Utility tokens need strong economic models.
The recent cryptocurrency bear season has shown the fragility of the vast portion of tokens that are currently in circulation. The reality is that new projects need time to develop into valuable entities with large userbases. Cryptocurrency projects that issue utility tokens base their token’s future price appreciation on the factor that an increased user base will be the sufficing factor in boosting token value.
Reality is harsh.
The current market snapshot shows that once tokens get listed, they suffer a brutal depreciation even if the team is making the effort to join the userbase. The effort end up in vain as people observe the platform’s token value collapse and are pushed away as they do not want to hold a depreciating asset. Utility tokens that base their price appreciation entirely on user adoption are basing their growth on a dangerous assumption that may sabotage the rise of even the most innovative applications.
Building an Intrinsic Value
In order for utility tokens to be stable enough to not faze off new user interest, projects need to plant multiple means to ensure token price support.
A new blockchain-powered application, LipChain, is establishing multiple utilities for its token.
LipChain is a media application cored around surfing content; it distributes a large portion of ad revenue among the content creators and athletes that use the application.
For a token to survive market-moving pressures, it must have its own independent economy. Merely relying on users to hold the token is not a sufficient support mechanism for the token’s economy. Therefore, LipChain is placing its token value support not on the users, but on enterprise interest. It recognizes that everyday people can be fazed off with price depreciation pressures, but enterprises are more resilient.
One of LipChain’s key token utilities is for advertisers. LIPS tokens will be used for advertising in the LipChain application. Enterprises have established marketing budgets and that budget has to be expensed. Thus, if enterprises are attracted to LipChain, they will not be interested in building a token economy on holding the tokens, but a token economy on expensing the tokens. This form of price support through transactional circulation is a model that more utility tokens need to follow.
While developing a token that holds value for enterprises is a good tactic, LipChain is not placing all its eggs in one basket.
LIPS tokens will hold value for LipChain application users too. In addition to providing voting rights, the tokens will function as a proof of loyalty and will allow holders to utilize them for discounts. The team intends to allow users to redeem these discounts for merchandise and its in-house wave pools.
Thus, LIPS tokens not only hold a transactional value for enterprises, but also a hold value for users. A loyalty mechanism to support the applications’ users will sustain a long-term community growth as not only will the userbase have the opportunity to hold a stake in the platform’s growth, but it will also ensure they have the opportunity to see immediate tangible benefits via discounts.
LipChain is establishing a new example for how applications built on the blockchain can establish a strong token economy that sustains the long-term value of their tokens. The current bear market has put a visage of extremely fragility on most utility tokens but it shouldn’t be this way if utility tokens are able to build multiple usage mechanisms.
🌐 Website: https://www.lipchain.io/
💡 Whitepaper: https://www.lipchain.io/assets/pdf/white_paper.pdf
👨 ANN Thread: https://bitcointalk.org/index.php?topic=4507111.0
💻 Telegram: https://t.me/LipChain