scheme for people to get rich quick which destroyed credibility would you agree? I have upvoted for visibility

Too many tokens to cover a single need, it is as if the way is opened for the utopia of crypto-money to be snatched from our hands and centralized by those who already dominate the money.
The real riches are resources and minerals such as diamond, gold, etc. Everything else is smoke that the great ones let us play with.

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I do think more people will still fall victim because crypto has been made in such a way that people have to hide themselves to use it

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Startups industry hope thier utility tokens can use, is a fantasy, so the chances of success are small.

Because those industries, if they really want to use utility tokens, they will issue them themselves, or look for old utility tokens brands instead of looking for startups industry.

Excellent friend analysis, it is very true not all merchants rely on the use of crypto for transactions, their financial transactions ... this world is very addicted and is based on the trust of everyone ..
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